Options to Reconsider (Cooling-Off Options, Either-Or Options, and Options to Revoke Due to Non-Payment) — practice questions

Correct answer: C. Clauses 2/1 and 2/2: A cooling-off option gives one or both parties, or a third party, the right to continue or revoke within a stipulated period. It must be stipulated in the contract, unless implied by pre-existing custom or added later by agreement, and must have a stipulated time limit coinciding with the start of the contract. It is invalid if the limit is unstated or indeterminate, such as ending when an index reaches a particular value; there is no minimum or maximum except what custom accepts.

Correct answer: A. Clause 2/3: Cooling-off options apply to binding financial contracts such as sale, lease, transfer of debt, guarantee, division of wealth and Waqf. They do not apply to non-binding contracts such as unpaid agency, to contracts requiring advance payment such as Salam, or to contracts requiring spot payment of both countervalues such as currency exchange, since an option would defer the effect of the exchange.

Correct answer: D. Clauses 2/5/1 and 2/5/2: If the option is held by both parties or by the seller alone, ownership of neither countervalue transfers, and legal rights in the subject matter remain with the seller. If the option is held by the buyer alone, ownership of the sold item transfers to the buyer, and his conduct as owner serves as confirmation of the contract. Under Clause 2/4/3, neither party is obliged to pay or deliver during the option period unless agreed.