Question

Which of the following statements is true with respect to an option?

Selections

A. Valid without consideration

B. Valid if the consideration is exactly $10 but is not delivered

C. Valid if consideration is delivered even if it is less than $10

D. Not valid if the delivered consideration is less than $10 

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Answer: C

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5 Keys Summary

• An option is a form of contract and must include sufficient consideration to be legally binding and enforceable.

• The law has a very low requirement for the amount of consideration needed to make an option valid; an option can be given for a nominal sum, such as 5 cents or one dollar.

• Because adequacy of consideration is not generally required to make a contract enforceable, an option is valid if consideration is delivered, even if the amount is minimal, such as less than $10.

• For the option to be binding, some consideration must, in fact, pass from the optionee (buyer) to the optionor (seller); a mere recital of consideration is insufficient.

• If valid consideration is delivered, the option contract grants the optionee the right, but not the obligation, to purchase the property upon specified terms within a specified time.

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