tries to avoid paying a reward by revoking it are avoided. On the other hand, one practical problem with a promissory approach to cases of reward is that, unless the reward is offered in the course of business, it has to be in subscribed written form in order to be validly constituted.173 That would be unusual for an offer of reward, many of which appear simply on photocopied notices of reward, or as advertisements in newspapers or in shop windows. This problem can be avoided if recourse is had to the English offer analysis, and in fact, under English influence, some Scottish courts have taken just such a view, describing offers of reward made to the public as contractual offers capable of acceptance by conduct.174

Again under the influence of the Common law, in South Africa the offer of reward is regarded as an offer capable of acceptance by performance of the act prescribed as the condition for the reward, a view set out in Dietrichsen v. Dietrichsen175 and affirmed in Bloom v. The American Swiss Watch Company.176 In Louisiana, the relevant codal provision on offers of reward made to the public describes them as offers, but provides that they are binding on the offeror.177 The nature of this exceptional binding effect of an offer of reward is not explained, being simply provided for in the Code. It comes close to a unilateral promise, however, in that it is further provided that the offer is binding ‘even if the one who performs the requested act does not know of the offer’, which is not a commonly adopted position in relation to offers of reward conceived of in offer (rather than promissory) terms. The result is that, in form, Louisiana appears to adopt an offer analysis in respect of cases of reward but, in effect, treats them like unilateral promises. The result is a practical, though hardly elegant, one.

6.  Options

There is no single way to define the concept of an ‘option’. To make the term meaningful, however, it must be taken to signify more than just the right of someone who holds a revocable offer to accept it, otherwise option would mean no more than offer and vice versa. One could say that a firm or irrevocable offer is an option:178 on that view then, for instance,

173See the Requirements of Writing (Scotland) Act 1995, s 1(2)(a)(ii).

174Hunter v. General Accident Corp. 1909 SC 344, affd 1909 SC (HL) 30; Hunter v. Hunter

(1904) 7 F 136.

175 1911 TPD 486. 176 1915 AD 100. 177 CC Art. 1944.

178As the Dutch Civil Code (BW) does: ‘A stipulation whereby one party binds himself to enter into a certain contract with another party at the latter’s option is deemed to be an

in German law all offers would be, by default, ‘options’, because they give the offeree a right to accept the offer enforceable against the offeror if the offeror tries to revoke the offer. In fact, however, German law does not call such an irrevocable offer an option, reserving the description of offers for options contracts. Similarly, Louisiana distinguishes firm options and options, there being separate codal provisions for the two.179

For present comparative purposes, an inclusive definition of an option will be taken, that being as follows:

a right granted by A under either under a firm offer, or a contract, or a unilateral promise (but not merely one which is the subject of a revocable offer), giving to B a discretionary right either to compel A to enter into a further contract with B or else to confer some other benefit upon B.

An option might then theoretically be either bilateral (because it was a contractual option, binding both parties to the agreement) or unilateral (binding only the party granting it). Consider the following example:

A grants an option to B, for no consideration, permitting B to purchase some land in A’s ownership, such option to be exercised within one year. When B exercises the option nine months later, A reneges on the option.

How should the undertaking of A under such an option be characterised: is it a unilateral promise, a contractual undertaking, or something else? No assistance can be derived from the DCFR, which contains no provision dealing specifically with the nature of options.

German law recognises the validity of an option contract (Optionsvertrag), this being a contract in terms of which one party is given the right to require the other party to enter into a further contract with him, though no specific provision is made for such a contract in the BGB. Though the contract therefore creates circumstances which may be gratuitous (conferring rights only on one party), the option may only be obtained by the usual contractual method and not through any unilateral juridical act. If the option concerns the sale of land, it would have to comply with the provisions of §311b on land contracts and would thus require notarial authentication.

In English law, the principal hurdle to the creation of options is, as in the case of a firm offer, the requirement that a valid option have some

irrevocable offer’ (BW, Art 6:219(3)). See also the Restatement (Second) Contracts, §25, which provides: ‘An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer.’

179 The German and Louisiana positions are discussed further below, at pp. 231, 233.

reciprocal consideration for its grant. Given, however, the willingness of the courts to find ever more imaginary instances of consideration, a potential purchaser of land under an option might, for instance, very well be seen as having provided consideration for the option by instructing a survey to assess the suitability of the land for an intended purpose. In the absence of some type of consideration, however, no matter how strained or convoluted it may be, a genuinely gratis option would clearly be invalid. Where options are validly created in English law, they are conceived of as a species of so-called ‘unilateral contract’, since they create binding duties on only one party. As unilateral contracts they are said to transform into bilateral or synallagmatic contracts once the option is exercised.180 So English law, in trying to describe an essentially unilateral and gratuitous obligation, has to give it the clothing of contract in order for it to be accommodated within the Common law obligational model.

What of the mixed legal systems? In Scots law, the nature of an option can be that of a firm offer (which, as noted above, is an offer with a promise attached to it to keep the offer open) requiring acceptance,181 or simply a promise, plain and simple, not requiring any acceptance (though still evidently requiring to be exercised by some sort of notification on the promisee’s part). Scots law thus has no difficulty with saying that an option can be constituted by a unilateral promise; indeed the reported cases seem to indicate a preference for such a promissory view. If the option relates to a real right in land, it has to be in subscribed writing,182 but where the option is in promissory rather than contractual form, only the promise itself has to be in such a form, the exercise of the option need not be.183

In both South African and Louisiana law, an option must be embodied in contractual form in order to be valid. A problem for South African law, as it is in many other systems, is whether the option is sufficiently precise in its terms to be enforceable: an option contract may be invalid for lack of certainty, for instance if it does not specify aspects of the substantive contract to be entered into by the parties with sufficient ­precision.184 It has though been suggested that an option which does not specify a time limit on its exercise is not void for uncertainty, but is rather to be taken as of unlimited duration, though it may expire after a

180See Lord Diplock in Sudbrook Trading Estate Ltd v. Eggleton [1983] 1 AC 444, 477A–B.

181For a case of an option conceived of as a firm offer see Hamilton v. Lochrane (1899) 1 F 478.

182Requirements of Writing Act (Scotland) 1995, s. 1(2)(a)(i).

183Stone v. Macdonald 1979 SC 363 (CSOH).

184See Letaba Sawmills (Edms) Bpk. v. Majovi (Edms) Bpk. 1993 (1) SA 768 (A).

reasonable time.185 If the grantor of an option contract tries to revoke it, the option holder is entitled to enforce the option against the grantor by means of an interdict. Alternatively, the option holder may claim damages in an amount designed to put him in to the position he would have been in had the option been exercised, so long as he can demonstrate, on the balance of probabilities, that he would have exercised the option.186 An additional complexity of South African law is that it appears that the South African courts make a distinction between options contracts and so-called ‘preference contracts’, the latter relating to rights of pre- ­emption, because, according to the courts, an option contract is a contract to keep an offer open but in the case of a right of pre-emption no offer exists at the time of the grant, and the grantor is not obliged to make any offer unless and until he decides to sell the property. This means that while the acceptance of the offer covered by the option contract is sufficient for the exercise of the option, the exercising of a right of pre-emption requires bilateral action, that is the making of an offer and acceptance.

In Louisiana law, an option is a ‘contract whereby the parties agree that the offeror is bound by his offer for a specified period of time and that the offeree may accept within that time’.187 As with all contracts in Louisiana, no consideration is required for an option contract; however, as with other contracts, ‘cause’ is required.188 The Louisiana codal provision looks, somewhat confusingly, like the description given earlier to a firm offer, but the difference is that a firm offer is not a contractual right, there being no contract until such a firm offer is accepted, whereas an option contract is a concluded contract, in which one party is given the option, exercisable for a specified period of time, of entering into a further contract. What this means, in the opinion of Litvinoff and Scalise, is that a ‘closer scrutiny reveals that an option is a contract that actually contains a promise to make another contract later.’ They add that, as the promise ‘binds only the grantor – since the grantee remains free to accept or reject – an option is or consists of a unilateral promise to contract.’189 This is somewhat hard to reconcile with the traditional Louisiana jurisprudential view that unilateral promises have no legal effect, although,

185See Van der Merwe et al., Contract, p. 83. In Hanekom v. Mouton 1959 (3) SA 35, Watermeyer J indicated that authority exists that a pactum de contrahendo may endure indefinitely.

186 Sommer v. Wilding 1984 (3) SA 647 (A). 187 CC Art. 1933.

188Art. 1966 states that ‘[a]n obligation cannot exist without a lawful cause’.

189Litvinoff and Scalise, Law of Obligations, p. 64.

if an accurate description, it would seem to suggest that there is at least one valid manifestation of such a promise in Louisiana law. A less radical view might be to characterise an option contract in Louisiana law as a contract which contains an irrevocable offer by A in favour of B, B having, for a stated period of time, the right to accept the offer and thereby require A to enter into a further contract with him. Putting it that way would give effect to Article 1933 of the Code on options contracts, without having to utilise the idea of a unilateral promise. However, that Litvinoff and Scalise felt compelled to use the description of a ‘unilateral promise’ to describe an option contract is perhaps not so surprising: as the above general discussion of options has shown, they are indeed, in essence, unilateral promises. The unequivocal recognition of this in Louisiana might constitute a first step towards a more general recognition of the utility of such an obligational form.

Whatever the classification of options adopted by specific jurisdictions, every system conceivably faces the problem of whether the option creates a right specific enough to be enforced. Whether that is so will depend on the nature of the right conferred upon the option holder. If the obligation is simply, for instance, that A will transfer to B the ownership of certain goods for a fixed price, that is likely to be a specific enough obligation to be enforceable under an option. Land contracts, on the other hand, may create more problems, if the option gives the holder the right to purchase the land under a contract of sale to be agreed between the parties, for what if the parties cannot agree? The grantor of the option may argue that, in good faith, he tried to negotiate a contract, but failed to reach agreement, so that he has exhausted his promissory undertaking. A way to avoid such an alleged failure to agree and consequent failure of the option would be to ensure that, when the option is granted, a draft of the future contract envisaged between the parties is attached to the option, thereby reducing to a minimum the number of terms of the further contract which require to be settled between the parties.

Although the model of contract does not pose any insuperable problems for classifying options, especially in systems where there is no requirement of mutual consideration, the option is nonetheless a prime candidate for analysis in a unilateral promissory way. The granting of an option occurs in circumstances where, typically, the grantor of the option intends unilaterally and immediately to bind himself, and may conceivably wish to do so for no consideration. A unilateral promissory analysis avoids arguments about when options in offer form expire, whether they have been accepted, and whether a specific form is required for the