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Acceptance of an offer is not a condition for concluding an option agreement for the conclusion of a contract, since before the acceptance of an offer, the parties already have a number of obligations – to serve the offer itself, to accept it, to pay remuneration.
Until the conclusion of the main contract, the accepting party does not have the right to demand fulfilment of obligations. This means that, having concluded the option agreement, the business entity is not considered to have concluded the main contract. Prior to the acceptance of the directed offer, the acceptor cannot assign the right to demand fulfilment of obligations under the main contract, transfer the performance results or otherwise dispose of them.
The only right of claim that an accepting party has is the claim to conclude a main contract. Until the moment when the request to conclude a main contract is served, there is only unilateral will of the party that served the offer to enter into a contractual relationship. In this regard, we should agree with the opinion of V.V. Vitryansky, who emphasizes that the characteristic feature of this contractual structure is the fact that its subject is not the actions of the obligated party for the transfer of goods, the performance of work, the provision of services, the payment of money, as is the case in an ordinary contractual obligation, but the vesting of an authorized party (the holder of the option) an unconditional right to enter into a relevant contract, from which the counterparty will be required to perform certain actions12.
Defining the subject of the option to conclude the contract, the legislator expanded the legal construction of the offer by adding it with a disposability in terms of the compensability of the offer within the option to conclude a contract. The remuneration of an option to conclude a contract does not contain a direct indication of the possibility of pursuing another economic goal. Article 429.2 of the Civil Code of the Russian Federation, as compensation, provides for two conditions
to their relations within the framework of the work agreement, the enforcement of which is provided by a measure of state coercion.
12 Vitryansky V.V. Ibid. P. 179.
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– payment or other counter performance. However, the absence of a direct indication of the pursuit of another economic goal does not prohibit its use as a payment for granting an option to conclude a contract. By virtue of the principle of freedom of contract, the parties are free to establish its conditions. Thus, the parties are entitled to conclude several interrelated deals, united by a single economic goal, which will include an option to conclude a contract.
The pursuit of another economic goal as a condition for the payment of an option to conclude a contract makes it possible to expand the ways in which this contractual structure is applied for business purposes. This contractual structure will allow to define in more detail the economic relations of the parties both within the framework of one agreement and in a systemic relationship with other deals concluded between the parties and with third parties.
The purpose of the option to conclude a contract is to obtain an acceptance by the acceptor of the right to claim the offeror to conclude the main contract within the period specified in the offer. Thus, the option to conclude a contract is considered concluded from the moment when an agreement has been reached between all the offerors and the acceptor on all the essential conditions for granting the offer (including the essential terms of the main contract) and the procedure for its acceptance. This indicates the consensual nature of the option to conclude a contract.
The offer is not a thing that must be transferred for the conclusion of a real deal and the fact that the offer is served, provided that the parties agree on all the essential terms of the main contract, is not legally significant for its conclusion in the future. The option to enter into a contract already provides for the obligation of the offeror to conclude an agreement with the consent of the acceptor. Even if the offer will not be served, the obligation to conclude a contract exists and does not cease. In the absence of an offer, the acceptor has the right to declare in court the demand for recognizing the contract as a prisoner or the requirement to compel the conclusion of a contract.
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In business, this means that the accepting party, having concluded the option agreement, calculates in the system of its own contractual relations to the main contract, as a legal fact. Supplies of inventory items under such a contract, although not concluded, can already be included in the entrepreneurial plans of the accepting party.
The direction of the offer means the termination of the offeror's obligation under the option agreement. The further fate of relations between the parties depends on the will of the acceptor. In case of refusal to accept a direct offer, the relations are being terminated. In the case of an acceptance of the received offer, the relations continue within the framework of the main contract concluded.
Unlike classical legal relations, generated by the serving of an irrevocable offer, the legislator in Art. 429.2 of the Civil Code of the Russian Federation indicates that the acceptance of an irrevocable offer should be made not on the terms of an offer, but on the terms of an option. Thus, the legislator additionally emphasizes that when using the option contractual structure, the obligation of the offeror to conclude the main contract arises earlier than the offer and follows not from the offer, but from the agreement on granting the option to conclude the contract.
Such a formulation of the legal norm seems to be not very successful, as it can give rise to a number of disputes related primarily to the content of the concept of options. Moreover, proceeding from the formulation in question for the conclusion of the main contract, the direction of the irrevocable offer is not required.
The subject of an option to conclude a contract is the obligation to conclude a main contract and, accordingly, a mechanism for the implementation of such an obligation, which can be brought into effect only by one of the parties. It is the onesided nature that the introduction of the mechanism for concluding the main contract is most needed in business activities, since it is subordinated to the economic goals of only one party and does not create additional obligations for it.
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There is quite a consequent question, what reasons prompted the legislator to create such a complex contractual structure consisting of an interrelated bilateral deal in the form of an option agreement and two unilateral deals – an offer and its acceptance.
Returning to the legal definition of the option to conclude a contract, it should be noted that this contractual structure is a way of concluding a basic contract on pre-determined conditions by serving an irrevocable offer and its acceptance in a specified period of time. In this case, the direction of the offer may be due to reimbursement on the part of the acceptor.
The contractual structure of the option to conclude a contract differs from the acceptance of the offer by reimbursement and the possibility to determine acceptance by a certain event, depending also on the will of one of the parties.
In fact, the general mechanism for concluding a contract by accepting an irrevocable urgent offer is aimed at achieving the same goal as the option to conclude a contract – the conclusion of a contract in a certain period of time on the basis of the will of the acceptor. Article 429.2 of the Civil Code of the Russian Federation provides an opportunity for the parties to an option to enter into a contract to accept a directed offer only upon the occurrence of a certain circumstance, depending also on the will of one of the parties13.
Is it possible to compensate for serving the classical offer, which is provided by the option to conclude a contract?
Payment of a reimbursement by an acceptor in favour of an offeror for the provision of an irrevocable offer is an obligation of the acceptor to the offeror in accordance with the condition of the option agreement.
The obligation to pay compensation in favour of the offeror directly in the offer itself, sent in accordance with Art. 435 of the Civil Code does not create for the acceptor an unconditional obligation for its payment before the acceptance of
13 For instance, when concluding an option to acquire a stake in the share capital of a company, such a circumstance may be the achievement by the commercial organization of a certain level of profitability or the achievement of a minimum profit level established by the parties.
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the offer. Accepting an offer in part or in stages is impossible. Such a mechanism is not provided by the Civil Code of the Russian Federation.
It seems possible to point out the need for payment of remuneration as one of the preconditions for an offer, but then the acceptor also has an obligation to pay the remuneration to the offeror only in the case of an acceptance of the offer. This circumstance substantially restricts the right of the offeror to receive remuneration in comparison with how this right is granted by the option to conclude a contract.
The comparative analysis of the option to conclude a contract and the legal relationship of the parties when accepting an irrevocable offer directed beyond the option agreement allows us to conclude that the option to conclude a contract is a contractual structure that is a compilation of classical legal relations arising from the acceptance of an irrevocable offer, general provisions on concluding a contract and principle of commercial nature of the contract, which, in conjunction with the dispositive nature of Art. 429.2 of the Civil Code of the Russian Federation makes this contractual structure the most convenient for building relationships between business entities.
In the law-enforcement practice of resolving disputes arising from the option to conclude a contract (formed in respect of option contractual structures concluded prior to the introduction into the Civil Code of the Russian Federation of their legal definition, but permitted after the entry into force of the provisions of articles 429.2 and 429.3 of the Civil Code), Art. 429.2 Civil Code and on contracts concluded earlier14, which in our opinion is a direct violation of Art. 4 of the Civil Code of the Russian Federation. Nevertheless, such a compulsory way of forming law enforcement practice introduces uniformity in the further practical application of the legal definition of an option agreement.
14 Decree of the Arbitration Court of the Volga-Vyatka District dated 23. 09.2015 on case No А31-
7898/2014[Electronic resource]: Access from the legal reference system “Consultant Plus” (access date:
25.07.2017).
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Civil law currently does not limit the scope of the option entities for the conclusion of the main contract. They can be both legal entities that carry out exchange activities, as well as business entities, citizens, non-profit organizations.
The legal object of obligations arising from the option to conclude a contract, as well as any other deal, is the aggregate behaviour of the obligated persons, aimed at the fulfilment of the main obligation – the conclusion of the main contract (delivery, provision of services, performance of work).
The legal object of the option to conclude a contract is the obligation of the offeror to send an offer that meets the conditions of the option agreement and accept payment from the acceptor or other counter-fulfilment of obligations. Obligations of the acceptor are the obligation to accept the offer, pay the remuneration to the offeror and, accordingly, meet the deadlines for accepting the accepted offer. On this, the legal object of the obligations arising from the option agreement ends. An option agreement is deemed to be executed, and further relations of the parties are built on the obligations arising from the main contract in the case of acceptance of the directed offer.
The analysis of the legal object of obligations additionally testifies to the need for the proposed changes to Art. 429.2 Civil Code of the Russian Federation.
From the moment of acceptance of the served offer between the acceptor and the offeror, the main contract provided for in the option agreement becomes a prisoner.
The principle of equality of parties to civil legal relations, established art. 1 of the Civil Code of the Russian Federation, operates in an option agreement only at the stage of formation of contractual terms. Since the conclusion of the agreement, the parties remain in an unequal position. By sending an offer, the offeror becomes obliged to ensure, for a certain period of time, the availability of the subject matter of the main contract and the opportunity to transfer the item to the acceptor at a price stipulated in the option agreement.
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Achieving an agreement on granting an option on the basis of an imbalance of interests may be due only to the existence of a different economic goal pursued by the offeror. Obviously, the achievement of this goal for the offeror is significant enough that it is ready to bear the risks of losses in a certain period of time due to a change in both the price and the demand for the subject of the main contract in the relevant commodity market. Such an economic goal certainly refers to one of the forms of remuneration provided to the offeror for the direction of an irrevocable offer and should be specified in the option agreement. Anything else can make it difficult or impossible to protect it.
The inclusion as a remuneration of the offeror in the legal definition of an option to conclude a contract of a different economic goal will create conditions for maximum transparency and detailing of the relationship between the offeror and the acceptor, including when concluding several separate deals united by a common goal.
In this connection, it seems possible to state paragraph 1 of Art. 429.2 of the Civil Code of the Russian Federation as amended:
"By virtue of the agreement to grant an option to enter into a contract (option to conclude an agreement), one party grants to the other party the right to enter into one or more contracts within a certain period on the terms stipulated in the agreement on granting the option to conclude the contract. The agreement on granting an option to conclude a contract must contain all the essential conditions of the main contract. The option to conclude a contract is granted for a fee, due to the achievement of another economic goal or other counter performance. The other party is entitled to conclude the contract in the manner, terms and conditions stipulated in the agreement on granting the option to conclude the contract. "
The proposed wording of paragraph 1 of Art. 429.2 of the Civil Code of the Russian Federation will delineate the obligations arising from the option agreement for the conclusion of the main contract from the obligation to conclude a contract arising from the relations of the parties when accepting a directed offer.
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The proposed edition will make full certainty in the principle of compensation for the relations of the parties to the option to conclude a contract. As an option remuneration for the offeror, it can also include counter-fulfilment of obligations by the acceptor, and the achievement of another economic goal in the entrepreneurial activity. Such a definition of option compensation will allow to detail the contractual relations of business entities and maximally provide judicial protection of their contractual interests.
Having considered the legal definition of the option to conclude a contract, it can be concluded that the option to conclude a contract is a bilateral consensual deal. Its subject is the acquisition by one of the parties of the right to conclude a contract in a certain period of time on pre-agreed terms.
The use of the option to conclude a contract in various spheres of business activity provides for its reimbursement. As an option remuneration can act as a direct monetary reward, the counterparty performance of the other party commitment, and the achievement of a different economic goal.
The option to enter into a contract can be used as a contractual structure in an entrepreneurial activity in cases where one of the counterparties is not sure in advance of the need for it to enter into a basic contract in the future period.
In addition, the option to conclude a contract can be used by business entities as a regulator of economic relations and encouraging the counterparty to properly perform its counter obligations.
1.2 The concept of an option agreement and its main features
In the course of carrying out economic activities, entrepreneurs often have a need to purchase warehouse stocks of raw materials, use the results of subcontractors' work as part of their own goods, works or services. Often there is a situation when certain types of goods, works or services may be required only if other contracts with potential counterparties are concluded.
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The early acquisition of raw materials and their storage in the warehouse increases the costs of entrepreneurial activity. In this regard, for an entrepreneur, one of the essential ones is a contractual structure that will ensure the timely delivery of the necessary goods or raw materials, the performance of certain works on the first demand.
Undoubtedly, then, for an entrepreneur who is a buyer, such contractual relations are most convenient and economically expedient. But will such a situation be effective for the supplier of goods or raw materials? It is unambiguous that it is not economically viable for the supplier to reserve part of the production and wait for the buyer to express his will, shifting the burden of storage and ensuring the safety of the goods. If, however, these inconveniences are paid by the buyer in cash separately from payment of the value of the goods, the supplier gets the opportunity not only to profit from waiting, but also to increase the volume of products sold.
Therefore, such a contractual structure is necessary, within which the buyer could purchase not the goods as such, but the right to purchase it, thereby paying the supplier for warehouse costs. The role of such a contractual structure is carried out by an option agreement.
V.V. Vitryansky believes that contained in Art. 429.3 of the Civil Code of the Russian Federation, the definition of an option contract and its legal regulation do not allow us to speak of an option contract as a special contractual arrangement (in contrast to the same agreement on granting an option to conclude an agreement)15. This point of view is very controversial for the following reasons.
First, the purpose of the option contract in commercial turnover is difficult to overestimate. Due to the flexibility of this contractual structure, one of the parties is able to complete the deal in fulfilment of which the option agreement was concluded on the basis of the most favourable conditions in the relevant commodity market, and if such favourable conditions do not come – to refuse to perform.
15 Vitryansky V.V. Ibid. P. 182.
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Secondly, the option agreement, being a bilateral deal, is directed first of all on the acquisition by one party of the property right of a claim to the other party. The realization of this right of demand depends solely on the will and economic interests of the party from whom it originated.
Thirdly, the obligated party to such a deal is ready to submit to the interests of the obliging party, taking compensation not only for execution, but also for waiting, when the obliging party declares its demand. If the option contract is paid off and the option fee is paid, this deal has an economic goal for both parties.
Thus, the subject of the option contract is not the supply of goods, the performance of work or the provision of services, but the right to demand at a convenient time for the commission of the listed actions.
When considering the legal definition of an option contract, it is further proposed to name the parties to such a contractual structure as the "binding party" (the party that owns the right to execute) and the "obligated party" (the party that assumed the obligation to perform the actions specified by the contract at the request of the other party).
Commenting on the legal definition of the option contract A.G. Karapetov notes that the option agreement is a contract, by virtue of which one party undertakes to fulfil its obligations, provided that the other party submits a corresponding demand16.
We can agree with this interpretation, but we believe that the legal design of the option agreement deserves a more detailed definition. A.G. Karapetov does not specify what kind of requirement is presented by the obliging party and when the obligation to fulfil the actions stipulated by the option agreement arises from the obligated party.
In Art. 429.3 of the Civil Code of the Russian Federation stipulates that the obliging party may present only such a requirement, which is preliminary stipulated in the option agreement. Despite the greater scope of powers than the obligated
16 Karapetov A.G. Ibid. P. 68.