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Once the option has been exercised the parties are in a binding contract of sale

A worked RES examination question on option to purchase, from our Paper 1 bank — with the rule it turns on, and why each of the four options is right or wrong.

Paper 1Lesson 6Option to purchaseFree — no sign-up

The question

A buyer exercises an option and completion is set for eight weeks later. He asks his salesperson whether either side may still withdraw during that period if circumstances change, having heard that nothing is truly settled until completion.

Which statement is correct?

  1. A. Either party may withdraw provided the deposit changes hands in the right direction.
  2. B. Either party may withdraw before completion provided reasonable notice is given first.
  3. C. The buyer may withdraw but the seller may not, the option being for the buyer's benefit.
  4. D. Neither party may now withdraw voluntarily, a binding contract having come into being.

The answer, and why

Answer: D

The rule. Once the option has been exercised the parties are in a binding contract of sale. Neither may withdraw voluntarily.

Why D is correct. Neither may withdraw.

The other options.

  • B permits withdrawal on notice
  • C permits it to the buyer alone
  • A permits it against payment. Each treats the pre-completion period as still provisional.

Exam note. Exercise is the moment the arrangement becomes mutual. Completion merely performs it.

More on Option to purchase

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