An options clause in a contract provides one or both parties with the right, but not the obligation, to take certain actions in the future. This clause typically outlines specific conditions, terms, and procedures under which the options can be exercised. A typical example is the renewal option, which allows one or both parties to renew the contract for an additional term, after the initial term expires, subject to specified conditions. Another common type is the technology upgrade option, permitting the buyer or client to upgrade, or update technology, software, or equipment during the contract term.
In company law, on the other hand, an options clause typically refers to a provision in a company’s articles of association, or a separate share option plan, that grants employees, directors, or other individuals the right to purchase shares in the company at a predetermined price, within a specified period. Options in company law provide a mechanism for aligning the interests of employees, or other stakeholders with the company’s performance. This is a common practice to incentivise and reward key personnel, by giving them a stake in the company’s performance and success. The options clause usually outlines the terms and conditions of the stock options. Key types include employee stock options, and share option plans.
Sample Options clause:
The Seller hereby grants the Buyer an option (the „Option”) to purchase additional quantities of the Goods under the terms and conditions set forth herein.
(i) The Buyer may exercise the Option by providing written notice to the Seller within 30 days from the delivery and acceptance of the Goods.
(ii) Provided the Buyer chooses to exercise the Option, the Parties hereto agree that the consideration for such exercise shall be an additional payment at HUF 20,000 per unit purchase price.
(iii) The exercise of the Option is subject to the Buyer being in compliance with all other terms and conditions of the present Agreement at the time of exercise.
(iv) The Option granted herein is personal to the Buyer and may not be assigned or transferred without the prior written consent of the Seller.
(v) The Option shall expire automatically? if not exercised within the specified exercise period, and no extension shall be granted unless agreed upon in writing by both Parties.