Question 43

Jones must do nothing: the option automatically expires.

Since Smith did not exercise the option by the deadline of October 22, it automatically expires without any further action required by Jones.

A) Rescind the contract

Rescinding the contract is unnecessary and inappropriate in this context because the option will expire on its own if not exercised by the specified date. Therefore, this option does not apply.

B) Sign a declaration of novation

A declaration of novation is not relevant here, as novation involves creating a new contract that replaces an existing one. Since Smith's option is simply expiring, no new contract is needed, making this choice incorrect.

C) Do nothing: the option automatically expires

This is the correct choice. Once the deadline of October 22 has passed without exercise from Smith, his option rights automatically terminate without any action required from Jones.

D) Have an attorney draw up a discharge contract

While having an attorney draft a discharge contract might seem like a formal way to end the option rights, it is unnecessary. The option automatically expires, so legal action is not required to terminate Smith's rights.

Conclusion

The correct answer is that Jones must do nothing since Smith's option automatically expires if not exercised by the deadline. All other options involve unnecessary actions or concepts that do not apply to the expiration of an option, reinforcing that no further steps are required by Jones.