The correct answer is C. An option contract gives the optionee—the person receiving the option—the contractual right to purchase property according to specified terms within a defined period.
The optionee is initially not obligated to buy. The optionor, however, is obligated to honor the option during its enforceable term if the optionee properly exercises it.
The source-bank phrasing sometimes reverses the terms “optionor” and “optionee.” That is incorrect. Remember:
Optionor = grants the option.
Optionee = receives and may exercise the option.
Once the option is validly exercised according to its requirements, a binding purchase obligation can arise.
An option also differs from a right of first refusal. A right of first refusal usually becomes operative when the owner decides to sell and gives the holder an opportunity to purchase or match specified terms. An option can allow the optionee to initiate the purchase during the option period.
Study Guide Reference: Contracts — Options, Optionor/Optionee and Rights of First Refusal.
