Facts: Mr. Smith gives Ms Jones a check for $5000 as option to purchase her land
ID: 365930 • Letter: F
Question
Facts: Mr. Smith gives Ms Jones a check for $5000 as option to purchase her land located in Napa Valley - both parties sign the option to buy contract - Ms Jones accepts the check for $5000 as an option to buy her land. Ms Jones agreed to sell to Mr. Smith her 2 acre commercial lot for $300,000. Mr. Smith has 90 days to exercise his option to purchase Ms Jones property at her asking price of $300,000.
QUESTION: Discuss what legal options and arguments (if any?) Mr. Smith may have to enforce the agreement he has with Ms. Jones.
Explanation / Answer
The case is of option contract. Such kind of contracts are used in financial investment or in real estate. First of all we should have a little bit idea of what option contract is.
In option contract, seller offers to sell the asset at predetermined price if purchased within a certain limit of time, in exchange buyer pays a small amount of money sometime also known as token money. Buyer has a right to exercise its option to buy but no obligation is there. In case buyer doesn't exercise his option to purchase seller can seize his token money.
In the present case study, Mr smith has purchased an option from Ms Jones to purchase her land at 300000$ within 90 days buy paying a token money of $5000. In case he couldn't exercise his option to purchase tge land Ms Jones has full right to seize $5000.
To enforce the contract, Mr Smith have following options :
1. To arrange the rest of amount within stipulated time.
2. A clause may be added in contract not to sell the property to anyone in next 90days
3. An option to sell the option contract to financing institution at discounted rate
4. To raise fund from financial institution by putting contract as mortgage.
5. He may trade the option on stock exchange.
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