What is the exam-ready distinction?
| Official syllabus topic | Contracts: Options and Rights of First Refusal |
|---|---|
| Official PSI area | Contracts |
| Published weight | 19% of the 100-question national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual comparison. Use the source, document, actor, event, and timing stated in the question before applying a memorized definition.
Side-by-side comparison
Read across each row. The terms are deliberately compared on identical dimensions so the difference remains clear when the exam hides the vocabulary inside a scenario.
| Decision dimension | Option contract | Right of first refusal |
|---|---|---|
| Holder's power | May elect to buy during the option period on stated terms | Receives the first opportunity only if the owner decides to sell |
| Trigger | Option holder's timely exercise | Owner's decision and the event defined in the agreement |
| Terms | Purchase terms are set or determinable in the option | Often requires matching or responding to specified offered terms |
| Owner during term | Bound to keep the option available | Usually need not sell at all |
Decision rule
Georgia-specific distinction
Worked example
Scenario. An owner grants a neighbor the first opportunity to match a bona fide offer if the owner ever decides to sell, but the owner has not decided to sell.
Reason it through. The neighbor's right depends on a future owner decision and triggering offer. The neighbor cannot force a sale today.
Answer. The neighbor holds a right of first refusal, not a presently exercisable option to buy.
Common exam traps
- Calling every priority right an option
- Assuming a right of first refusal forces a sale
- Ignoring the exercise method and deadline
- Assuming recording cures an indefinite or defective agreement
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1An owner gives a neighbor the right to match any bona fide offer if the owner ever decides to sell. The owner has not decided to sell, and the neighbor now wants to buy. What does the neighbor hold?
- A. A right of first refusal that cannot force a sale now
- B. An option that lets the neighbor buy at any time
- C. A right of first refusal that lets the neighbor set the price
- D. A lease purchase that binds both parties to a later sale
Show answer and explanation →
Answer: A. A right of first refusal that cannot force a sale now
A right of first refusal is triggered only when the owner decides to sell and the event in the agreement occurs. Until then, the neighbor cannot force a sale or name a price. Calling it an option is the mistake, since an option would let the holder start the purchase on stated terms.
Question 2For $2,000, an owner gives a developer the right to buy a lot for $150,000 at any time in the next six months. Two months later, another buyer offers the owner $170,000. What is the developer's position?
- A. The owner can end the developer's right by refunding the $2,000
- B. The developer can still buy at $150,000 by exercising in time
- C. The developer must match the $170,000 offer to keep the right
- D. The developer must now buy, since the offer triggered the option
Show answer and explanation →
Answer: B. The developer can still buy at $150,000 by exercising in time
An option binds the owner to keep the stated terms open for the option period, and the developer paid consideration for that promise. The developer can buy at $150,000 by exercising within six months. Matching the outside offer is wrong because that describes a right of first refusal, not an option.
Question 3Which statement correctly describes an option contract during the option period?
- A. Both the optionor and the optionee are bound to complete the sale
- B. The optionee is bound to buy, but the optionor may still withdraw
- C. The optionor is bound to sell, but the optionee is not bound to buy
- D. Neither party is bound until the owner decides to sell the property
Show answer and explanation →
Answer: C. The optionor is bound to sell, but the optionee is not bound to buy
In an option, the owner, called the optionor, must keep the offer open, while the holder, called the optionee, may choose whether to buy. That one-sided obligation is what separates an option from a sales contract. The plausible error is treating an option like a purchase agreement that binds both sides.
Ready to move on?
You have this distinction down when all of these are true.
- Define every compared term without using the other term as the definition.
- Rebuild the comparison table from memory.
- State the decision rule and Georgia distinction without notes.
- Solve the worked example after changing one key fact.
- Explain the rule or fact that makes each distractor wrong.
- Answer all three original questions correctly in mixed practice on a later day.
Recommended next lesson
Continue with Contingency Versus Condition. Next, contingency versus condition looks at clauses that make a duty depend on an event, the same trigger question you used here to tell an option's exercise from a first-refusal event.
Return to the complete exam-concept library or the Contracts hub.