Which statement about a land sale option is correct?

• A. The option is effective only if recorded.
• B. Mailbox rule does not apply; the holder must exercise the option by receipt per contract terms.
• C. The option terminates upon grantor's incapacity.
• D. The option must be recorded to be valid.

Answer: (B)

Navigating how an option to purchase real estate becomes effective hinges on how the option contract handles exercise. When the option is exercised, it isn’t merely an acceptance of an offer; it’s a demand to buy under the terms of the option. Courts typically treat the exercise as effective only when the grantor actually receives the exercise notice (or as the contract specifies). The mailbox rule—which says a contract is accepted when mailed—does not automatically apply to exercising an option. If the contract requires receipt or a particular delivery method, the option holder must meet that requirement so the grantor actually has the notice. That’s why this statement is correct: the holder must exercise the option by receipt per contract terms, and the mailbox rule does not govern this step.

Recording an option is not required for validity; it’s about notice and priority, not the essential legality of the option itself. And the option generally does not terminate simply because the grantor becomes incapacitated; termination on incapacity isn’t a universal rule and depends on the contract and surrounding circumstances.