OPTIONOPTION CONTRACTSCONTRACTS

ThereThere areare variousvarious kindskinds ofof options;options; inin allall ofof themthem thethe option-option­ holderholder hashas a achoice,choice, aa powerpower ofof electingelecting betweenbetween alternatives.'alternatives;'!. UsuallyUsually thisthis choicechoice oror powerpower ofof electingelecting isis possessed'bypossessed'by onlyonly oneone party,party, andand forfor thatthat reasonreason thethe transactiontransaction isis oftenoften referredreferred toto asas unilateral;unilateral; butbut itit isis possiblepossible forfor bothboth partiesparties toto aa transactiontransaction toto havehave anan option.option. Thus,Thus, inin thethe casecase ofof anyany subsisting,subsisting, unacceptedunaccepted offer,offer, notnot yetyet becomebecome aa contract,contract, anan optionoption isis possessedpossessed" byby bothboth parties;parties; thethe offereeofferee maymay acceptaccept oror rejectreject atat hishis option;,opticontracts.contracts. ThisThis articlearticle willwill bebe almostalmost whollywholly restrictedrestricted toto aa discussiondiscussion ofof so-calledso-called "binding"binding options",options", oror "no optionoption contractscontracts givinggiving toto oneone thethe legallegal rightright ofof choice,choice, butbut no' suchsuch rightright toto thethe other.other. ItIt mightmight bebe said,said, also,also, thatthat anyany partyparty toto aa contractcontract hashas thethe optionoption ofof performingperforming hishis contractcontract oror ofof breakingbreaking it;it; butbut thisthis isis notnot aa lawfullawful option,option, andand bothboth lawlaw andand equityequity willwill dodo whatwhat theythey can,can, consistentlyconsistently with justice,justice, toto preventprevent and punishpunish hishis makingmaking an illegalillegal choice.choice. ThisThis paperpaper willwill not dealdeal withwith thethe power ofof doing illegalillegal things.things. Again, therethere are certain option contracts that are mademade illegal by statutesstatutes the object of which isis thethe prevention of gamblinggambling inin 2 stocks and commodities. These statutes do not make the exer-exer­ cise of his power of choice by"by' an option-holder illegal; they for­for- bid the making of the agreement by which one is given such a power of choice. These statutesstatutes have raisedraised some difficult ques­ques- tionstions andand have caused the courts toto draw finefine distinctions. These m~st questions asas toto legalitylegality must also be excludedexcluded here.here.

1 The word "option" is derived from "opto", to choose. The Celltury 1The word "option" is derived from "opto", to choose. The Century Dictionary defines it as, "(1) Choice, wish, preference, election; (2)(2) t1\ethe Dictionary defines it as, "(1) Choice, wish, preference, election; power or liberty of choosing, the opportunity of electing, or selecting, 'ail'av- power or liberty of choosing, the opportunity of electing, or selecting, alternative, or one of several lines of conduct." alternative, or one of several lines of conduct." 2See2 See CellturyCentury DictilmaryDictionarydefining defining "option":"option": "(4)"(4) OnOn stock,stock, oror otherother exchanges, a privilege, secured by the payment of a certain premium, oror exchanges, a privilege, secured by the payment of a certain premium, consideration, either (1) of calling for the delivery, or (2) of making de­de- consideration, either (1) of calling for the delivery, or (2) of making livery, of a certain specified amount of some particular stock or"produce, atat livery, of a certain specified amount of some particular stock or 'produce, a specified price, and within specified limits' of time. The first kindkind ofof a specified price, and within specified limits- of time. The first option is usually designated a call, and the second a Pllt,. but both areare option is usually designated a call, and the second a put; but both sometimessometimes calledcalled futures."futures."

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ThereThereremain remainfor fordiscussion, discussion,then, then,lawful lawfultransactions transactionsbetween between two parties where* two parties where'ititis istheir theiriritention intention thatthatone oneof ofthem, them,but butnot not the other, the other, shallshallhave have aalawful lawful powerpower ofof electingelectingbetween between alter­alter- natives affecting their natives affecting their legallegal relationsrelations withwith eacheach other.other. SuchSuch . options are of various sorts. . options are of various sorts. AnAnoption option maymaybe begranted granted inina asep­ sep- arate and independent agreement, arate and independent agreement, asas wherewhere AA payspays BB aa sumsum ofof money for an option to buy money for an option to buy propertyproperty atat aa fixedfixed priceprice withinwithin aa certain time. certain time. TheThe propertyproperty involvedinvolved maymay bebe land,land, chattels,chattels, oror any commodity. On the any commodity. On the otherother hand,hand, thethe grantgrant ofof anan optionoption maymay be merely one term or provision be merely one term or provision inin aa largerlarger agreement,agreement, asas wherewhere a lessee is given the 3 a lessee is given the optionoption toto purchasepurchase3 or_or toto receivereceive anan extensionextension of the lease,4 of the lease/ oror wherewhere aa partnershippartnership agreementagreement providesprovides thatthat thethe survivor shall have the option survivor shall have the option ofof buyingbuying thethe interestinterest ofof thethe otherother in case of death I or where in case of death...5 or where aa contractcontract ofof salesale givesgives alsoalso anan optionoption on other property or gives 0 on other property or gives thethe vendorvendor thethe optionoption toto repurchase;repurchase° or where a lease or or where a lease or aa contractcontract ofof employmentemployment givesgives oneone partyparty thethe option of terminating 7 option of terminating itit onon certaincertain terms,7terms, oror wherewhere aa note-holdernote-holder has the option of converting 8 has the option of converting itit intointo stock.stock.8 The intention of giving such The intention of giving such anan optionoption toto oneone ofof thethe partiesparties may be expressed in various may be expressed in various ways.ways. ThereThere isis nono setset andand invaria­invaria- ble form. It may be agreed ble form. It may be agreed thatthat AA shallshall have "the"the optionoption toto buy", or "the first refusal", buy", or "the first refusal", or thethe "right"right ofof pre-emption".llpre-emption") TheThe 3 McCormick v. Stephany, 57 N. J. Eq. 257; Dowling v. Betjemann, 3 McCormick v. Stephany, 57 N. J. Eq. 257; Dowling v. Betjemamt, 22 Johns. & Hem. Johns. & Hem. 544. 4Hersey v. Giblett, 18 Beav. 174; Moss v. Barton,L. R. 1 Eq. Cas. 474; 4 Hersey v. Giblett, 18 Beav. 174; Moss v. Barton, L. R. 1 Eq. Cas. 474; Nicholson v. Smith, Nicholson v. Smith, 2222 Chan. D. 640. 5 Dibbins v. Dibbins, (1896) 2 Ch. 348; Hom fray v. Fothergill, 5 Dibbins v. Dibbins, (1896) 2 Ch. 348; H omfray v. Fothergill, 1 Eq. 567. 567. 6 Barrel v. Sabine, 1 Vernon 268; Woodruff °Barrel v. Sabine, 1 Vernon 268; Woodruff v. Woodruff, 44 N. J. Eq. 349. 349. 7 Hanau v. Ehrlich (1912), A. C. 39 (H. of L.); 7 Ha1lUlt v. Ehrlich (1912), A. C. 39 (H. of L.) ; RustRltSt v. Conrad, 47 Mich. 449 (lease); Singer S. M. Co. v. Mich. 449 (lease); Singer S. M. Co. v. Union Co., Holmes 253;253; PittsburgPittsbltrg Co. v. Bailey, 76 Kans. Co. v. Bailey, 76 Kans. 42. 8 Campbell v. London & B. R. Co., 5 Hare 519, 529. There 8 Campbell v. London & B. R. Co., 5 Hare 519, 529. There isis alsoalso another kind of option, called a contract another kind of option, called a contract inin thethe alternative. HereHere thethe op-op­ tion is not between paying and not tion is not between paying and notpaying,paying, oror betweenbetween doingdoing andand notnot doing;doing; it is between doing one thing and doing it is between doing one thing and doing another.another. See BrantlyBrantly onon Cont.,Cont., Sec. 156-160. Another sort of option contract Sec. 156-160. Another sort of option contraCt isis oneone wherebywhereby thethe ownerowner of goods agrees to sell the same at of goods agrees to sell the same at auctionauction toto thethe highesthighest bidderbidder withoutwithout reserve. Warlow v. Harrison, 1 reserve. Warlow v. Harrison, 1E.E. && E.E. 316.316. 0 The terms of the option must not be too indefinite, or the II The terms of the option must not be too indefinite, or the contractcontract cannot be enforced. Fogg v. Price, 145 cannot be enforced. Fogg v. Price, 145 Mass.Mass. 513513 ("if("if thethe premisespremises areare forfor sale at any time, the lessee shall have sale at any time, the lessee shall have thethe refusalrefusal ofof them."them." HeldHeld tootoo in-in­ definite to enforce.) ; Potts v. Whitehead, definite to enforce.); Potts v. Whitehead,2020 N.N. J.J. Eq.Eq. 55;55; 2323 N.N. J.J. Eq.Eq. 512512

HeinOnline -- 23 Yale L.J. 642 1913-1914 OPTIONOPTION CONTRACTSCONTRACTS agreementagreement maymay bebe underunder sealseal oror notnot sealed,sealed, withwith considerationconsideration oror withoutwithout it,it, unilateralunilateral oror bilateral.bilateral. ItIt maymay bebe aa conditionalconditional con-con­ tracttract toto convey,convey, oror aa contractcontract toto keepkeep anan offeroffer open.open. TheThe formform inin whichwhich suchsuch anan agreementagreement isis expressedexpressed isis anan importantimportant matter.matter. CourtsCourts frequentlyfrequently overlookoverlook thisthis factfact andand laylay downdown generalgeneral rulesrules asas ifif theythey werewere applicableapplicable toto allall alike.alike.

OPTIONOPTION AGREEMENTAGREEMENT WITHOUTWITHOUT CONSIDERATION.CONSIDERATION. LetLet usus considerconsider firstfirst anan optionoption agreementagreement notnot underunder sealseal andand withoutwithout consideration.consideration. SuchSuch anan agreementagreement isis notnot bindingbinding onon eithereither partyparty andand amountsamounts toto nothingnothing moremore thanthan anan offer,offer, revocablerevocable atat willwill byby thethe offeror.offeror.1o0 SuchSuch anan offeroffer maymay bebe acceptedaccepte~ beforebefore withdrawal,withdrawal, however,however, andand thenthen becomesbecomes aa contractcontract ,though,though notnot 2 anan optionoption contract."contract.l1 InIn CookeCooke v.v. Oxley,Ozley/2 thethe defendantdefendant agreedagreed toto sellsell certaincertain hogsheadshogsheads ofof tobaccotobacco toto thethe plaintiffplaintiff atat aa priceprice named,named, providedprovided thethe latterlatter wouldwould givegive noticenotice ofof acceptance.byacceptance. by fourfour o'clock. The plaintiff gavegave suchsuch noticenotice beforebefore fourfour o'clock,o'clock, butbut previouslypreviously theretothereto thethe defendant hadhad soldsold thethe tobaccotobacco toto another.another. The defendantdefendant had aa rightright toto do this,this, forfor prior toto acceptance therethere waswas no considerationconsideration forfor thisthis agreement. The court failedfailed toto consider thethe factfact that therethere had been nono formalformal revocation of thethe offer, evidently thinkingthinking thatthat a mere change of mind by the offeror would prevent a contract from arising on acceptance. If thisthis was sound law then,then, it is so no longer. In Great Northern R. Co. v. Witham/Witham,13s thethe defendant agreed that the plaintiff might have, for one year, the option of buying at certain rates such quantities of specified goods as thethe plaintiff might choose to order. The plaintiff accepted this in writing. Such an acceptance made no contract, because the plaintiff's op­op- tional promise to order goods if it chose was no consideration. (enforcement refused because no time was fixed during which thethe credit toto bebe givengiven was to extend)extend) ; Zimmermal~Zimmermian v. Rhoads, 226 Pa. 174. An op­op- tion very indefiniteindefinite inin character was enforced in Manchester Ship CallalCanal Co. v. Manchester R. Co.Co. (1901),"2(1901),2 Ch. 37. InIn Hayes v.v. O'Brien, 149 Ill.Ill. 403, anan option toto buy "at"at the samesame price per acre, asas any otherother person or purchaserpurchaser mightmight have offered"offered" was enforced. SeeSee alsoalso HomfrayHom/rayHomnfray v. Fother­Fother- gill, 1 Eq. 567. 1010 CookeCooke v.v. Ozley,3Oxley, 3 T.T. R.R. 653653;;.Burnet Burnet v.v. Bisco, 44 Johns.johns. 235;235; ReeseReese Co.Co. v.v. HOllse,House, (Cal.)(Cal.) 124124 Pac.Pac. 442.442. 1111B. B. && M. R.R. Co.Co. v.v. Bartlett,Bartlett,3 3 Cush.Cush. 224;224; NyltlasyNyulasy v.v. Rowan,Rowan, 1717 Vict.Vict. L.L. R.R. 663;663; IdeIde v.v. Leiser, 1010 Mont.Mont. 5.5. 1212 33 T.T. R.R. 653.653. 13L.13L. R.R. 99 C.C. P.P. 16.16.

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ButBut whenwhen thethe company,company, priorprior toto anyany revocationrevocation ofof thethe defendant,defendant, orderedordered aaspecific specific lotlot ofof goods,goods, promisingpromising toto paypay thethe namednamed prices,prices, aa contractcontract forfor thethe salesale ofof thisthis specificspecific lotlot waswas completed.completed. PriorPrior theretothereto therethere waswas nono contractcontract bindingbinding thethe defendantdefendant toto givegive thethe plaintiffplaintiff anan option;option; therethere waswas onlyonly anan offer,offer, andand bothboth partiesparties hadhad anan option.option. AfterAfter acceptanceacceptance byby orderingordering specifiedspecified goods,goods, therethere waswas aa bindingbinding contractcontract toto sell,sell, andand neitherneither partyparty hadhad anan option;option; thethe defendantdefendant waswas boundbound toto deliverdeliver andand thethe plaintiffplaintiff waswas boundbound toto pay.pay. BINDINGBINDING OPTIONS.OPTIONS. AnAn agreementagreement givinggiving anan optionoption toto oneone ofof thethe partiesparties isis bindingbinding inin casecase itit isis underunder sealseal oror isis basedbased onon consideration.consideration. SuchSuch anan agreementagreement maymay bebe ofof thethe followingfollowing classes:classes: 1.I. ItIt maymay bebe anan offeroffer ofof aa promisepromise forfor aa promisepromise (a(a bilateralbilateral contract),contract), accompaniedaccompanied by aa contractcontract notnot toto withdrawwithdraw thethe offer.offer. ThisThis accompanyingaccompanying contractcontract mustmust eithereither be underunder sealseal oror be·be basedbased onon consideration;consideration; itit isis generally unilateral,unilateral, beingbeing underunder sealseal oror thethe consideration having been paid. II.II. ItIt maymay be an offer of aa promisepromise forfor an actact (a(a unilateral contract), accompaniedaccompanied by a contract toto hold thethe offeroffer openopen asas inin thethe preceding case.case. III. It may be a unilateral contractcontract with 'anan express conditioncondition precedent.precedent. Often itit will be difficult toto determine to which of the threethree classes an option contract belongs, because generally the parties do not stop toto analyze their own intentions and do not express theirtheir agreement inin unequivocal words. In suchsuch cases the courts must do as they do in the construction of statutes,-give the words the meaning that seems just and reasonable, the meaning that the parties possibly would have expressed ifif they had thought about it. The fact is, however, that the courts often do inin this matter just what the contracting parties did;.did;, theythey determine the obligationsobligat~ons of thethe parties without analyzing the agreement any 14 more carefully thanthan did thethe parties. 14 In general, thisthis results in 14There is a strong tendency on the part of courts and writers to 14 There is a strong tendency on the part of courts and writers to classify andand define all options asas fallingfalling under classclass I,I, whereas probably most options belongbelong toto class III.III. "An option isis anan unaccepted offer";offer"; McMillanMcMil101t v. Phila.Phila. Co.,Co., 159159 Pa.Pa. 142.142. "An"An optionoption isis notnot an actual or exist-exist­ inging contract,contract, butbut isis aa rightright reserved in a subsisting agreement. InIn: aa certain sense anan optionoption isis aa meremere pollicitation,pollicitation, aa promisepromise withoutwithout mutuality,mutuality, notnot yetyet ripenedripened intointo aa perfectperfect agreement."agreement." RiversRivers v.v. OakOak LawnLawit SS .Co.,.Co., 5252 La.La. Ann.Ann. 762.762. "A"A contractcontract byby which thethe owner ofof propertyproperty agreesagrees withwith anotheranother per-per­ sonson thatthat hehe shallshall havehave thethe rightright toto buybuy hishis propertyproperty atat aa fixedfixed priceprice withinwithin

HeinOnline -- 23 Yale L.J. 644 1913-1914 OPTIONOPTION CONTRACTSCONTRACTS justice;justice; butbut toto arrivearrive atat justicejustice inin thatthat wayway isis aa confessionconfession thatthat lawlaw isis basedbased uponupon moralitymorality andand instinct,instinct, andand notnot uponupon logiclogic andand reasonedreasoned principles.principles. ThereThere needneed bebe nono hesitationhesitation inin confessingconfessing suchsuch aa truth;truth; butbut atat thethe samesame timetime logicallogical analysisanalysis isis usefuluseful andand maymay possiblypossibly arrivearrIve atat aa reasonedreasoned principleprinciple capablecapable ofof practicalpract~cal applicationapplication forfor aa longlong time.time. ThereThere isis nono doubtdoubt thatthat toto whicheverwhichever ofof thethe threethree aboveabove classesclasses anan optionoption contractcontract belongs,belongs, itit isis bindingbinding onon thethe option-giver,option-giver, andand forfor breachbreach ofof itit thethe option-holderoption-holder cancan maintainmaintain anan actionaction forfor damages.damages. ItIt isis generallygenerally heldheld alsoalso thatthat thethe optionoption contractcontract willwill bebe specificallyspecifically enforcedenforced inin equityequity ifif thethe remedyremedy atat lawlaw isis inade-inade­ quate;quate; butbut therethere isis somesome conflict.conflict. LetLet usus considerconsider eacheach classclass separately.separately. I.1. OFFEROFFER TOTO MAKEMAKE AA BILATERALBILATERAL CONTRACT.CONTRACT. (a)(a) OptionOption ContractContract UnderUnder Seal.Seal. SupposeSuppose thethe followingfollowing case:case: .4A offers offers aa promisepromise toto sellsell hishis landland toto BB forfor a returnreturn promisepromise toto paypay $1,000,$1,000, acceptanceacceptance toto bepe withinwithin thirtythirty days, andand promisespromises underunder sealseal notnot toto withdraw thethe offeroffer forfor thatthat time.time. This amounts toto twotwo things;things; anan offer toto make a bilateralbilateral contract inin thethe future, andand a completedcompleted unilateralunilateral con-con­ tract.tract. TheThe unilateral contract not toto withdrawwithdraw the offer isis valid 5 and binding,binding, and for itsits breach an action for damagesdam~ges willwilllie. lie.lli If itit remainsremains unbroken, and thethe offer toto sell isis accepted by BB, within the time limited, there arises a bilateral contract toto sell and to buy, enforcible both at law and in equity. The obligation of this contract and the remedy thereon are both mutual, and there is not the least justificationjustification for those fewfe~ cases refusing 16 specific performance .for lack of mutuality.mutuality.16 But suppose that A attempts to break his contract to leave the offer open, and notifies B thatthat thethe offer is withdrawn. Can B a certain time.time. He does not sell the land;land; he doesdoes not agreeagree to sell it,it, but he does sellsell something;something; that is,is, thethe right or privilege toto buy at thethe elec­elec- tiontion ofof*the the other party;" Ide v. Leiser, 10 Mont. 5. See alsoalso Sizer v. Clark, 116 Wise.Wisc. 534; JJohnstonOhllstOll v. Trippe, 3333 Fed. 530;530; Myers v. Stolle,Stone, 128 Ia.Ia. 10; Clat'kClark 011on Cont., Sec. 22; 18 Harv.Harv. L.L. R. 457.457. When thethe parties call thethe optionoption contract aa "refusal","refusal", itit lookslooks asas ifif theythey regardedregarded itit asas anan offer withwith a promisepromise not toto withdraw.withdraw. ItIt isis soso regardedregarded by thethe courtcourt inin Potts v.v. Whitehead,Whitehead, 2020 N. J.J. Eq.Eq. 55.55. 1515 WarlowWarlow v. Harrison, 1 1 E.E. && E.E. 316.316. A contractcontract wherebywhereby oneone bindsbinds himselfhimself toto acceptaccept anan offeroffer isis thethe samesame inin charactercharacter asas oneone byby whichwhich hehe bindsbinds himselfhimself notnot toto withdrawwithdraw anan offer.offer. 1636 LitzLitz v.v. Gooslillg,Goosling, 9393 Ky.Ky. 185;185; 2121 L.L. R.R. A.A. 127.127.

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later,later, butbut withinwithin thethe thirtythirty days,days, acceptaccept thethe offeroffer toto sell,sell, completecomplete thethe bilateralbilateral contract,contract, andand maintainmaintain anan actionaction atat lawlaw forfor breachbreach ofof thisthis latterlatter contractcontract toto sellsell oror aa suitsuit inin equityequity forfor specificspecific per­per- formance?formance? ItIt isis generallygenerally heldheld thatthat hehe cancan dodo both.both. SuchSuch aa rulingruling involvesinvolves twotwo difficulties.difficulties. First,First, AA hashas withdrawnwithdrawn hishis offeroffer andand isis nono longerlonger mindedminded toto sell,sell, asas BB knows.knows. CanCan aa manman bebe forcedforced intointo aa contractcontract againstagainst hishis will?will? InIn suchsuch aa casecase therethere isis nono meetingmeeting ofof thethe minds.minds. AdmittingAdmitting thatthat AA contractedcontracted toto keepkeep hishis offeroffer openopen andand toto remainremain ofof aa mindmind toto sell,sell, thethe factfact isis thatthat hehe diddid notnot dodo so.so. ItIt isis hardlyhardly correctcorrect toto saysay thatthat hehe couldcould notnot breakbreak thatthat contract,contract, forfor thethe factfact isis thatthat hehe hashas brokenbroken it.it. NNoror cancan hehe bebe preventedprevented fromfrom doingdoing so,so, forfor hehe hashas controlcontrol ofof hishis ownown mindmind inin spitespite ofof jailsjails andand punishmentspunishments andand ofof allall thatthat judgesjudges andand chan­chan- cellorscellors cancan do.do. IfIf thethe foregoingforegoing bebe true,true, therethere isis nono contractcontract forfor 7 thethe salesale ofof thethe landland forfor eithereither lawlaw oror equityequity toto enforce.enforce.17 InIn 8 Mier v.v. Hadden/Hadden,8 Ostrander, J.,J., says:says: "While"While itit maymay seemseem atat firstfirst blush a legallegal paradoxparadox thatthat aa contractcontract forfor thethe salesale ofof land,land, mutual and enforceable,enforceable, cancan be made whenwhen atat thethe time.ittime it i!>is claimed toto havehave been made one partyparty toto itit isis openly protesting thatthat he will make no suchsuch contract,contract, andand while reasonsreasons may bebe advanced toto support thethe proposition thatthat thethe optionoption holder shouldshould be inin suchsuch aa case remittedremitted to an action forfor damages for refusalrefusal to hold the offeroffer open for thethe stipulatedstipulated time, there isis reasonreason and precedent forfor holding that the offer to sell,sell, if paid for, may not be withdrawn during the stipulatedstipulated time, being inin lawlaw a con­con- tinuing offer to sell." IfIf A is to be ,forcedforced toto convey against his will or to pay damages for non-conveyance, it is because the law is creating an obligatio~,obligation, quasi-contractual inin .character,character, based neither on present consent nor upon unjust enrichment. Such an obligation well deserves thethe name quasi-contract, because it is precisely like the obligation that the offeror was previously willing toto assume, and not only does thethe court pretend that it is a real contract, but it enforces it exactly as if itit were one. In thisthis itit differs from other so-called quasi-contracts. As to them, thethe remedyremedy isis inin debt or indebitatusindebitatus assumpsit for an amount measured by the defendant's unjust enrichment;enrichment; while in the casecase under discussion thethe remedyremedy isis inin express assumpsitassumpsit forfor anan 17 See, taking this 17 See, taking this view,view, note, 2121 L.L. R.R. A. 130. HanleyHanley v.v. Watterson, 3939 W.W. Va.Va. 214;214; Rease v.v. Kittle,Kittle, (W.(W. Va.)Va.) 4949 S.S. E.E.150; 1501 Newton v. Newton,Newton, 11 R.R. 1.1. 390.390. is18 148148 Mich.Mich. 488.488.

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aniountamountmeasured measuredby bythe theextent extentof ofthe theplaintiff's plaintiff'sdisappointment disappointment as in the case of real agreements. as in the case of real agreements. InIna acase caselike likethis, this,both bothlaw law and equity say to the defendant, and equity say to the defendant, asasequity equityoften oftensays saysin inother other cases, You ought to have kept cases, You ought to have,kept youryouroffer offeropen; open; weweshall shalltreat treat that as done which ought that as done which ought totohave havebeen beendone, done,and andhold holdyou youas asif if it had been done. But this is it had been done. But this is quasi-contract,quasi-contract,not not contract;contract; ititis is an obligation based upon righteousness, an obligation based upon righteousness, notnotupon uponconsent. consent. ThereThere is no real objection to creating such is no real obj'ection to creating such anan obligation,obligation, butbutonly onlythe the superficial one that some superficial one that some thousandsthousands ofofjudges judgeshave havesaid saidthat thatthey they cannot make cannot make contractscontracts forforparties. parties. The second difficulty, referred The second difficulty, referred toto above,above, exists-existsonly only ininequity equity where a bill is brought for where a bill is brought for specificspecific performance.performance. ItIt isis generallygenerally held that equity will not decree held that equity will not decree specificspecific performanceperformance ofof aa con­con- tract without consideration even tract without consideration even thoughthough itit isis underunder seal.seal. InIn thethe foregoing case, the creation foregoing case, the creation ofof anan obligationobligation toto conveyconvey thethe landland is the specific enforcement of is the specific enf9rcement of thethe promisepromise ofof AA toto holdhold hishis offeroffer open for thirty days. But there open for thirty days. But there waswas nono considerationconsideration forfor thisthis promise. A similar difficulty exists promise. A similar difficulty exists ifif wewe regardregard thethe obligationobligation as quasi-contractual, although as quasi-contractual, although quasi-contractquasi-contract doesdoes notnot purportpurport toto be based upon consideration. be based upon consideration. TheThe obligationobligation ofof quasi-contractquasi- contract isis based upon equity and good conscience, based upon equity and good conscience, andand inin generalgeneral thesethese areare held to give rise to an obligation held to give rise to an obligation onlyonly wherewhere therethere isis anan unjustunjust enrichment. In the present case enrichment. In the present case therethere hashas beenbeen no -such-such enrich­enrich- ment; nothing whatever has been ment; nothing whatever has been addedadded toto A's wealth and noth­noth- ing whatever has been subtracted from ing whatever has been subtracted from B's. For thethe same reason the obligation of A to convey cannot the obligation of A to convey cannot be sai4said to rest upon the doctrine of estoppel, for there doctrine of estoppel, for there has been no representation of fact by A, nor has B in any respect by A, nor has B in any respect changed his position. His mere acceptance cannot in itself be regarded acceptance cannot in itself be regarded as a material change of position; and if, since acceptance, position; ,and if, since acceptance, such a change has takentaken place, it has been with full kiowledge it has been with full kriowledge of A's previous revocation. Thus it appears that in cases where Thus it appears that in cases where A'sA's offeroffer hashas beenbeen revokedrevoked prior to acceptance, his obligation prior to acceptance, his obligation toto convey,convey, subsequentlysubsequently arising.arising­ from such acceptafice, can hardly be from such acceptance, can hardly be basedbased uponupon recognizedrecognized prin-prin­ ciples of contract or of quasi-coritract, ciples of contract or of quasi-contract, eithereither legallegal oror equitable,equitable, and it can be specifically enforced and it can be specifically enforced onlyonly byby disregardingdisregarding anotheranother generally recognized principle. Nevertheless, generally recognized principle. Neverthel~ss, itit hashas beenbeen specifi-specifi­ cally enforced,19 and cally enforced,19 and damagesdamages areare collectiblecollectible atat law.law. 10 O'Brien v. Boland, 166 Mass. 481; Cummins V.Beavers, 103 Va. 19 O'Brien v. Bolalld, 166 Mass. 481; Cf,mmi11s~. Beavers, 103 Va.230;230; Watkins v. Robertson, 105 Va. 269 (cf. Graybill Watkills v. Robertso11, 105 Va. 269 (el. Graybillv.v. Brugh,Brugh, 8989 Va.Va. 895).895).

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(b)(b) OptionOption ContractContract BasedBased onon Consideration.Consideration. Suppose the following case: A offers a promise to sell hislandland Suppose the following case: A offers a promise to sell his to J3 for a p.romise to pay $1,000, acceptance tobebe withinwithin thirtythirty to B for a promise to pay $1,000, acceptance to days; and promises for $10 paid by B not to withdrawthethe offeroffer days; and promises for $10 paid by B not to withdraw for that time. This case is just like the one preceding,exceptexcept for that time. This case is just like the one preceding, that a consideration of $10 is substituted for aseal.seal. JustJust asas that a consideration of $10 is substituted for a before, this transaction consists of an offer to makea abilateralbilateral before, this transaction consists of an offer to make contract to sell and to buy, with a unilateral contracttoto holdhold thethe contract to sell and to buy, with a unilateral contract offer open for thirty days. Just as before, acceptancebyby BB be-be­ offer open for thirty days. Just as before, acceptance fore revocation of the offer completes a bilateral contractfor~or thethe fore revocation of the offer completes a bilateral contract sale of the land, enforcible both at law and in equityagainstagainst bothboth sale of the land, enforcible both at law and in equity parties. In case A revokes before acceptance, the sameproblemsproblems parties. In case A revokes before acceptance, the same arise as in case of the offer und-er seal, with two differences. AsAs arise as in case of the offer under seal, with two differences. before, there is no meeting of the minds, and hencenono realreal agree-agree­ before, there is no meeting of the minds, and hence ment to convey. But there is a small enrichment ofA,A, whichwhich ment to convey. But there is a small enrichment of may be made the basis of a quasi-contract. B paidAA $10$10 forfor aa may be made the basis of a quasi-contract. B paid promise, and the promise has been broken. In suchcasescases BB hashas promise, and the promise has been broken. In such a right to sue for damages, or he may sue in quasi-contract forfor a right to sue for damages, or he may sue in quasi-contract restitution. In the latter case his recovery wouldbebe limitedlimited toto restitution. In the latter case his recovery would the amount received by A, his unjust enrichment. ButBut thisthis isis the amount received by A, his unjust enrichment. far from being the same as an obligation to convey theland.land. TheThe far from being the same as an obligation to convey the consideration' of $10 also relieves equity of the difficultyinvolvedinvolved consideration of $10 also relieves equity of the difficulty in specifically enforcing a sealed promise without consideration. in specifically enforcing a sealed promise without consideration. Mutuality. The two foregoing cases are alike in their lack of mutualitymutuality The two foregoing cases are alike in their lack of of agreem~nt at the moment of acceptance. They are alike alsoalso of agreement at the moment of acceptance. They in the matter of mutuality of obligation. Prior to acceptance by in the matter of mutuality of obligation. Prior to Contra, Davis v. Petty, 147 Mo. 383; Corbett v. Cronkhite, 239 Ill. 9 Davis v. Petty, 147 Mo. 383; Corbett v. Cronkhite, (threeContra,judges dissenting). (three judges dissenting). The ~se of Warlow v. Harrison, 1 E. & E. 316, also appears toto be The case of Warlow v. Harrison, 1 E. & E. 316, 'contra.in principle. An owner of 'a horse contracted with aUall comerscomers toto "contra.in principle. An owner of -a horse contracted sell it at auction to the highest. hidder withput reserve.reserve. PlaintiffPlaintiff waswas thethe sell it at auction to the highest bidder witlout highest bidder but defendant refused to accept thethe bid.bid. ItIt waswas heldheld thatthat highest bidder but defendant refused to accept there was :no contract of sale upon which the plaintiffplaintiff couldcould sue,sue, butbut thatthat there was no contract of sale upon which the he mu~t sue, if at all, for· breach of the· preliminary contractcontract notnot toto with­with- he must sue, if at all, for. breach of the. preliminary dra\" ·the hor.se from sale. The measur:e of damages inin thethe twotwo actionsactions 'the horse from sale. The measure of damages woulddrav no doubt be identical. would no doubt be identical. A sealed option, without consideration, should alwaysalways bebe specificallyspecifically A sealed option, without consideration, should enforced, if the option holder has performed anan onerousonerous conditioncondition inin re­re- enforced, if the option holder has performed liance upon it. Such performance may not bebe technicaltechnical consideration,consideration, butbut liance upon it. Such performance may not it is sufficient basis for an equitable estoppel. See Wilks v.v.Ga. Ga.Pac. Pac.R. R.R., R., it is sufficient basis for an equitable estoppel. See Wilks 79 Ala. 180. 79 Ala. 180.

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B,B, thethe contractcontract waswas unilateral,unilateral, andand AA alonealone waswas underunder anan obliga­obliga- tion. B had an option. tion. B had an option. ThisThis lacklack ofof mutualitymutuality ofof obligationobligation ISis nono objectionobjection toto thethe enforcementenforcement ofof A'sA's contract,contract, eithereither atat lawlaw oror inin equity.equity. TheThe doctrinedoctrine thatthat equityequity willwill notnot enforceenforce specificspecific per­per- formanceformance againstagainst AA unlessunless thethe samesame remedyremedy isis availableavailable againstagainst 20 BB waswas explodedexploded byby Mr.Mr. AmesAmes20 andand others,others, andand ~aswas inin factfact nevernever followedfollowed generallygenerally byby thethe courts.courts. AA unilateralunilateral contractcontract toto conveyconvey land,land, forfor anan executedexecuted consideration,consideration, hashas alwaysalways beenbeen enforcedenforced 2 1 specifically.21specifically. ThisThis remedyremedy shouldshould nevernever bebe refused,refused, onon thethe groundground ofof wantwant ofof mutuality,mutuality, inin casecase thethe contractcontract isis un!Iateral,unilateral, asas isis thethe casecase withwith thethe preliminarypreliminary optionoption contract,contract above.above. AA promisepromise underunder sealseal toto conveyconvey landland maymay nofnot bebe specificallyspecifically en­en- forcible,forcible, butbut thisthis isis forfor lacklack ofof consideration,consideration, andand notnot forfor wantwant ofof mutuality.mutuality. AA promissorypromissory notenote toto repayrepay money,.borrowedmoney,-borrowed willwill notnot bebe specificallyspecifically enforcedenforced inin equity,equity, butbut thisthis isis becausebecause itit isis specificallyspecifically enforcibleenforcible atat lawlaw inin debtdebt oror itsits equivalent,equivalent, notnot forfor wantwant ofof mutuality.mutuality. IfIf aa promisee hashas performed hishis ownown partpart ofof thethe contractcontract andand hishis remedyremedy atat lawlaw isis notnot adequate,adequate, hehe maymay bebe sure ofof gettinggetting a decreedecree forfor specific performance.performance. So,So, ifif A's promiseproniise toto holdhold the offeroffer open was'was" given forfor ~1O$10 paid, thethe factfact th.atth at B was not bound toto do anythinganything'more,"more, unlessunless he laterlater makes aa new promise, is no objection toto aa decreedecree forfor specificspecific performance of A's promise. Equity must still wrestle with thethe problem of whether it is possible for a ,courtcourt toto prevent a man fromfrom changing his mind, and toto compel him toto keep his offer open; but this is very different'different from the question of mu­mu- tuality of -remedy. 1'£If it is possible for equity to keep A's offer open, and if it was open when B accepted, theret}.1ere 'arises-arises a new bilateral contract to sell andan,d to buy, specifically enforcible against bilateral contract to sell an,d to buy, specifically2 enforcible against both, and mutuality of remedy exists. 222

20 3 Col. L. Rev. 1 ; Lectures on Leg. 20 3 Col. L. Rev. 1; Lectures on Leg. Hist.,Rist., 370. 21 Ames, 3 Col. L. R., 1; Howe v. Watson, (Mass.) 60 N. E. 415; 1 21 Ames, 3 Col. L. R., 1; Howe v. Watson, (Mass.) 60 N. E. 415; 1 Ames Cases Eq. 429, Ames Cases Eq. 429, and cases cited in NoteNote 3.3. AndersonAlIdersOl~ v. Anderson,Alldersol~, 251 Ill. 251 Ill. 415.415. TheThe statementstatement contra,cOl~tra, inin BisphamBispham onon Equity,Equity, inin Sec. 377,377, mustmu'st be due toto aa misunderstanding of unilateral contracts.cont~a~ts. 22 It is often said that by bringing suit for specific performance, the 22 It is often said that by bringing suit for specific performance, the plaintiff plaintiff subjects himself toto thethe jurisdictionjurisdiction ofof equity andand thusthus makesmake~ "thethe remedy remedy mutual.mutual. See RichardsRichards v.v. Green,Green, 2323 N.N. J.J. Eq.Eq. 536;536; 'Woodruff'Woodruff v.v. Woodruff,W oodmff, 4444 N.N. J.J. Eq.Eq. 439.439. ThisThis isis equivalentequivalent toto sayingsaying thatthat mutualitymutuality ofof remedy,remedy, existingexisting priorprior toto thethe bringingbringing ofof aa suit,suit, isis. unnecessary.unnecessary.

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OFFE~ II.II. OFFER TOTO MAKEMAKE AA UNILATERALUNILATERAL CONTRACT.CONTRACT. SupposeSuppose thethe followingfollowing case:case: AA offersoffers toto sellsell certaincertain landland toto BB forfor $1,000,$1,000, toto bebe paidpaid withinwithin thirtythirty days,days, andand promisespromises forfor aa con-con­ sideration,sideration, oror underunder seal,seal, notnot toto withdrawwithdraw thethe offeroffer forfor thirtythirty days.days. ThisThis isis anan offeroffer ofof aa promisepromise forfor anan act,act, accompaniedaccompanied byby aa unilateralunilateral contractcontract toto holdhold thethe offeroffer open.open. TheThe onlyonly differencedifference betweenbetween thisthis kindkind of9f anan optionoption andand thatthat containedcontained aboveabove inin T,I, isis inin thethe modemode ofof acceptanceacceptance and'inand"in thethe consequentconsequent situationsituation ofof B.B. HereHere aa meremere noticenotice ofof acceptanceacceptance withwith aa promisepromise toto paypay thethe $1,000$1,000 wouldwould bebe ofof nono effect.effect. InIn thisthis casecase acceptanceacceptance mustmust con-con­ sistsist ofof payment.payment. AA meremere promisepromise toto paypay wouldwould notnot bindbind AA toto convey,,convey," forfor AA prescribedprescribed aa differentdifferent modemode ofof acceptance.acceptance. ItIt followsfollows fromfrom this,this, thatthat suchsuch aa promisepromise toto paypay doesdoes notnot bindbind BB either.either. ThereThere isis nono considerationconsideration forfor it.it. ButBut ifif BB acceptsaccepts A'sA's offeroffer asas prescribed,prescribed, andand actuallyactually payspays thethe moneymoney toto AA priorprior toto anyany revocationrevocation ofof A'sA's offer,offer, AA becomesbecomes boundbound byby hishis promisepromise toto sell,sell, bothboth atat lawlaw andand inin equity.equity. InIn casecase AA has"has revokedrevoked hishis offeroffer priorprior toto paymentpayment byby B,B, thethe veryvery samesame problemsproblems arisearise asas inin classclass I.I. BB cancan undoubtedlyundoubtedly suesue forfor breachbreach ofof A'sA's promisepromise notnot toto revoke;revoke; andand ifif BB can succeedsucceed inin acceptingaccepting byby doingdoing thethe actact requestedrequested afterafter suchsuch revocation,revocation, nono doubtdoubt thethe courtscourts wouldwould holdhold thatthat AA isis nownow bound byby aa contractcontract toto convey,convey, enforcible bothboth atat lawlaw andand inin equity. The problems ofof mutualitymutuality of agreement, mutuality ofof remedy,remedy, consideration, and measure of damages, would bebe thethe same, and should be solved in the same way asas inin class I.I.

III. OPTION REGARDED AS A CONDITIONAL CONTRACT. (a)(a) Where the Condition is the Making of Payment. The preceding discussion has dealt with options as consisting of an offer and of anan independent contract not to withdraw thethe offe..offer. But inin fact-act anan option may be nothingnothing of thethe sort, and optionsoptions areare notnot generallygenerally so worded asas toto expressexpress suchsuch aa meaning. Suppose thethe following:following: A agreesagrees toto sellsell certain landland toto BB forfor $1,000$1,000 ifif paid withinwithin thirtythirty days,days, andand inin returnreturn -B-B payspays $10$10 inin cash.cash. ThisThis isis aa unilateralunilateral contractcontract toto sellsell onon condition.condition. ThereThere isis nono offeroffer toto bebe acceptedaccepted andand nonenone thatthat cancan bebe revoked.revoked. Subse­Subse- quentquent paymentpayment byby BB isis notnot anan acceptanceacceptance ofof anan offer;offer; itit isis thethe fulfilmentfulfilment ofof aa conditioncondition precedentprecedent toto A'sA's liabilityliability onon hishis previousprevious contract.contract. BB isis notnot boundbound toto fulfilfulfil thethe condition,condition, butbut ifif hehe doesdoes notnot fulfilfulfil it,it, hehe cannotcannot suesue forfor damages,damages, forfor thethe land,land, oror forfor hishis $10.$10. IfIf AA preventsprevents BB fromfrom fulfillingfulfilling thethe condition,condition, itit wouldwould bebe heldheld toto

HeinOnline -- 23 Yale L.J. 650 1913-1914 OPTIONOPTIONCONTRACTS CONTRACTS amountamount toto aa waiverwaiver ofof thethe condition,condition, andand BB couldcould maintainmaintain suitsuit 23 bybymerely merely keepingkeeping hishis tendertender good.good.23 TheThe performanceperformance byby BB ofof thethe condition,condition, thatthat is,is, thethe paymentpayment ofof thethe $1,000,$1,000, isisnot not thethe con­con- siderationsideration forfor A'sA'spromise promise toto convey.convey. TheThe considerationconsideration forforthat that promisepromise waswas $10$10 paid.paid. ThisThis considerationconsideration isis amplyamply sufficient-atsufficient at law,law, inin equity,equity, andand inin thethe marketmarket place,place, forfor thethe conditionalconditional prom­prom- ise ise ofof AA toto convey,convey, burdenedburdened asas itit waswas byby thethe conditioncondition ofof pay~pay- mentment ofof $1,000$1,000 withinwithin thirtythirty days.days. NoNo questionquestion cancan arisearise herehere asas toto mutualmutual assent.assent. UponUpon paymentpayment ofof thethe $10$10 byby B,B, thethe partiesparties areare agreed.agreed. AA promisespromises andand BB pays.pays. ThatThat completescompletes thethe contract,contract, andand thethe obligationobligation ofof AA attachesattaches atat once,once, althoughalthough itit isis aa conditionalconditional obligation.obligation. OnOn fulfilmentfulfilment ofof thethe condition,condition, BB isis entitledentitled toto aa conveyance,conveyance, andand onon A'sA's refusalrefusal toto convey,convey, BB cancan suesue forfor damagesdamages atat law,law, oror forfor thethe returnreturn ofof hishis 24 $10$10 inin quasi-contract,quasi-contract, oror forfor specificspecific performanceperformance inin equity.24equity. The contract in this case is unilateral, nor can it ever become The contract25 in this case is unilateral, nor can it ever become bilatera1.bilateral.25 SupposeSuppose BB shouldshould notifynotify AA th~tthat hehe acceptedaccepted andand shouldshould promisepromise toto paypay thethe $1,000$1,000 withinwithin thethe thirty-daythirty-day period.period. ThisThis wouldwould notnot alteralter A'sA's obligation inin thethe leastleast andand itit wouldwould bebe thethe fulfilmentfulfilment ofof nono condition.condition. NorNor wouldwould itit put anyany obligationobligation onon B. B's newnew promisepromise toto pay thethe $1,000$1,000 has no considerationconsideration whatever;whatever; A doesdoes nothing inin return forfor it. WhatWhat AA has done inin the past isis no consideration.consideration. True, A obligated himself inin thethe past atat B's request,request, but from thatthat request there arose neither a moral nor a legal obligation on B's part. He paid $10 for what A did at his request, and that is regarded by the law and by mor­mor- ality, ality, just as it was regarded by the parties themselves, as the exact equivalent of A's undertaking. There are, however, many cases holding B bound by his later 6 promise to pay the $1,000.2$1,000.26 These cases generally go upon the theory thatthat the option was likelike thatthat stated under heading I above, thattha.t itit consisted of an offeroffer toto make a bilateral contract and an independentindepe~dent unilateral contract not toto withdraw thethe offer. If it was thethe intention of thethe parties to makemake such a bilateral contract,contract, no exceptionexception can be takentaken toto thethe decisions exceptexcept asas alreadyalready dis- 2 3 Rockland-R. Lime Co. v. Leary, 23 Rocklalld-R. Lime Co. v. Leary, 203203 N.N. Y.Y. 469.469. 24 Wilks 24 Wilks v.v. Ga.Ga. Pac.Pac. R.R. R.,R., 7979 Ala. 180180 (semble)..(semble).- 25 Brantly on Cont., Sec. 146, treats the 25 Bralltly 011 CUllt., Sec. 146, treats thecontractcontract asas aa bilateralbilateral one,one, afterafter acceptance,acceptance, althoughalthough hehe 'regards'regards thethe originaloriginal contractcontract asas aa unilateralunilateral one,one, and and notnot asas anan offer.offer. ThisThis appearsappears toto bebe anan inconsistentinconsistent position.position. 28 See below, 26 See below,NoteNote 36.36.

HeinOnline -- 23 Yale L.J. 651 1913-1914 YALEYALE LAWLAW JOURNALJOURNAL cussedcussed underunder headingheading I.1. If,If, however,however, thethe correctcorrect analysisanalysis ofof thethe factsfacts inin suchsuch casescases showsshows thatthat thethe transactiontransaction waswas a aunilateralunilateral contract'contract toto convey,convey, conditionalconditional uponupon thethe actualactual makingmaking ofof thethe supported~ payment,pay:ment, thethe decisionsdecisions cannotcannot bebe supported. ThereThere is,is, however,however, anotheranother possible.possible analysisanalysis .of.of thethe facts,facts, andand oneone thatthat maymay supportsupport thethe decisions.decisions. ItIt willwill bebe explainedexplained underunder thethe headingheading thatthat fol-fol­ lows.lows. (b)(b) WhereWhere thethe ConditionCondition isis thethe MakingMaking ofof aa Promise.Promise. InIn thethe foregoingforegoing casecase thethe conditioncondition ofof thethe vendor'svendor's promisepromise toto conveyconvey waswas actualactual paymentpayment byby thethe vendee.vendee. ButBut thethe conditioncondition maymay bebe thethe makingmaking ofof aa promisepromise insteadinstead ofof beingbeing paymentpayment oror thethe per-per­ formanceformance ofof somesome otherother kindkind ofof act.act. SupposeSuppose thethe followingfollowing case:case: InIn considerationconsideration ofof $10$10 paidpaid byby B,B, II promisepromise toto conveyconvey BlackacreBlackacre toto BB onon conditioncondition thatthat hehe willwill promise,promise, withinwithin thirtythirty days,days, toto paypay $1,000$.1,000 forfor thethe conveyance.conveyance. (Signed)(Signed) A.A. HereHe.re AA makesmakes aa uni-uni­ laterallateral contract,contract, bindingbinding himhim atat once,once, andand notnot bindingbinding BB atat all,all, butbut hishis obligationobligation isis conditionalconditional uponupon B'sB's makingmaking aa promisepromise toto pay.pay. ThisThis promisepromise mustmust bebe mademade withinwithin thirtythirty days,days, toto fulfilfulfil thethe con-con­ dition.dition. ItIt isis notnot aa promisepromise toto paypay withinwithin·thirty thirty days.days. InasmuchInasmuch asas AA doesdoes notnot fixfix aa timetime forfor eithereither conveyanceconveyance oror payment,payment, nono doubtdoubt byby implicationimplication ofof law,law, theythey areare toto bebe contemporaneous acts. BB couldcould notnot maintain suitsuit on A's promise toto conveyconvey without.without .hav­hav- inging performed two conditions precedent,precedent, one,one, anan express condi-condi­ tion-thetion~the making ofof a promisepromise withinwithin thirty days; the other, impliedimplied by lawlaw and~nd foundedfounded inin equity andand good conscience-aconscience-a t~nder tender of·of, $1,000 within a reasonablereasonable time. Suppose that B within the thirty days makes the requested promise to pay $1,000 to A. Is thisthis a binding promise? There is no doubt that ifif it is held to be binding on B, it will also be held, by implicationimplication .ofof law, toto be conditional upon tendertender of convey­convey- anceance-byby A. But how can B's promisepromise be regarded as binding? What isis thethe consideration for it?it? A'sA's promise to·to convey waswas not thethe consideration,consideration, forfor thatthat promisepromise waswas made inin returnreturn forfor the executedexecuted considerationconsideration ofof $10, itsits fullfull and complete equivalentequivalent 27 bothboth in.in lawlaw andand inin morals.morals.17 TheThe legallegal obligationobligation ofof thatthat promisepromise attachedattached whenwhen itit waswas made.made. ButBut whenwhen BB fulfilsfulfils thethe expre~sexpress con­con- ditiondition andand makesmakes hishis promisepromise toto pay,pay, therethere isis aa changechange inin thethe charactercharacter ofof A'sA's legallegal obligation.obligation. PriorPrior theretothereto A'sA's obligationobligation 2727 AnAn optionoption isis notnot unconsciomibleunconscionable merelymerely becausebecause thethe considerationconsideration waswas onlyonly $1.$1. MierMierv. v. Hadden,Hadden,148 148 Mich.Mich. 488;488; CummillsCummins v.v. Beavers,Beavers,103 103 Va.Va. 230;230; butbut cf.cf. MurphyMurphy v.v. Reid,Reid, 125125 Ky.Ky. 585.585.

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waswas subjectsubject toto twotwo conditionsconditions precedent.precedent. SubsequentSubsequent theretothereto A'sA's obligationobligation isis subjectsubject toto onlyonly oneone conditioncondition precep.ent,precedent, thethe oneone im­im- pliedplied byby law.law. ThisThis changechange inin thethe charactercharacter ofof hishis obligationobligation isis aa detrimentdetriment toto him,him, oneone thatthat hehe sufferssuffers andand thatthat thethe partiesparties contem­contem- platedplated thatthat hehe shouldshould suffer,suffer, inin returnreturn forfor B'sB's promise.promise. ThisThis changechange isis contemporaneouscontemporaneous withwith thethe makingmaking ofof B'sB's promise,promise, andand hencehence cannotcannot bebe said,said toto bebe pastpast consideration.consideration. ItIt isis truetrue thatthat AA hashas performedperformed nono newnew actact oror forbearance.forbearance. TheThe changechange inin thethe charactercharacter ofof hishis obligationobligation isis causedcaused whollywholly byby B'sB's newnew act,act, thethe actact ofof promisingpromising $1,000.$1,000. ProbablyProbably AA cannotcannot inin anyany wayway preventprevent thisthis changechange inin hishis legallegal obligation.obligation. ButBut alIall thisthis isis immaterial.immaterial. ItIt makesmakes nono differencedifference whatwhat isis thethe immediateimmediate causecause ofof thethe change.change. TheThe materialmaterial factfact is,is, thatthat therethere isis suchsuch aa change,change, thatthat itit isis aa legallegal detrimentdetriment toto A,A, andand thatthat itit isis contemplatedcontemplated byby thethe partiesparties asas thethe equivalentequivalent ofof B'sB's promisepromise toto pay.pay. TheThe changechange inin thethe charactercharacter ofof A'sA's obligationobligation isis thethe considera­considera- tiontion forfor B's newnew promisepromise toto pay, butbut itit doesdoes notnot followfollow fromfrom thisthis thatthat B'sB's newnew promisepromise isis aa partpart ofof thethe considerationconsideration forfor A's obliga­obliga- tion.tion. TheThe consideration forfor A's obligation remainsremains exactlyexactly whatwhat itit was, namely, $10$10 inin handhand paid.paid. Whenever one makesmakes a condi­condi- tional promise in returnreturn forfor a particular consideration, thethe ful­ful- filment of thethe condition works an importantimportant changechange in the prom­prom- isor's situation, but it isis not the making of a new contract oror thethe giving of a new consideration for thethe promise. And so, upon the fulfilment of the condition, the unilateral contract binding A to convey isis stilIstill a unilateral contract binding A, and its considera­considera- tion is the very same consideration that existed from the first. It is enforcible at lawlaw and in equity just as it was from the first. It never was an unaccepted offer, and it is not nownow' a newly ac­ac- cepted one. The only difference in itit is, that one step has been taken toward full performance. It is no longerlonger conditional, be-be­ cause thethe condition has been fulfilled.fulfilled. It formerly contained an option, whereaswhereas it now contains none,none, because the option has been exercised,exercised, and thethe choice made. TheThe new promisepromise ofof BB toto paypay $1,000 isis a new and separateseparate con-con­ tracttract betweenbetween thethe parties. It,It, too,too, isis unilateral,unilateral, a new obligationobli"gatioIi toto paypay $1,000$1,000 restingresting uponupon B,B, with nono newnew obligationobligation upon A.A. TheThe considerationconsideration for B'sB's newnew promisepromise isis fullyfully performedperformed andand consistsconsists ofof thethe veryvery materialmaterial changechange inin thethe legallegal situationsituation ofof A.A. B'sB's newnew promisepromise isis enforcibleenforcible at lawlaw andand inin equityequity justjust asas otherother

HeinOnline -- 23 Yale L.J. 653 1913-1914 YALEYALE LAWLAW JOURNALJOURNAL unilateralunilateral contractscontracts areare enforcible.enforcible. ThusThus decisionsdecisions enforcingenforcing B'sB's promisepromise maymay bebe justified.justified. IfIf wewe acceptaccept thethe foregoingforegoing analysis,analysis, whatwhat wouldwould bebe thethe effect~ffect ofof aa noticenotice ofof revocationrevocation givengiven byby AA toto BB beforebefore BB hadhad fulfilledfulfilled thethe conditioncondition byby makingmaking hishis newnew promisepromise toto paypay $1,000?$1,000? ItIt takestakes twotwo toto makemake aa contract,contract, eveneven aa unilateralunilateral one.one. Perhaps,Perhaps, therefore,therefore, B'sB's newnew promisepromise mademade afterafter A'sA's revocationrevocation shouldshould bebe heldheld to-to bebe notnot bindingbinding uponupon him.him. ButBut eveneven ifif so,so, thisthis shouldshould notnot affectaffect thethe pre-pre­ viousvious obligationobligation ofof AA toto convey.convey. TheThe previousprevious contractcontract gavegave BB aa choice.choice. ThisThis hehe cancan makemake withoutwithout anyany assentassent onon A'sA's part,part, forfor itit takestakes onlyonly oneone toto makemake aa choice,choice, oror toto exerciseexercise anan option.option. HenceHence itit wouldwould seem,seem, thatthat whenwhen BB makesmakes hishis newnew promisepromise toto paypay $1,000,$1,000, hehe fulfilsfulfils thethe conditioncondition precedentprecedent toto A'sA's liabilityliability onon hishis promisepromise toto convey,convey, andand hehe hashas anan immediateimmediate rightright toto enforceenforce A'sA's promisepromise atat lawlaw andand inin equity,equity, whetherwhether hehe himselfhimself cancan bebe suedsued byby AA oror not.not. EvenEven ifif wewe shouldshould assumeassume thatthat thethe conditioncondition precedentprecedent toto A'sA's liabilityliability isis thethe makingmaking ofof aa bindingbinding promisepromise byby B,B, ifif AA himselfhimself preventsprevents thethe fulfilmentfulfilment ofof thethe condition,condition, hehe cannotcannot equitablyequitably taketake advantageadvantage ofof it,it, andand B'sB's suitsuit againstagainst AA forfor conveyanceconveyance oror forfor 2288 damagesdamages willwi11liejust lie just asas ifif thethe conditioncondition hadhad beenbeen waived.waived. If B'sB's new promisepromise isis a newnew andand separateseparate unilateralunilateral contract,contract, shouldshould itit notnot followfollow thatthat BB -can enforce A'sA's previousprevious contractcontract toto conveyconvey without himselfhimself tendering payment? AndAnd cannotcannot AA main-main­ taintain suit on B'sB's promise for thethe $1,000$1,000 without himself tendering a conveyance? Are not thethe twotwo contracts entirely independent and unconditional? Undoubtedly itit would have been so held in former times,times,2929 but it can be asserted with confidence that it would not now be so held. ItIt is true that as far as the express words are concerned, both promises are unconditional, but the courts knowknow how to importimport conditionsconditions intointo contractscontracts on purely equitableequitable grounds forfor thethe sakesake of justice. Or,Or, toto expreSsexpress it inin otherother words,words, theythey know how toto createcreate an equitable defencedefence toto anan actionaction uponupon anan entirelyentirely unconditionalunconditional promise. This "imported"imported condition",condition", oror "equitable"equitable defence", isis foundfound byby thethe courtscourts entirelyentirely outsideoutside ofof thethe termsterms ofof thethe contractcontract suedsued upon,upon, -andand frequentlyfrequently outsideoutside ofof thethe unexpressedunexpressed intentionsintentions ofof thethe parties,parties, andand therethere isis nono improprietyimpropriety inin findingfinding itit inin thethe termsterms ofof aa separateseparate contract.contract. 2828 RipleyRipley v.McClure,v. McClure,4 4 Ex.Ex. 345;345; UnitedUnited StatesStatesv. v. Peck,Peck, 102102 U.U. S.64;S. 64; Rockland-R.Rockland-R.Lime Lime Co.Co. v.v. Leary,Leary,203 203 N.N. Y.Y. 469;469; BrantlyBrantly 01£on Cant.,Cont.,Sec. Sec. 141;141; Dig.Dig. ofof Just.,Just., 45,45, 1,1,85, 85, 7.7. 29.See29-See PordagePordagev. v. Cole,Cole, 11 Wms.Wins. Saunders,Saunders, 319.319.

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TheThe courtcourt willwill implyimply suchsuch aa condition,condition, oror createcreate suchsuch aa defence,defence, inin casecase thethe promisorpromisor hashas notnot received,received, andand isis notnot goinggoing toto receive,receive, thethe substantialsubstantial valuevalue thatthat hehe rightlyrightly expectedexpected inin exchange.exchange. Now,Now, inin thethe casecase beforebefore us,us, ifif thethe promisepromise ofof BB toto paypay $1,000$1,000 isis inin factfact aa separateseparate unilateralunilateral contract,contract, itit isis clearclear thatthat AA andand BB diddid notnot makemake anan exchangeexchange ofof promises,promises, thethe obligationobligation ofof thethe oneone waswas notnot thethe considerationconsideration forfor thethe obligationobligation ofof thethe other.other. ButBut itit isis notnot clearclear thatthat theythey diddid notnot contemplatecontemplate anan exchangeexchange ofof performances.performances. InIn fact,fact, itit isis certaincertain thatthat thethe partiesparties contemplated.contemplated thethe landland andand thethe $1,000$1,000 asas substantialsubstantial equivalents,equivalents, andand itit isis notnot justjust thatthat eithereither partyparty shouldshould havehave bothboth landland andand moneymoney atat thethe samesame time,time, and,and, hence,hence, ifif eithereither shouldshould suesue thethe other,other, withoutwithout firstfirst makingmaking aa ten-ten­ derder ofof performance,performance, hehe wouldwould bebe metmet byby aa perfectperfect equitableequitable defence.defence. (c)(c) WhereWhere thethe ConditionCondition isis thethe GivingGiving ofof Notice.Notice. ThisThis isis strictlystrictly notnot aa separateseparate class,class, allall suchsuch casescases fallingfalling underunder headingsheadings (a)(a) andand (b).(b). SupposeSuppose thethe followingfollowing case:case: InIn consid-consid­ erationeration ofof $10$10 paidpaid byby B,B, II promisepromise toto conveyconvey BlackacreBlackacre toto BB forfor $1,000,$1,000, providedprov:ided BB shallshall givegive noticenotice ofof hishis electionelection byby MayMay 1st. (Signed)(Signed) A.A. ThisThis isis oneone of thethe commonest formsforms ofof anan optionoption so contract.30 ItIt isis aa unilateral contractcontract toto convey, withwith oneone express condition.condition. If BB givesgives noticenotice prior toto MayMay 1st, thatthat hehe elects toto buy, he becomesbecomes entitled toto enforce A's promise atat lawlaw andand inin equity, if withinwithin a reasonable timetime he tenderstenders paymentpayment of $1,000. Such tendertender would be a condition precedent by implication of law.law. It should not be held, however, that B isis bound to pay the $1,000. He has made no promise and has been asked to make none. Yet it is frequently held, that the giving of notice is by implication the making of a promise to pay, with resultsresults similar toto those explained under heading (b) above.above. Of course, by "notice" thethe partiesparties may mean "notice of aa promise".slpromise".3

SPECIFICSPECIFIC PERFORMANCE OF OPTION CoCoNrRACTS.NlTRACTS. ItIt isis believed thatthat thethe foregoingforegoing analysis presentspresents meansmeans ofof determiningdetermining thethe correctnesscorrectness ofof decisionsdecisions uponupon optionoption contracts.contracts, 3030 SeeSee MossMoss v.v. BartOli,Barton,L. L. R.R. 11 Eci.Eci. Cases,Cases, 474;474; B11cklalldBuckland v.v. Papillon,Papillon, L.L. R.R. 22 Ch.Ch. App.App. 67.67. SI31The The optionoption holderholder waswas heldheld boundbound asas byby aa promise,promise, afterafter hehe hadhad givengiven noticenotice ofof accept(lnce,acceptance, inin thethe followingfollowing cases:'cases FriaryFriary BreweriesBreweries ·v."v. Singleton,Singleton, (1899)(1899) 11 Ch.Ch. 86;86; 22 Ch.Ch. 261;261; CastleCastleCreek Creek W.W. Co.Co. v.v. Aspen,Aspen, 146146 Fed.Fed. 88; ; WoodsWoods v.v. Hyde,Hyde, 66 L.L. T.T. 317.317. SeeSee contra,contra,Ranelagh Ranelaghv. v. Melton,Melton, 22 Dr.Dr. &&Sm. Sm. 278278 (semble).(semble).

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ThereThere isissome some inconsistencyinconsistency andand conflictconflict inin thethe reportedreported cases,cases, but no more than in other but no more than in other branchesbranches ofofthe thelaw. law. ItItwill willbe befound found that the decisions themselves that the decisions themselves areareless lessin in conflictconflict withwith eacheach otherother than are the reasons given than are the reasons given forfor thethe decisions.decisions. SuchSuch conflictconflict asas exists may be said to be due exists may be said to be due chieflychiefly totothree three things:things: (1)(1) aa fail­fail- ure to distinguish between ure to distinguish between considerationconsideration forfora apromise promiseand anda acon­ con- dition of the promisor's dition of the promisor's liability;liability; (2)(2) aafailure failure toto understandunderstand thethe differences between unilateral differences between unilateral andand bilateralbilateral contracts;contracts; (3)(3) andand most important of all, a most important of all, a failurefailure toto observeobserve thatthat optionoption contractscontracts are capable of just as great differences are capable of just as great differences inin charactercharacter asas areare otherother contracts. Each of these contracts. Each of these threethree thingsthings necessarilynecessarily involvesinvolves thethe otherother two.two. (a)(a) EnforcementEnforcement AgainstAgainst OptionOption Giver.Giver. It is universally held, that It is universally held, that wherewhere thethe so-calledso-called acceptanceacceptance byby the option holder is given before the option holder is given before revocationrevocation byby thethe optionoption giveJ,",giver, a valid contract arises, a valid contract arises, specificallyspecifically enforcibleenforcible inin equity,equity, inin thosethose cases where the legal remedies are deemed 3 2 cases where the legal remedies are deemed inadequate.inadequate.32 ThisThis isis true irrespective of the class to which true irrespective of the class to which thethe optionoption contractcontract belongs,belongs, whether I, whether I, II,II, oror IIIIII h~rein.herein. It is almost as universally It is almost as universally heldheld thatthat thethe optionoption giver'sgiver's promise may be accepted and become may be accepted and become enforcibleenforcible both atat law andand inin equity, even though before any so-called even though before any so-called acceptance by thethe option holderholder one of those events occurs one of those events occurs that are legallylegally sufficient to revoke anan offer. For example, the offer. For example, the death of thethe option giver before notice of acceptance does not of acceptance does not prevent equity from decreeing specific

32 Green v. Low, 2 Jur. N. S. 848; Pegg v. Wisden, 16 Beav. 239; Moss 32 Green1J. Low, 2 Jur. N. S. 848; Pegg v. Wisdell, 16 Beav. 239; Moss v. Barton, L. R. 1 Eq. Cas. 474; Buckland v. v. Barton, L. R. 1 Eq. Cas. 474 ~ Bllckland v. Papillon, L. R. 1 Eq. Cas. 477; Nicholson v. Smith, 22 Ch. 460; Wilks v. Ga. Nicholson v. Smith, 22 Ch. 460; WilllS v. Ga. Pac. R.R. Co.,Co., 79 Ala. 180; Byers v. Denver C. R. Co., .13 Col. 552; Rockland-R. Byers v. Denver C. R. Co., .13 Col. 552; Rocldand-R. Lime Co. v.v. Leary,Leary, 203 N. Y. 469; Hoogendorn v. Daniel, 203 N. Y. 469; Hoogendom v. Dalliel, 178 Fed.Fed. 765;765; FrankFrank v. Schnuettgen,Scll1metlgen, 187 Fed. 515; Hawralty v. Warren, 18 N. 187 Fed. 515; Hawralty v. Warren, 18 N. J.J. Eq.Eq. 124;124; GreenGreelt v.v. Richards,Richards, 23 N. J. Eq. 33, 536; Herman v. Babcock, 103 23 N. J. Eq. 33,536; Herman v. Babcock, 103 Ind.Ind. 461;461; CarterCarter v.v. Love,Love, 206206 I1l. 310; Seyferth v. Groves & S. R .Co., 217 Ill. 483. III. 310; Seyfertlz v. Groves & S. R .Co., 217 III. 483. Contra,Contra, LitzLitz v.v. Goos-Goos­ ling, 93 Ky. 185; 21 L. R. A. 127. Thus an ling, 93 Ky. 185; 21 L. R. A. 127. Thus an optionoption to to renewrenew aa leaselease willwill bebe specifically enforced in equity in specificalIy enforced in equity in favorfavor ofof thethe lessee.lessee. McCormickM cCornucll v.v. Stephany, 57 N. J. Eq. 257; 1 Ames Cases Stephany, 57 N. J. Eq. 257; 1 Ames Cases Eq.Eq. 431,431, andand notenote collectingcolIecting cases. cases. But the option holder may But the option holder may loselose hishis rightright toto specificspecific performanceperformance byby laches; Mills v. Haywood, 6 Ch. Div. 196; and laches; Mills v. Ha)Jwood, 6 Ch. Div. 196; andequityequity maymay refuserefuse aa remedyremedy on the grounds of hardship and on the grounds of hardship andunfairness,unfairness, TalbotTalbot v.v. Ford,Ford, 1313 Sim.Sim. 173.173.

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33 performance.performance.333 TheseThese casescases areare certainly.certainly,sound, sound, ifif thethe contractcontract fallsfalls withinwithin classclass III,III, asas mostmost optionsoptions probablyprobably do;do; butbut theythey areare moremore doubtful,doubtful, thoughthough notnot entirelyentirely indefensible,indefensible, ifif theythey fallfall withinwithin classesclasses II andand IIII., InIn likelike manner,manner, thethe holderholder maymay enforceenforce thethe contractcontract eveneven thoughthough hishis acceptanceacceptance isis subsequentsubsequent toto aa noticenotice ofof revocationrevocation andand aa salesale toto somesome thirdthird personperson whowho hadhad noticenotice ofof 34 thethe option.option.3434 OfOf course,course, allall conditionsconditions precedentprecedent mustmust bebe ftil-frtl­ 35 filled.filled.35 (b)(b) EnforcementEnforcement AgainstAgainst OptionOption Holder.Holder. AA noticenotice ofof acceptanceacceptance byby thethe optionoption holderholder isis almosta,lmost alwaysalways heldheld toto createcreate aa bilateralbilateral contract,contract, andand suitsuit bothboth atat lawlaw andand inin 36 equityequity isis heldheld toto lielie inin favorfavor ofof thethe optionoption giver."giver. TheseThese de-de.,. cisionscisions areare soundsound onlyonly inin casecase thethe particularparticular contractcontract fallsfalls withinwithin classclass II oror classdass IIIII (b),(b), andand areare incorrectincorrect if itit fallsfalls inin classclass IIII oror classclass IIIIII (a). VeryVery likelylikely itit isis truetrue thatthat partiesparties whowho makemake optionoption contractscontracts usuallyusually contemplatecontemplate bilateralbilateral obligations,obligations, thusthus justify-justify­ 3 7 inging mostmost decisionsdecisions of thethe sort. In Woods v.v.,Hyde,31 Hyde, aa leaselease con-con­ tainedtained anan agreementagre~ment thatthat ifif thethe lesseelessee shouldshould desiredesire toto purchasepurchase atat £25,000 and shouldshould givegive noticenotice inin writingwriting by aa certaincertain time,time, he "should be entitled toto become thethe purchaserpurchaser of such premisespremises at the price";price"; and ifif the lessee, within three months after notice, should paypayor or tender thethe £25,000, thethe lessorlessor wouldwould convey. TheThe

•333 Woods v. Hyde, 6L:6'L: T. 317; Hall v. Buslinell,BusHnell, 14 L. T. 246; Moss v. Barton, L. R. 1 Eq. Cas. 474; Nicholson v. Smith, 22 Ch. D. 640; InIn're re AdamsAd(lms & K. Vestry, 27 Ch. D. 394 (semble) ;;.Douglas,Douglas v. Whitmore, stated in Ripley v. Waterworth, 7 Ves. Jr. 436; MaughlinMaughlin,v. *v.Perry, 35 Md. 352; Rockland-R. Lime Co. v. Leary, 203 N. Y. 469; Adams v. Peabody Coal Co., 230 Ill. 469; In re Hunter, 1 Edw. 1; Longworth v. Mitchell,Mitcheli, 26 Ohio St. 334; Brantly, CContr.,ontr.; Sec. 146.146. See con-tra,contra, NewtonN ew~on v. Newton, 11 R. 1.I. 390, carrying out logically thethe ideaidea that an option is an offer. 34 Maughlin v. Perry, 35 Md. 352; Ross v. Parks, 93 Ala. 153; Adams v. Peabody CoalCoal Co., 230 Ill.Ill. 469; M-y,'erMyer v. Hadden, 148 Mich. 488; 12 Ann. Cas. 88, andand note; Stitt v. Htlidelwpers,Huidekopers, 1717 Wall. 384;384; Johnston v. Trippe, 33 Fed.Fed. 530;530; BrantiyBrantly on Contr., Sec.Sec. 146. 353 Woodruff v.'v. Woodruff,Woodruff, 4444 N. j.1. Eq., 349;349; and seesee below, "Time"Time of thethe Essence."Essence." 3636 Smith v.v. Baugham, 156156 Cal. 359359 (semble)(semble) ;; WatfordWatford Oil Co.Co. v. Ship­Ship- 1IIan,man, 233 Ill.II. 99 (semble)(semble) :: Johnston v. Trippe,Trippe,33 33 Fed. 530530 (semble)(semble) ;; Friary Breweries v. Singleton, (1899)(1899) 11 Ch.Ch. 86;86; 22 Ch.Ch. 261;261; CastleCastle'Creek Creek W.W. Co.Co. v.v. Aspen, 146146 Fed.Fed. 8;8; seesee 88 Ann.Ann. Cases,Cases, 660;660; MillsMills v.v. Haywood, 66 Ch. D.D. 196196 (semble)(semble) ;; LinnLinn v.v. McLean,McLean, 8080 Ala.Ala. 360360 (semble)(semble) ;; Perr-y,1Perryv. v. Paschal,Paschal,103 103 Ga.Ga. 134;134; GuyerGuyer v.v. Warren,Warren, 175175 Ill.Ill. 328;328; FryFry S.S. P.,P., Sec.Sec. 465.465. 31 37 66L. L. T.t. 317.317.

HeinOnline -- 23 Yale L.J. 657 1913-1914 YALEYALE LAWLAW JOURNALJOURNAL courtcourt (Wood,(Wood, V.V. C.)C.) overruledoverruled aa demurrerdemurrer toto aa billbill forfor specificspecific performanceperformance byby thethe heirheir ofof thethe optionoption givergiver againstagainst thethe optionoption holder,holder, andand said,said, "Contract"Contract completecomplete fromfrom thethe momentmoment thatthat thethe defendantsdefendants hadhad givengiven thethe notice.notice. ThatThat havinghaving givengiven thatthat notice,notice, theythey couldcould notnot withdrawwithdraw fromfrom thethe purchase."purchase." ButBut inin aa casecase ex­ex- actlyactly likelike this,this, Kindersley,Kindersley, V.V. c.,C., thoughtthought thethe contrary,contrary, andand saidsaid thatthat thethe vendorvendor couldcould notnot compelcompel thethe vendeevendee toto paypay eveneven thoughthough thethe latterlatter hadhad givengiven thethe requiredrequired threethree monthsmonths noticenotice ofof accept­accept- ance.ance. HeHe says,says, "could"could thethe owner'owner atat anyany timetime saysay toto thethe lessees,lessees, 'you'you havehave givengiven meme .thisthis noticenotice ofof youryour desire,desire, andand nownow II willwill filefile aa billbill toto compelcompel you toto complete',complete', althoughalthough thethe lessees,lessees, untiluntil theythey havehave paid thethe money havehave never performedperformed thethe condition;condition; andand theythey mightmight say,say, 'we'we dodo not meanmean toto performperform it'?it'? Could he applyapply toto compelcompel them?them? Impossible."38Impossible."'8 ASSIGNMENT OFOF OPTIONOPTION CONTRACTS.CONTRACTS. It maymay be laidlaid downdown asas aa general principle,principle, with exceptionsexceptions as below, thatthat anan option contract isis binding upon thethe assignsassigns andand successorssuccessors ofof thethe optionoption giver and thatthat itit isis enforcible 1?yby thethe assigns of the option holder.holder. ThisThis showsshows that inin fact most option contracts must belong toto classclass III,III, thatthat theythey areare contracts toto con­con- vey onon condition, and not mere offers with a promise to hold thethe offer-soffei-s open. An offer made to a specificspecific person cannot be ac­ac- cepted by anybody else, and the offeree has nothing toto assign. ItIt has, inin fact been held that an option contract is not assignable.assignable."39 There is, however, overwhelming authority to show that the as­as- 40 signee of the option holder may enforce the contract.40 So, the contract will be 'enforcedenforced in favor of the administrator of a lessee 41 who had an option to buy;buy;41 of the heir of such a lesseelessee;;4242 of the option holder's committee in lunacy;43 of equitable assignees where no legal transfer has been made;44made ;44 and of assignees illin 38 Ranelagh v. Melton, 2 Dr. & Sm. 38 Rallelagh v. Meltoll, 2 Dr. & Sm. 278; 10 Jur. N. S., 1141. 39 Rease v. Kittle, (W. Va.) 49 S. E. 150. 39 Rease v. Kittle, (W. Va.) 49 S. E. 150. 40 Wilks v. Ga. Pac. R. R., 79 Ala. 180 (semble) ; 40 Wilks v. Ga. Pac. R. R., 79 Ala. 180 (semble) ; CummillsCummins v. Beavers, 103 Va. 230; Perry v. Paschal,PLlschal, 103 Ga. 134; DouglasDOltglas v. Whitmore, stated in Ripley v. Waterworth, 7 Ves. Jr. 456; House v. Jackson,Jacks01~, 24 Ore. 89. Ripley41 v. Waterworth, 7 Ves. Jr. 456; House v. 24 Ore. 89. 41 In re Adams & K. Vestry, 27 Ch. D. 394. 42 111 re Adams & K. Vestry, 27 Ch. D. 394. 42AIlkellYAnkeny v.v. Richardson,Richardsoll, 187 Fed.Fed. 550; this is probably unsound,unsound, forfor thethe benefit of thethe optionoption contract isis generallygenerally held toto be personal property andand to belong toto the executorexecutor forfor the benefit of thethe next of kin. See below, NotesNotes 56 and 57.57. 43 43 DibbinsDibbillS v. Dibbins,Dibbills, (1896)(1896) 2 Ch. 348 (semble).(semble). 44Friary44 Friary BreweriesBreweries v. Singleton,Sillgletoll, (1899)(1899) 11 Ch. 86;86; 22 Ch.Ch. 261.

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bankruptcy.bankruptcy.4545 TheThe optionoption contractcontract maymay bebe mademade toto thethe optionoption holderholder andand assignsassigns ;41;46 oror itit maymay bebe mademade expresslyexpressly non-assign-non-assign­ able.able.447 7 OfOf course,course, thethe optionoption holderholder cannotcannot substitutesubstitute somesome other'sother's responsibilityresponsibility andand creditcredit forfor hishis own;own; thethe assigneeassignee hashas nono remedyremedy untiluntil hehe seessees thatthat allall conditionsconditions precedentprecedent areare fulfilled.fulfilled. AA granteegrantee fromfrom thethe optionoption givergiver maymay alwaysalways retainretain thethe propertyproperty ifif hehe isis aa purchaserpurchaser forfor valuevalue withoutwithout notice.notice. ThisThis isis becausebecause thethe granteegrantee getsgets legallegal titletitle andand hashas equalequal equity.eguity. AA granteegrantee fromfrom thethe option giver maymay retainretain thethe propertyproperty eveneven thoughthough hehe hadhad notice andand gave nono value,value, inin casecase thethe optionoption waswas notnot aa contractcontract butbut waswas 4848 aa meremere offer andand hadhad not beenbeen acceptedaccepted priorprior toto conveyance.conveyance. andand perhapsperhaps alsoalso inin casecase thethe optionoption waswas a contractcontract underunder sealseal butbut with-with­ outout consideration.consideration.40411 InIn thethe latterlatter case,case, thethe optionoption holder would have nono remedyremedy atat lawlaw againstagainst thethe granteegrantee becausebecause ofof lacklaCK ofof privity, and he would havehave nono remedy in equityequity against thethe granteegrantee becausebecause he hashas given nono consideration.consideration. A granteegrantee .fromfrom thethe option giver maymay never retain thethe propertyproperty _as against anan option holder tvho'vho hashas given consideration for his option, in case such grantee had noticenotice of the option. 500 And the same isis truetrue wherewhere thethe option was a mere offer, .ifif the offer was properly accepted and the grantee had notice thereof before his own right accrued."'accrued.51 The heir or devisee of the option giver will take subjectliubject to thethe rights of thethe option holder, and the latterlatter may take 52 obtain a decree for specific performance against him.52

4 455BucklandBuckland v. Papillon,L. R. -l"1Eq. Cas. 477; 2 Ch. App. 67; assignable even though assigns were not mentioned in thethe option. 46 Maughlin v. Perry, 35 Md. 352; Pearson v. Millard, 150 N. C. 303. 47 Behrens v. Cloudy, 50 Wash. 400; Myers v. Stone, 128 la.Ia. -10.10. 484 8 As inin Cooke v.v. Oxley, 3 T. R. 653; DickinsonDickmson v. Dodds, 22-Ch.·D:463; Ch..D.-463; Peacock v. Deweese, 73 Ga. 570. 40 Graybill v. Brugh, 89 Va. 895; but see note 19 above. 50 Mills v.v. Haywood, 6 Ch. D. 196 (semble); ManchesterMa1Jchester Ship Canal Co. v. Manchester R. Co. (1901),2(1901), 2 Ch. 37 (semble) ;; Hersey v. Giblett, 18 Beav. 174; HasesHayes v. O'Brien, 149 Ill. 403; Ross v. Parks, 93 Ala. 153; Bir-Bir­ minghamninghain Canal Co. v. Cartwright, 11 11 Ch. D.421.D. 421. ThisThis isis not because thethe option holder has anan interestinterest inin thethe land, but because therethere isis anan impliedimplied negative covenantcovenant binding the option givergiver not toto sell toto others.others. 51 Ma1JsfieidMansfield v. Hodgdo1J,Hodgdon, 147147 Mass. 304.304. 52 52LawesLawes v.v. Bennett, 11 CoxCox 167;167; TownleyTownley 'lI.v. Bedwell, 1414 Ves.Ves. 591;591; Nicholson 'lI.v. Smith, 2222 Ch. D. 640;640; RocklatJd-R.Rockland-R. Lime CO.Co. V.v. Leary, 203 N.N. Y. 469;469; Birmingham Canal Co. 'lI.v. Cartwright,Cartwright,11 11 Ch. D.421D. 421 (devisee).(devisee).

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CHARACTERCHARACTER OFOF OPTIONOPTION HOLDER'SHOLDER'S INTEREST.INTEREST. ThereThere areare manY'many dictadicta toto thethe effecteffect thatthat anan optionoption holderholder hashas nono estateestate oror interestinterest inin thethe landland onon whichwhich hehe hashas anan option.option.ros"3 ThisThis isis correctcorrect inin casecase thethe optionoption isis toto bebe regardedregarded asas aa meremere offeroffer toto sell.sell. ButBut wherewhere thethe optionoption isis inin factfact aa conditionalconditional contractcontract toto convey,convey, thethe optionoption holderholder shouldshould bebe heldheld toto havehave anan interestinterest inin thethe land,land, withinwithin thethe meaningmeaning ofof the.the.statutestatute ofof frauds,frauds, justjust asas itit isis heldheld inin thethe casecase ofof thosethose whowho holdhold aa contractcontract rightright ofof purchase,purchase, butbut withwith 5 4 nono option.option.ro4 InIn factfact itit isis notnot unusualunusual forfor thethe option holder's rightright 5 toto bebe calledcalled anan equitableequitable interest.interest.1roro ItIt hashas alsoalso beenbeen heldheld thatthat onon thethe deathdeath ofof the the optionoption holder,holder, before noticenotice ofof acceptance,acceptance, thethe rightright passes, notnot toto thethe heir,heir, but " toto thethe personal representative.representative.roo Thi~This seemsseems toto bebe aa soundsound ruling,ruling, becausebecause thethe option holderholder had notnot boundbound himselfhimself toto buy,buy, and hishis heirheir oror devisee shouldshould notnot bebe permitted toto taketake fundsfunds fromfrom thethe personalpersonal estate and use themthem to buy landland forfor his ownown benefit,benefit, when thethe option holderholder had nevernever indicatedindicated anan intentionintention toto do soso him­him- 7 self.self.G7 TheThe option holder had thethe rightright toto dodo so,so, butbut he was notnot bound toto dodo so.so. The possession of such a right doesdoes not operate asas an equitable conversion of thethe amountamount of thethe price to be paid, so thatthat it shouldshould thereafter be regarded asas dedicated to the use of the heir. In this respect therethere is a great difference between the position of the option giver and thethe option holder. Where there has been made a valid bilateral contract to convey landland for a price, the vendor is held toto have worked an equitable conversion of the land into personalty, and in case of death before conveyance, the vendor's executor can enforce the contract for the benefit of the

E3 Ide v. Leiser, 10 Mont. GS Ide v. Leiser, 10 Mont. 5; Myers v. Stone,StOlle, 128 la.Ia. 10; Bostwick v. Hess, 80 Ill. 138; ManchesterMallchester Ship CanalCallal Co. v. ManchesterMallchester R. Co., (1901) 2 Ch. 37. But held in BucklandBltcldalld v. Papil101t,Papillon, L. R. 2 Ch. App. 67, that an option for a lease was an interest inin the land within the meaning of the Bankruptcy Act. r4 See Dougherty G4 See Dougherty v. Catlett, 129 Ill. 431. "'froro People's R. Co. v. Spencer, 156 Pa. 85; ThompsonThompsoll v. Thompson,Thompsoll, 1 Jones 430; Thalheimer v. Tischler, 55 Fla. 796; LondonLOlldoll Co. v. Gomm, 20 Ch. D. 562. 56 GO 111it re Adams & K. Vestry, 24 Ch. D. 199; 2727 Ch.Ch.' D. 394; BrantlyBralltly on011 Contr. 146. In GustinGustill v.v. UnionUlIioll School Dist.,Dist., 9494 Mich. 502,502, thethe CourtCourt said:said: "The deceased (option(option holder)holder) had merely a rightright toto acquire an interest, andand' atat hishis death nothingnothing descendeddescended toto hishis heirs.heirs. The lease,lease, however,however, withwith thethe accompanyingaccompanying rightright toto purchase, did passpass toto hishis representatives."representatives." 5 7 Fry G7 Fry S. P., Sec. 218.

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5 nextnext ofof kin,kin, toto thethe exclusionexclusion ofof thethe heir;heir ;588 andand toto thethe exclusionexclusion ofof aa deviseedevisee ofof thethe land,land, inin casecase thethe contractcontract waswas mademade subse-subse­ quentquent toto thethe executionexecution ofof thethe will.will.599 InIn likelike manner,manner, thethe vendee,vendee, havinghaving boundbound himselfhimself toto acceptaccept conveyanceconveyance andand toto paypay thethe price,price, hashas workedworked aa similarsimilar equitableequitable conversionconversion ofof thethe amountamount ofof thethe purchasepurchase priceprice toto bebe paidpaid byby him,him, andand hishis heirheir oror deviseedevisee cancan compelcompel thethe executorexecutor toto applyapply thethe moneymoney toto purchasepurchase thethe land,"land,6o oror otherwiseothenvise forfor thethe benefitbenefit ofof thethe heirheir oror devisee,6devisee,611 toto thethe ex-ex­ clusionclusion of thethe nextnext ofof kin.kin. AnAn option contract,contract, onon thethe otherother hand,hand, isis aa unilateral contract.contract. The optionoption givergiver isis boundbound toto convey,conv.ey, butbut thethe optionoption holderholder isis notnot boundbound toto buy.buy. AsAs shouldshould bebe ex-ex­ pected,pected, thethe resultresult ofof thisthis is,is, thatthat thethe option giver isis heldheld toto have workedworked anan equitableequitable conversionconversion ofof hishis landland inin casecase thethe conditionsconditions ofof thethe contract areare fulfilled.fulfilled. IfIf thethe optionoption holderholder ,fulfils-fulfils thosethose conditions, subsequent toto thethe deathdeath ofof thethe optionoption giver,giver, thethe EnglishEnglish courts hold,hold, thatthat thethe personal representative of thethe ven-ven­ dor,dor, and not thethe heir,heir, will get thethe money.money.022 But thethe option holder hashas not boundbound himselfhimself toto buy,buy, and hashas thereforethere'fore worked nono equitable conversion of hishis personal estate. If hehe dies without becoming bound, his heir shouldshould not profit, forfor itit isIS notnot shown that the deceased desired him toto profit.profit. The doctrine of equitable conversion rests wholly upon the supposedsupposed intention and desire of the deceased, and in this case thethe deceasedde~eased expressed no in-in­ tention. But thethe deceased had a valid contract right,right, a chose in action. It is property, and belongs to his estate. But it is per-per­ sonal property and goes to thethe executor as such. From the foregoing, it appears that the position of the option giver isis almost identical with that of anyoneany one who has made a binding contract to convey. This could scarcely be so, if the option were nothing more than an unaccepted offer. In fact, it is nearly always a present contract to convey on condition, and should be so treated. Some of the American courts hold that the equitable conversion

ro8r'sBubb'sBllbb's Case,Case, Freeman C. C. C. 38;38; I Ames CasesCases Eq., 194. roo59 Mayer v.v. GO~lJland,Gowland, 22 Dickens 563.563. 0000 Milner v. Mills, Moseley, 123;123; lAmesIAmes Eq. Cas., 191;191; Daire v.v. Bev­Bev- crsham,ersham, Nelson 76; II Ames 192. 1 011M Matthewsatthcws v. Gadd,Gadd, 2 South Australia L.L. R. 129;129; 1 Ames 193.193. 2 62_Lawes v. Bcnnett,Bennett, 1 Cox 167;167; TowllleyTownley v.v. Bedwell, 1414 Yes.Ves. 591;591; 11 Ames 199.

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ofof th~the optionoption giver'sgiver's landland doesdoes notnot taketake placeplace untiluntil noticenotice ofof ac­ac- 3 ceptanceceptance byby thethethe optionoption holder.holder.03 PossiblyPossibly thesethese decisionsdecisions cancan bebe i.~stifiedi.~stifiedjustified onon thethethe groundground thatthat nono conversionconversion shouldshould bebe heldheld toto taketake placeplace i~in thethethe casecase ofof any any conditionalconditional contractcontract toto convey,convey, untiluntil thethe fulfilmentfulfilmentfulfilmerlt ofof thethethe condition.condition. IfIf thethethe premisespremises areare destroyeddestroyed byby fire,fire, beforebefore thethe optionoption holderholder hashas fulfilled·fulfilled·fulfilled thethethe condition,condition, byby giving giving notice oror otherwise,otherwise, itit hashas beenbeen heldheld thatthatthat thethe optionoption holderholder isis entitledentitled toto thethe insuranceinsurance ifif h,ehe 4 fulnlsfulnlsfulfils thethethe conditioncondition later.later.later.664 InIn EnglandEngland ititit hashas beenbeen held,held, thatthat anan option onon landland forfor anan in­in- 65 definitedefinite timetimetime isisis obno~iousobnoxious toto thethe rulerule againstagainst perpetuities.65 TIMETIME ISIS OFOF THE EsSENCE.ESSENCE. InIn optionoption contractscontracts timetime isis nearly alwaysalways ofof thethe essence.600 ThisThis wouldwould bebe soso on on eithereither theorytheory ofof an an option. IfIf we regardregard itit asas anan offer,offer, ititit isisis openopen forfor aa timetime limitedlimited and no offeroffer cancan be ac­ac- 7 ceptedcepted after itsitsits lapse.lapse.lapse.61 IfIf we regardregard itit as aa conditional contract, itit containscontains thethethe express express conditioncondition thatthat notice shallshall be givengiven or that moneymoney shallshall bebe paidpaid byby a speci.fiedspecified time.time. Such anan express condi­condi- tiontion shouldshould bebe enforcedenforced accordingaccording toto its terms,terms, unless suchsuch en­en- forcementforcement willwill resultresult inin an inequitableinequitable forfeiture.forfeiture. InIn thesethese cases therethere isis no such forfeiture;forfeiture; thethe option holder has receivedreceived full value forfor thethe consideration he paid forfor the option itself, and he has asas yet paid nothingnothing on thethe cop-tractcontract of sale. He is in statu quo. There maybemay be more thanthan oneone act, the performance of which by , 63 Smith v. Loewenstein, 50 Ohio St. Rockland-R. 03Smith v. Loewenstein, 50 Ohio St. 346; Rockland-R. Lime Co. 'lI.v. Leary,Leary, 203 N. Y. 469.469. 64 Williams v. Lilley, 67 Conn. 50; People's Street 6464 Williams 'lI.'lI. Lilley, 67 Conn. 50; .People's Street R. Co. 'lI.v. Spencer, 156156 Pa. 85.85. Contra,Contra, Edwards 'lI.'lI.v. West,7West, 7 Ch. D. 858; Gilbert 'lI.v. Port, 28 OhioOhio St.St. 276. Of course, thethe option contract may itselfitself show which party isis beneficiary.beneficiary. Allyn 'lI.'lI.v. Allyn, 154154 Mass. 570. 05 Allyn Allyn, 65651 London Co. 'lI.'lI.v. Gomm, 20 Ch. D. 562, overruling on this point Bir­Bir- minghamminyham Co. 'lI.'lI.v. Cartwright, 11 Ch. D. 432; but see MullerMttller v.'lI. Trafford, (1901)(1901) 11 Ch. 54; Manchester Ship Canal Co. 'lI.v.'lI. Manchester R. Co., (1901) 22 Ch. 37. 6 0606 Barrel 'lI.v.'lI. Sabine, 1 Vernon, 268; Dibbins 'lI.'lI.v. Dibbins, (1896) 2 Ch. 348; CampbellCampbell 'lI.'lI.v. London Co., 5 Hare, 519, 529; Potts v.'lI. Whitehead,Whitehead,20 20 J. N. J.J. Eq. 55; Maughlin 'lI.v.'lI. Perry, 35 Md. 352; White 'lI.v. Hanford Bank,Baltk, 148148 Cal. 552; Neill 'lI.v.'lI. Hitchman, 201 Pa. 207; Kemp v.'lI; Humphreys, 13 Ill. 573; Longfellow 'lI.v.'lI. Moore, 102 Ill.Ill. 289; Harding 'lI.v.'lI. Gibbs, 125 Ill.Ill. 85; Wat­Wat- sonson 'lI.v.'lI. Coast, 35 W. Va. 463. But a condition that rentrent shall have been "duly""duly" paid does not mean "punctually". Starkey 'lI.'lI.v. Barton, (1909)(1909) 1 Ch. 284.284. 67Haughwout v. Boisaubin, 18 N. J.Eq. 318. 6161 Haughwout 'lI.'lI. Boisatlbin, 18 N. J. Eq. 318.

HeinOnline -- 23 Yale L.J. 662 1913-1914 OPTIONOPTION CONTRACTSCONTRACTS thethe exactexact timetime specifiedspecified isis aa conditioncondition precedent.precedent. FrequentlyFrequently thethe optionoption givergiver promisespromises toto conveyconvey ifif thethe' optionoption holderholder shallshall givegive noticenotice ofof hishis electionelection byby aa fixedfixed time,time, andand' shallshall paypay thethe priceprice 6 withinwithin anotheranother fixedfixed timetime thereafter."thereafter.868 InIn RanelaghRanelagh v.v. Melton,Melton,G9" aa leaselease providedprovided thatthat "in"in casecase thethe lesseeslessees shallshall givegive threethree monthsmonths noticenotice toto thethe lessorlessor andand shall,shall, atat thethe expirationexpiration ofof suchsuch notice,notice, paypay untounto himhim thethe sumsum ofof £210£210 ** *** * thethe lessorlessor willwill convey."convey." TheThe moneymoney waswas notnot tenderedtendered untiluntil tenten daysdays afterafter thethe expirationexpiration ofof thethe threethree monthsmonths notice,notice, andand thethe courtcourt refusedrefused toto compelcompel thethe lessorlessor toto convey.convey. ThisThis decisiondecision isis correctcorrect becausebecause paymentpayment byby aa dayday certain'certain: waswas anan expressexpress conditioncondition precedent.precedent. TheThe courtcourt shouldshould notnot disregarddisregard it,it, andand holdhold thethe defendantdefendant onon aa promisepromise withwith aa differentdifferent condition,condition, unlessunless thethe plaintiffplaintiff isis aboutabout toto suffersuffer anan un-un­ reasonablereasonable forfeiture.forfeiture. HereHere itit isis notnot so.so. TheThe reasonreason givengiven byby thethe court, however, waswas thatthat thethe relationrelation ofof vendorvendor andand purchaserpurchaser diddid notnot existexist untiluntil actualactual payment,payment, regardingregarding thethe optionoption asas beingbeing thethe offeroffer ofof aa promisepromise forfor anan act,act, as in classclass IIII herein.herein. ThisThis analysisanalysis seemsseems toto bebe incorrect,incorrect, eveneven thoughthough thethe decision isis sound.sound. TheThe contract should bebe regardedregarded as aa conditionalconditional contract toto sell, datingdating from thethe timetime thethe leaselease waswas executed, the consideration being thethe covenant,covenant· to pay rent.rent. If1£ thethe condition is onlyonly that notice shall bebe given within a cet-cet­ taintain time,,time,. and no timetime is specified forfor the making of payment, a delay in paying is not fatal to thethe optibn holder.7700 Of course, if thethe option specifies no particular time for either notice or pay-pay­ 71 ment, time is not of the essence.71.essence. Arthur L. Corbin. Yale University.

68 RanelaghRa1lelagh v. Melton, 2 Dr. & Sm. 278; 10 JJur.ur. N. S. 1141; Rockland­Rockland- R. Lime Co. v. Leary, 203 N. Y.Y. 469. There may also be other.other conditions precedent, e.g., appraisal, WoodrwffWoodruff v. Woodmff, Woodruff, 44 N. J. Eq. 349. 6989 2 Dr. & Sm.Sm. 278; 10 Jur. N.N. S. 1141.1141. 1070 Pegg v.v. Wisden,Wisden, 16 Beav. 239; Nichols011Nicholson v. Smith, 2222 Ch. D. 460; Friary Breweries v.v. Single'ton,Singleton, (1899)(1899) 11 Ch. 86; 22 Ch. 261; Maug/!linMaughlin v. Perry, 35 35 Md. 352.352. 7171 Moss v. Barton, L. R. 11 Eq. Cas. 474.474. (A(A three-yearthree-year leaselease with optionoption for a renewalrenewal forfor 5,5, 7,7, 14, 14, oror 2121 yearsyears fromfrom expiration.expiration. Lessee continuedcontinued toto occupy, but gave no notice until fourfour years after expirationexpiration of firstfirst lease.lease. SpecificSpecific performanceperformance decreed.)decreed.) BucklalldBuckland v.v. Papillon,Papillon,L. L. R.R. 22 Ch.Ch. App.App. 67;67; 11 Eq.Eq. Cas.Cas. 477;477; HerseyIJersey v.v. Giblett, 1818 Beav.Beav. 174;174; Byers v. DenverDenver C.C. R. Co.,Co., 1313 Colo.Cblo. 552.552. AA reasonablereasonable timetime willwill bebe allowed.allowed. LarmonLarmonv. v. Jordan,Jordan,5656 Ill.Ill. 204;204; StolleStone v.v. Hanlloll,Harmon,31 31 Minn.Minn. 512;512; Fitzpatricl~Fitzpatrickv. v. Woodruff,Woodruff, 9696 N.N. Y. 565.565.

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