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23 Yale L.J. 641 (1913-1914)
Option Contracts

handle is hein.journals/ylr23 and id is 649 raw text is: OPTION CONTRACTS There are various kinds of options; in all of them the option- holder has a choice, a power of electing between alternatives.' Usually this choice or power of electing is possessed'by only one party, and for that reason the transaction is often referred to as unilateral; but it is possible for both parties to a transaction to have an option. Thus, in the case of any subsisting, unaccepted offer, not yet become a contract, an option is possessed by both parties; the offeree may accept or reject at his option;, the offerer has the option of withdrawing his offer before acceptaice. Sdch two-sided options as this will be touched upon hereafter only to distinguish them. Their full discussion would cover the forma- tion of almost all contracts. This article will be almost wholly restricted to a discussion of so-called binding options, or option contracts giving to one the legal right of choice, but no such right to the other. It might be said, also, that any party to a contract has the option of performing his contract or of breaking it; but this is not a lawful option, and both law and equity will do what they can, consistently with justice, to prevent and punish his making an illegal choice. This paper will not deal with the power of doing illegal things. Again, there are certain option contracts that are made illegal by statutes the object of which is the prevention of gambling in stocks and commodities.2 These statutes do not make the exer- cise of his power of choice by' an option-holder illegal; they for- bid the making of the agreement by which one is given such a power of choice. These statutes have raised some difficult ques- tions and have caused the courts to draw fine distinctions. These questions as to legality must also be excluded here. 1 The word option is derived from opto, to choose. The Century Dictionary defines it as, (1) Choice, wish, preference, election; (2) the power or liberty of choosing, the opportunity of electing, or selecting, av- alternative, or one of several lines of conduct. 2 See Century Dictionary defining option: (4) On stock, or other exchanges, a privilege, secured by the payment of a certain premium, or consideration, either (1) of calling for the delivery, or (2) of making de- livery, of a certain specified amount of some particular stock or 'produce, at a specified price, and within specified limits- of time. The first kind of option is usually designated a call, and the second a put; but both are sometimes called futures.

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