In an option contract, which statement is true?

• A. The option price must be specified in the contract
• B. The option agreement must clearly state all the terms and conditions of the sale
• C. The option period must be defined
• D. The option must be exercised for a sale

Answer: (B)

The key idea is that an option contract on real estate must be clear and complete about what is being agreed to. For an option to be enforceable, the agreement should spell out all the terms and conditions of the sale so both parties know exactly what will happen if the option is exercised. This includes aspects like what property is involved, the price or how it will be determined, the description of the property, the option price or consideration, any contingencies, and the time frame in which the option can be exercised. When the terms are explicit, there’s less chance of dispute and the contract meets the requirements of a enforceable real estate agreement.

That’s why the statement that the option agreement must clearly state all the terms and conditions of the sale is the best answer. It captures the need for a complete, definite, written agreement so the parties’ rights and obligations are unambiguous. The other points—such as listing the price alone, or defining the option period in isolation, or requiring exercise to occur for a sale—are all parts of the deal but don’t, by themselves, ensure the contract is as clearly and fully defined as stating all terms and conditions.