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Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

CHAPTER 3 ACCEPTANCE AND REJECTION OF OFFER

1-3 Corbin on Contracts § 3.3

§ 3.3 Assignment of Power by an Option Holder-Irrevocable Offers

In the case of an irrevocable offer, the power of acceptance can generally be assigned without the assent of the offeror.n1 The general rule can be derogated by a lawful provision in the offer restricting assignability.n2 An irrevocable offer is both an offer and a binding contract. The offeree has what is called a ''binding option,'' and the transaction has already created a contract. The holder of the option has contract rights, and usually is as yet under no duties, the option contract being unilateral. The transaction also involves an offer to the holder of the option, who has an irrevocable power of acceptance. The courts have treated such a transaction as a unit, with the result that the option holder's power, as well as rights, are assignable without the assent of the other party.n3

Just as in the case of other contracts, however, if the exercise of the option involves the undertaking of a legal duty by the option holder, the rights of any assignee will be conditional upon the undertaking of that duty by the contemplated party. Likewise, if the contract made by the exercise of the option is one that requires a personal performance by the option holder, the rights of the assignee will be conditional on such personal performance. Thus, if A gives to B a binding option to buy land for a sum of money in cash, B can assign the option to C and the latter can compel conveyance by A on proper tender of the cash; no credit is involved and it is immaterial who pays the money.n4 On the other hand, if the option given to B is to buy land for B's note for $1,000 and for B's services as an attorney, B can assign the option to C, but C's right to a conveyance will be conditional on giving B's note and the readiness of B to act as attorney. C cannot compel performance by A by tendering C's own note and services in place of B's.n5

Legal Topics:

For related research and practice materials, see the following legal topics:

Contracts LawFormationAcceptanceMethods of AcceptanceGeneral OverviewBusiness & Corporate LawAgency RelationshipsAuthority to ActContracts & ConveyancesEnforcement & ExecutionContracts LawTypes of ContractsOption ContractsContracts LawPerformanceAssignmentGeneral Overview

FOOTNOTES:

(n1)Footnote 1. See also §§ 271, 883 below.

(n2)Footnote 2.

Cal. - Masterson v. Sine, 68 Cal.2d 222, 65 Cal.Rptr. 545, 436 P.2d 561 (1968) .

Ky. - Campbell v. Campbell, 313 Ky. 249, 230 S.W.2d 918 (1950) .

(n3)Footnote 3.

Minn. - Koehler & H. Mercantile Co. v. Illinois Glass Co., 143 Minn. 344, 173 N.W. 703 (1919) ; McMillan v. Ames, 33 Minn. 257, 22 N.W. 612 (1885) .

N.Y. - Cochran v. Taylor, 273 N.Y. 172, 7 N.E.2d 89 (1937) assignee of option given specific performance.

Ohio - Himrod Furnace Co. v. Cleveland & M.R. Co., 22 Ohio St. 451 (1872) .

Or. - House v. Jackson, 24 Or. 89, 32 P. 1027 (1893) , option in a lease.

Eng. -Whiteley v. Hilt, [1918] 2 K.B. 808, 119 L.T.R. 632. Restatement (Second) of Contracts § 320, ill. 2.

(n4)Footnote 4. Restatement (Second) of Contracts § 310, ill. 1.

(n5)Footnote 5.

Ga. - Franklin v. Jordan, 224 Ga. 727, 164 S.E.2d 718 (1968) . Although the option to purchase land was assignable, indeed explicitly so, the assignee's ability to demand performance was conditioned on the tender of the note of the original optionee. Because of the lack of such tender, specific performance was denied.

Mass. - E.M. Loews, Inc. v. Deutschmann, 344 Mass. 765, 184 N.E.2d 55 (1962) .

N.Y. - Lojo Realty v. Estate of Johnson, 253 N.Y. 579, 171 N.E. 791 (1930) .

Restatement (Second) of Contracts § 319, ill. 2, § 320, ill. 2.