An option will lapse unless it is exercised within the time specified in the option. Time is generally of the essence in an option, and is usually the most important precondition to validly exercising the option. There are sometimes other preconditions to exercising the option, other than the time. It is important to determine specifically what these preconditions are, as non-fulfilment of a condition precedent will potentially prevent the exercise of the option.

See Time and preconditions.

The exercise of the option must be communicated to the grantor. There must be an "absolute and unqualified" exercise of the option. The option usually specifies that it is to be exercised by notice in writing, and sometimes the option also prescribes the form. If the option does not expressly require a notice in writing, it may imply it, or statutory provisions may require it. Otherwise, verbal notice to the grantor should be sufficient, if the intention to exercise the option is communicated clearly and unequivocally. It is recommended to always revert to the option for confirmation of the manner in which to communicate the exercise of that option. It is recommended to always revert to the option for confirmation of the manner in which to communicate the exercise of that option.

See Form of notice.

The notice exercising the option must be properly served as specified in the option. An option will usually specify the methods of service, and sometimes when service is deemed. In the absence of the option specifying the method of service, the preferred method is personal service on the grantor, or service by hand on a person over the age of 16 years at the grantor’s residence or place of business. It is important in enforcing the exercise of an option to ensure that the grantor cannot raise any question about the receipt of notice of the exercise of an option. The methods of service and when service has been effected are discussed in the guidance note.

See Service of notice.

Payment is usually required under an option. This payment will usually be considered to be the deposit under the resulting contract of sale. The payment should be paid promptly and strictly in accordance with the terms of the option.

See Payment.

As noted in the subtopic Overview, an option will often provide for a nominee. The nominee may be able to exercise the option or alternatively may be nominated as the purchaser on exercise of the option. The ability of the nominee to exercise an option is discussed in the guidance note.

See Exercise for or by nominee.

If the option is validly exercised by the grantee, a binding contract of sale will result between the grantor and the grantee, in the terms of the option. Usually, the parties will execute a formal contract for sale, but a contract will exist from the date of exercise of the option even if no formal contract is executed.

See Resulting contract.