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Option (law): Wikis

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In law, an option is the right to convey a piece of property. The person granting the option is called the optionor (or more usually, just the grantor) and the person who has the benefit of the option is called the optionee (or more usually, just the beneficiary).

Options characteristically exist in one of two forms:

  • Call options, which give the beneficiary the right to require the grantor to sell or convey the property to them at the agreed price on exercise
  • Put options, which give the beneficiary the right to require the grantor to buy or receive the property at the agreed price on exercise.

Because options amount to dispositions of future property, in common law countries they are normally subject to the rule against perpetuities and must be exercised within the time limits prescribed by law.

In relation to certain types of asset (principally land), in many countries an option must be registered in order to be binding on a third party.

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