An option agreement is characterized by which feature?

• A. It has no effect on offer duration
• B. The offer must be accepted before a certain date
• C. Separate consideration is given to keep the offer open
• D. It requires a signed document

Answer: (C)

The key idea is that an option agreement creates an option contract by requiring separate consideration to keep the offer open for a fixed period. The buyer pays option money to the seller, and in return the seller agrees not to revoke the offer for the duration of the option. This gives the buyer an exclusive right to purchase at the agreed terms within that time frame, while the seller is bound to preserve the offer during those days.

That’s why the correct choice is that separate consideration is given to keep the offer open. Without this separate consideration, the offer could be withdrawn or lapse, and there wouldn’t be a binding, irrevocable period.

The other statements aren’t the defining feature. An option does affect how long the offer stays open, so saying it has no effect on offer duration isn’t accurate. While the option period implies a deadline, the existence of separate consideration is what truly distinguishes an option contract. And while option agreements are typically in writing and signed for enforceability, the essential characteristic highlighted in exams is the payment of consideration to keep the offer open.