When a person wants to buy options from another person, from a broker or directly from the corporation, he is required to demand the agreement signed by the seller in order to authenticate the trade and to make sure that he in fact owns the rights on the options.
Key Purposes of using Option to Purchase Contract:
There are basically two key purposes of using and signing an option to purchase contract. First of all, this legal document indicates towards the actual owner of the options as there is physical proof of the options to own or possess, the contract itself serves as the legal proof of owning the rights of certain options in shares and stocks. Secondly, mostly when owners sell their options, they want the buyer to sell the options on a certain price and after a certain period of time and it’s not possible without asking him to agree with the terms and signing a contract with the seller. This way if the buyer resale the options before maturity or before agreed value, the seller can use the contract to file a case against the buyer.
Key Elements to include in the Option to Purchase Contract:
- Name of the person who is selling the options with complete address
- Name of the person who is buying the options with complete address
- Date when the owner is selling the options
- Details of the options i.e. amount, value, company name and other particulars
- Maturity and expiration of the options
- Specific rate and time when the new owner is allowed to resale or trade the options again
- Terms and conditions of the contract
- Termination and validation of the contract
- Signature of both parties with witnesses
Importance and uses of Option to Purchase Contract:
When it comes to the importance of the option to purchase contract, you can understand that the options are stocks and shares and there is nothing physical about these shares that one can own but he has to possess something i.e. legal document that indicates towards the legal owner of the options. This explains that if you want to buy options from another person, you need to have the signed contract by the seller in order to authenticate the deal and to make sure that you in fact own the options. Later, if you want to trade the options i.e. sell or exchange, you need to use the purchase contract in order to show the other buyer that you have the selling and trading rights of the options he is interested in. in the same manner, if you want to pledge the options as collateral for getting mortgage loan for personal or business purposes, you need to present the purchase contract to the mortgage firm or bank so that they can verify that you have the rights on the options. As well as when it comes to the use of this purchase contract, it is mainly used in trading options in shares and stocks i.e. selling, buying, exchanging or pledging.
Here is preview of a free sample Option to Purchase Contract created as fillable PDF form,
Here is download link for this Option to Purchase Contract,