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Contract or Option?

A buyer contracted to buy 10 acres of land subject to a study to determine whether the property could be subdivided.  The contract provided that, during the study period, the buyer, “at its absolute and sole discretion,” could cancel the contract.  The seller cancelled the escrow, and Buyer sued.  The Court found that there was no contract between the parties, only an unenforceable option.  As the buyer had absolute discretion to cancel, it was an option.  But for an option to be enforceable, there must be some consideration- the buyer must have paid something for it.  Here, there was no consideration, so the option was unenforceable.

To avoid this problem, parties must make a choice.  Either the agreement cannot be cancelled on the sole discretion of a party, or there must be some consideration, such as a non-refundable deposit.  If the seller ties up his property for a period of time, he should be paid something for it.