Option

Choice; election. A contract by which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from or selling to B, specified securities or property at a fixed price within a certain time. Story v. Salomon, 71 N. Y. 420; Harris v. Tumbridge, 83 N. Y. 93, 38 Am. Rep. 80S. “A unilateral agreement, binding upon the optioner from the date of its execution, but [which] does not become a contract ititcr partes, in the sense of an absolute contract to convey on the one side and to purchase on the other, until exercised by tbe optionee;” Barnes v. Rea, 219 Pa. 279, 68 Atl. 836. An option is not a sale, but a right to exercise a privilege, and only when that privilege has been exercised in the manner provided in the agreement does it become a binding contract; id. It is said that options have been universally construed by the courts as binding agreements to keep an offer open; 18 Harv. L. Rev. 457; Perry v. Paschal, 103 Ga. 134, 29 S. E. 703; but Prof. Langdell takes the view that an option is a complete unilateral contract, which can never become a bilateral contract, and differs entirely from an offer; 18 Harv. L. Rev. 1, 11. As to how far an option to buy land works a conversion, see id.

1.

Where notes are given to cover losses on deals in options in grain, a part of which is to be delivered, the illegality of a part taints the whole, the consideration being entire; Supp. 107; [1892] 2 Q. B. 484; Scott v. Brown, 54 Mo. App. 606. The sale of commodities to be delivered at a future day is not per sc unlawful where the parties intend in good faith to comply with the terms of the contract; Mohr v. Miesen, 47 Minn. 228, 49 N. W. 862; Morrissey v. Broomal, 37 Neb. 766, 56 N. W. 383. See Wager; Contracts. These options are of three kinds, viz.: “calls,” “puts,” and “straddles,” or “spread eagles.” A call gives A the option of calling or buying from B or not certain securities. A put gives A the option of selling or delivering to B or not. A straddle is a combination of a put and a call, and secures to A the right to buy of, or sell to, B or not. Where neither party, at the time of making the contract, intends to deliver or accept the shares, but merely to pay differences according to the rise or fall of the market, the contract is void either by virtue of statute or as contrary to public policy; 11 C. B. 538. In each transaction the law looks primarily at the intention of the parties; and the form of the transaction is not conclusive; Story v. Salomon, 71 N. Y. 420; 5 M. & W. 466; North v. Phillips, 89 Pa. 250. Option contracts are not prima facie gambling contracts; Story v. Salomon, 71 N. Y. 420.

But see Lyon v. Culbertson, 83 111. 33, 25 Am. Rep. 349.

See Dos Passos, Stock-Brokers.