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option contract scenario

Alice owns property in a rural part of town. A developer approaches her about buying the property for use as a shopping center. The developer wants to be sure that he can get the property rezoned for commercial use before he buys it. Alice offers to sell the property for $150,000. She agrees in writing to keep her offer open for one year beginning May 1. Three months later, however, another buyer offers Alice $175,000 for the same property. Alice agrees to sell to the second buyer.


(a) When the developer learns what Alice has done, he sues her for breach of contract. What result? Explain fully.

(b) How would your answer differ, if at all, had the developer paid Alice $5,000 at the time she agreed to hold the offer open? Why?

(c) Assume, as in (b), that the developer did pay Alice the $5,000. How would your answer differ, if at all, had Alice's promise to hold the offer open been oral instead of written? Why?

(d) How important is it that Alice notify the developer that she is withdrawing her offer before she agrees to seller to the other buyer? Explain fully.

Solution Preview

In the first question, remember the fact that the option contract isn't actually a contract - it's only an offer. Therefore, until both parties agree to make the sale, there is no concluded agreement. In b, when the offeree furnishes the offeror with consideration (the $5,000), the offer is irrevocable. (As a special note, read Restatement 87: it stipulates that the option contract only needs to ...

Solution Summary

Offers versus contracts are clarified.