OPTION. Choice; election.
A contract by which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from or selling to B, specified securities or property at a fixed price within a certain time. Story v. Salo mon, 71 N. Y. 420; Harris v. Tumbridge, 83 N. Y. 93, 38 Am. Rep. 398.
"A unilateral agreement, binding upon the optioner from the date of its execution, but [which] does not become a contract inter partes, in the sense of an absolute contract to convey on the one side and to purchase on the other, until exercised by the optionee;" Barnes v. Rea, 219 Pa. 279, 68 Atl. 836. An option is not a sale, but a right to exer cise a privilege, and only when that privi lege has been exercised in the manner pro vided in the agreement does it become a binding contract ; id. It is said that options have been universally construed by the courts as binding agreements to keep an offer open; 18 Harv. L. Rev. 457; Perry v. Pas chal, 103 Ga. 134, 29 S. E. 703 ; but Prof. Lang dell takes the view that an option is a com plete unilateral contract, which can never be come a bilateral contract, and differs entire ly from an offer; 18 Harv. L. Rev. 1, 11.
As to how far an option to buy land works a conversion, see id. 1.
Where notes are given to cover losses on deals in options in grain, a part of which is to be delivered, the illegality of a part taints the whole, the consideration being entire; Miles v. Andrews, 40 Ill. App. 155. See Dwight v. Badgley, 75 Hun 174, 27 N. Y.
Supp. 107; [1892] 2 Q. B. 484; Scott v. Brown, 54 Mo. App. 606. The sale of com modities to, be delivered at a future day is not per se unlawful where the parties intend in good faith to comply with the terms of the contract ; Mohr v. Miesen, 47 Minn. 228, 49 N. W. 862; Morrissey v. Broomal, 37 Neb. 766,_ 56 N. W. 383. See WAGER; CONTRACTS.
These options are of three kinds, viz.: "calls," "puts," and "straddles," or "spread eagles." A call gives A the option of calling or buying from B or not certain securities. A put gives A the option of selling or de livering to B or not. A straddle is a combi nation of a put and a call, and secures to A the right to buy of, or sell to, B or not. Where neither party, at the time of making the contract, intends deliver or accept the shares, but merely to pay differences accord ing to the rise or fall of the market, the con tract is void either by virtue of statute or as contrary to public policy ; 11 C. B. 538. In each transaction the law looks primarily at the intention of the parties; and the form of the transaction is not conclusive; Story v. Salomon, 71 N. Y. 420 ; 5 M. & W. 466; North v. Phillips, 89 Pa. 250. Option contracts are not prima facie gambling contracts; Story v. Salomon, 71 N. Y. 420. But see Lyon v. Culbertson, 83 Ill. 33, 25 Am. Rep. 349. See Dos Passos, Stock-Brokers.