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An option contract is a promise which meets the requirements for the formation of a contract and
limits the promisor's power to revoke an offer.
The option contract is simply a contractual promise that limits the power of the
offeror to revoke the offer. Restatement § 25. f course, the effect of this is that
the offeree has a defined period in which to accept the offer. The promise to
limit the revocation is called the "option."
Let's take one last look at the process of forming an option contract and the
attributes of the different methods of formation to put this all together then:
Once you decide that an offer has been made, then determine whether the
offer is irrevocable. An irrevocable offer will prevent the termination of the
power of acceptance by the offeror. See Restatement § 35 , 1-2 Corbin on
Contracts § 2.14. An option contract will make an offer irrevocable for a
specified period of time. See the methods below regarding the formation of an
option contract. Restatement § 25.
(i) by the offeree beginning to perform under an offer that looks to acceptance
by performance only, Restatement § 45,
(ii) by a writing signed by the offeror which recites a purported consideration
and proposes a fair exchange, Restatement § 87(1)(a),
(iii) by statute, including a firm offer under U.C.C. § 2-205, and
(iv) by detrimental reliance, Restatement § 87(2).
1. an offer and a promise not to revoke the offer or to keep the offer open,