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Call option agreement
I need a call option agreement for a real estate transaction, granting the buyer the right to purchase a property within a 12-month period at a predetermined price. The agreement should include a non-refundable option fee, specify the terms for exercising the option, and outline any conditions or contingencies related to the property.
What is a Call option agreement?
A Call option agreement gives you the right to buy specific assets, like company shares or real estate, at a set price within an agreed timeframe. Under German law (BGB 搂搂 145-157), these contracts are particularly common in corporate transactions and real estate deals, where buyers want to secure future purchase rights without immediate commitment.
German courts enforce these agreements when they include clear terms about the strike price (Aus眉bungspreis), exercise period, and precise description of the underlying assets. The agreement must follow strict form requirements, especially for real estate options which need notarization (搂 311b BGB). Buyers only pay a premium upfront, making it a cost-effective way to secure future opportunities while limiting downside risk.
When should you use a Call option agreement?
Consider using a Call option agreement when you need to secure future buying rights without committing to an immediate purchase. This proves especially valuable in German real estate development, where you might want to lock in the price of adjacent properties for future expansion, or in corporate acquisitions when planning a phased company takeover.
The agreement works perfectly for startup investments, letting venture capitalists secure rights to increase their stake as the company grows. It's also crucial in succession planning for German Mittelstand companies, where family businesses can arrange gradual ownership transfers while maintaining operational stability. Just remember that real estate options require notarization under German law to be legally binding.
What are the different types of Call option agreement?
- Real Estate Call Options: Required notarization and strict form requirements under German property law. Commonly used for development projects and land assembly.
- Corporate Share Call Options: Popular in M&A transactions and venture capital investments, allowing staged acquisitions with predetermined pricing.
- Employee Stock Options: Structured as call options for company shares, often part of executive compensation packages in German corporations.
- Commodity Call Options: Used in industrial contracts, particularly common in energy and raw materials trading under German commercial law.
- Convertible Security Options: Hybrid instruments combining debt with equity call options, frequently used in startup financing rounds.
Who should typically use a Call option agreement?
- Investors and Venture Capitalists: Use Call option agreements to secure rights for future ownership increases in German startups and growing companies.
- Corporate Legal Departments: Draft and review these agreements to ensure compliance with German corporate law and BGB requirements.
- Property Developers: Secure future purchase rights for strategic land acquisitions, working with notaries for proper execution.
- Family Business Owners: Structure succession plans using call options to facilitate gradual ownership transfers.
- Notaries: Required by law to authenticate real estate call options and ensure proper documentation.
How do you write a Call option agreement?
- Asset Details: Gather precise descriptions of shares, property, or other assets covered by the option, including current market value.
- Strike Price: Determine and document the exact purchase price or calculation method that will apply when exercising the option.
- Exercise Period: Set clear start and end dates for when the option can be exercised under German law.
- Party Information: Collect complete legal names, addresses, and registration details of all involved parties.
- Notarization Requirements: For real estate options, arrange for a German notary in advance to ensure legal validity.
- Conditions Precedent: List any specific conditions that must be met before the option can be exercised.
What should be included in a Call option agreement?
- Parties and Assets: Complete identification of option holder, grantor, and precise description of the assets covered.
- Exercise Terms: Clear specification of strike price, exercise period, and method of exercising the option.
- Conditions: Any prerequisites or conditions that must be fulfilled before option exercise.
- Transfer Mechanics: Detailed process for executing the transfer once the option is exercised.
- Form Requirements: Notarization clause for real estate options per 搂 311b BGB.
- Governing Law: Explicit reference to German law and jurisdiction.
- Representations: Warranties about ownership and authority to grant the option.
What's the difference between a Call option agreement and an Option Agreement?
A Call option agreement is often confused with a general Option Agreement, but they serve distinctly different purposes under German law. While both deal with future rights, their scope and application differ significantly.
- Rights Direction: Call options specifically grant the right to buy, while general option agreements can include both put (right to sell) and call provisions.
- Legal Structure: Call options focus solely on purchase rights with predetermined terms, whereas option agreements often contain more complex, bilateral arrangements.
- Pricing Mechanism: Call options typically specify a fixed strike price, while option agreements might include variable pricing formulas or market-based calculations.
- Usage Context: Call options are common in corporate acquisitions and real estate deals, while general option agreements see broader use across various commercial relationships.
- Risk Profile: Call options limit the buyer's downside to the premium paid, while option agreements might involve more complex risk allocation between parties.
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