Which statement best describes an option contract?

Which statement best describes an option contract?

• A. An option contract requires no consideration.
• B. An option contract can be formed only for real estate.
• C. An option contract is created by a paid-for promise to keep an offer open.
• D. An option contract allows revocation at any time.

Answer: (C)

An option contract is created when the offeree pays for a promise to keep the offer open. That paid-for promise creates a separate contract, so the offeror is bound not to revoke the offer for the specified period. This is why the best description is a paid-for promise to keep an offer open—the essence of an option contract. In contrast, option contracts generally require consideration and aren’t limited to real estate, and they cannot be revoked during the time the offer is kept open.

An option contract is created when the offeree pays for a promise to keep the offer open. That paid-for promise creates a separate contract, so the offeror is bound not to revoke the offer for the specified period. This is why the best description is a paid-for promise to keep an offer open—the essence of an option contract. In contrast, option contracts generally require consideration and aren’t limited to real estate, and they cannot be revoked during the time the offer is kept open.