Juan thinks he would like to purchase Tara's house, but doesn't know whether he will be able to save enough money for a down payment on a loan. Juan agrees to give Tara $5,000 for the option to purchase her house for $150,000 sometime within the next five years. Juan and Tara reduce their agreement to writing, sign it, and Juan gives Tara $5,000. Two years later, Juan wins the lottery and now is financially able to purchase Tara's house. However, that same day Juan receives a letter from Tara revoking her offer to sell for $50,000. Which of the following is true?

Question

Juan thinks he would like to purchase Tara's house, but doesn't know whether he will be able to save enough money for a down payment on a loan. Juan agrees to give Tara $5,000 for the option to purchase her house for $150,000 sometime within the next five years. Juan and Tara reduce their agreement to writing, sign it, and Juan gives Tara $5,000. Two years later, Juan wins the lottery and now is financially able to purchase Tara's house. However, that same day Juan receives a letter from Tara revoking her offer to sell for $50,000. Which of the following is true?

A. Tara's revocation isn't effective.
B. Tara's revocation is effective as long as she refunds the $5,000.
C. Tara's revocation is effective.
D. Juan can't complain because he failed to accept Tara's offer before it was revoked.

Answer 1

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Answer 2

A. Tara's revocation isn't effective

Answer 3

To find the correct answer, we need to examine the information given in the scenario.

First, Juan paid Tara $5,000 for an option to purchase her house for $150,000 within the next five years. This agreement was reduced to writing and signed by both parties.

According to the scenario, two years later, Juan receives a letter from Tara revoking her offer to sell the house for $50,000.

Now, let's analyze the options provided:

A. Tara's revocation isn't effective.
B. Tara's revocation is effective as long as she refunds the $5,000.
C. Tara's revocation is effective.
D. Juan can't complain because he failed to accept Tara's offer before it was revoked.

To determine the correct answer, we need to refer to the concept of an option contract. An option contract is a type of agreement that gives one party the right, but not the obligation, to buy or sell an asset, in this case, Tara's house, within a specified period.

Since Juan paid Tara $5,000 for the option to purchase the house within the next five years, he has entered into an option contract. This means that Tara cannot revoke her offer during this specified period.

Therefore, the correct answer is:

A. Tara's revocation isn't effective.

Tara cannot revoke her offer as long as Juan is still within the specified period of the option contract.