The California Supreme Court weighed in on these questions with a recent ruling that has some real estate investors, brokers, and attorneys revising their forms for options and purchase and sale agreements. The Court ruled on March 18, 2010, in the case of Steiner v. Thexton (48 Cal.4th 411), that when a buyer can cancel a purchase agreement in his sole and absolute discretion and get his deposit fully refunded, the agreement is an option agreement, but it is one that is illusory because it lacks consideration.

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