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Purchase option clause

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What is a purchase option clause?

A purchase option clause is a contractual agreement that gives one party (the beneficiary) the right, but not the obligation, to purchase an asset or property at a specified time and price. The purchase option clause establishes the terms and conditions under which the beneficiary can exercise his purchase option.

In general, this type of clause usually specifies elements such as the agreed purchase price or the way to determine that price, the duration of the option (that is, the period during which the beneficiary can exercise it), the conditions to exercise it and any other relevant condition or restriction.

The party that grants the purchase option (known as the grantor) is obligated to keep the sale offer open for the period stipulated in the contract. However, the option holder is free to decide whether or not to exercise his right to purchase.

Essential content

  • Purchase price.
  • Term of the exercise.

Optional content

  • Conditions for exercising the option.
  • Obligations of the grantor.
  • Causes of termination

In which contracts is it usually applied?

This type of clause is commonly included in various types of contracts. Here are some examples of contracts where this clause is often used:

Limitations

For this clause, the limitations of the principles related to contracting are usually applied. For example, the limits of the principle of autonomy of the will of the parties, according to which contracts cannot be contrary to the law, morality and public order.

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