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    OPTION MONEY and EARNEST MONEY

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    Lovely Jane Raut Cabilto
    Option money refers to a sum paid to hold an offer open for a specified period of time, and does not form part of the purchase price. Earnest money forms part of the purchase price and demonstrates the buyer's sincerity in completing the purchase. Key differences include: 1) Option money does not require the buyer to purchase, while earnest money binds the buyer to pay the balance; and 2) Option money cannot be recovered if the buyer does not purchase, while earnest money must be returned if the sale does not complete.

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    OPTION MONEY and EARNEST MONEY

    Uploaded by

    Lovely Jane Raut Cabilto
    63 views2 pages
    Option money refers to a sum paid to hold an offer open for a specified period of time, and does not form part of the purchase price. Earnest money forms part of the purchase price and demonstrates the buyer's sincerity in completing the purchase. Key differences include: 1) Option money does not require the buyer to purchase, while earnest money binds the buyer to pay the balance; and 2) Option money cannot be recovered if the buyer does not purchase, while earnest money must be returned if the sale does not complete.

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    law

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    Option money refers to a sum paid to hold an offer open for a specified period of time, and does not form part of the purchase price. Earnest money forms part of the purchase price and demonstrates the buyer's sincerity in completing the purchase. Key differences include: 1) Option money does not require the buyer to purchase, while earnest money binds the buyer to pay the balance; and 2) Option money cannot be recovered if the buyer does not purchase, while earnest money must be returned if the sale does not complete.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    63 views2 pages

    OPTION MONEY and EARNEST MONEY

    Uploaded by

    Lovely Jane Raut Cabilto
    Option money refers to a sum paid to hold an offer open for a specified period of time, and does not form part of the purchase price. Earnest money forms part of the purchase price and demonstrates the buyer's sincerity in completing the purchase. Key differences include: 1) Option money does not require the buyer to purchase, while earnest money binds the buyer to pay the balance; and 2) Option money cannot be recovered if the buyer does not purchase, while earnest money must be returned if the sale does not complete.

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    OPTION MONEY and EARNEST MONEY

    1st slide

    Option money is the consideration paid for the purpose of holding one to his promise to buy or sell a
    determinate thing for a certain period of time, which consideration is separate and distinct from the
    purchase price. The offeror cannot withdraw the offer until after the expiration of the option.

    Earnest money is the money given as part of the purchase price and as a proof of the perfection of the
    contract. It is also called “arras” or something of value to show that the buyer was really in earnest and
    given to the seller to bind the bargain.

    2nd slide

    OPTION MONEY VS. EARNEST MONEY

    OPTION MONEY EARNEST MONEY


    As to Money Given Money given as distinct Forms part of the purchase
    consideration for an option price.
    contract.
    As to Perfection Applies to a sale not yet Given only when there is
    perfected. already a sale.
    Obligation of the buyer upon Prospective buyer is not When given, the buyer is bound
    payment of consideration required to buy. to pay the balance.
    As to Recovery If buyer does not decide to buy, If sale did not materialize, it
    it cannot be recovered. must be returned. (Villuaneva,
    2014; Pineda, 2010)
    As to Transfer of Ownership Ownership is reserved to the Title passes to the buyer upon
    seller and is not to pass until full delivery of the thing sold.
    payment.
    Effect of Non-payment Specific performance. Specific performance and
    rescission.

    3rd slide

    Example:

    Aiko offered to sell her phone to Lean for P10,000, giving Lean a week to decide whether to buy
    it or not. Lean accepted the offer and gave Aiko P1,000 to hold the offer for a week.
    4th slide

    Example:

    Ashley offered to buy Nicole’s car for P750,000 to which Nicole agreed to it. To show that Ashley
    is in earnest, she gave Nicole P50,000 upon the execution of the agreement which Nicole accepts.

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