Robert C. Romain and Ronald D. Romain (Romains), defendants-appellants, appeal an order of the Vanderburgh Superior Court, directing them to specifically perform an option contract for the purchase and sale of certain realty entered into with the plaintiff-appellee, A. Howard Wholesale *1125 Company (Howard). The Romains contend that Howard failed to properly exercise the option before its expiration.
We agree, and reverse.
The dispute revolves around the language of paragraph two of the option. The option reads in relevant part, as follows:
1. Granting of Option: In consideration of the sum of Ten and no/100 Dollars ($10.00) whereinafter called the "Option Payment" paid to Grantor, the receipt of which is hereby acknowledged, Grantor hereby grants to Grantee the exclusive and irrevocable option from the date hereof through and including 12-80-85, to purchase the Premises on the terms and conditions set forth in this Option.
2. Exercise of Option: Grantee shall exercise this Option to purchase on or before the above stated date of expiration of this Option by paying Grantor an additional option-exercise payment of Five Thousand Dollars ($5,000.00) and either (a) delivering to Grantor written notice of such exercise, or (b) mailing such notice by registered or certified mail to Grantor at Grantor's above-stated mailing address. In the event that this Option is not exercised on or before said date, this Option shall thereupon terminate, all rights, duties and obligations of all parties with respect hereto shall cease, and Grantor shall be entitled to retain all Option Payments as full payment for the Option granted hereunder.
8. Purchase Price and Option Payments: The purchase price for the premises shall be One Hundred Sixty One Thousand Dollars ($161,000.00) less (a) Ten Dollars of the original Option Payment, less (b) Five Thousand and no/100 Dollars of Option-exercise payment, less (c) assessments or other amounts to be paid by Grantor as hereinafter stated; to be paid upon the execution and delivery of the deed for the Premises as provided hereinafter.
4. Contract for Sale: In the event Grantee elects to exercise this option this agreement shall thereupon constitute an absolute agreement upon the Grantor to sell and the Grantee to purchase said above described real property upon the terms and conditions herein set forth.
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14. Governing Law: This Option and the Performance thereof shall be governed, interpreted, construed, and regulated by the laws of the State of Indiana.
The trial court took evidence only on the question of whether the consideration for the option had in fact been paid, the parties having stipulated that Howard's attorney attempted to exercise the option for Howard by notice letter dated December 30, 1985. Enclosed in the notice letter was a check from Howard through its affiliated company, Mid-South Development Co. in the amount of $5,000.00 payable to the Romains. The notice letter enclosing the check was mailed by certified mail, postmarked December 80, 1985 and received on or about January 2, 1986 by Huber Realtors, the agent who drafted the option contract under a listing agreement with the Romains. The parties further stipulated that the Romains by their attorney advised Howard by letter dated January 3, 1986 that the exercise of the option by Howard was deemed improper and tender of the check was rejected. The Romains have not negotiated the check.
Richard Rheinhardt of Huber Realty testified at trial that he prepared the option contract at issue by slightly modifying a form originally prepared by the Chicago Title Insurance Company. There is no evidence in the record as to what or why modifications were made; neither is there evidence of commonly accepted business custom with respect to payment of an option-exercise payment. The trial court entered judgment on a general verdict in favor of Howard directing specific performance of the option contract.
The Romains have presented several questions for our review. We find one issue, restated, to be dispositive:
Does the option contract entered into by the parties permit the option to be exercised by mailing the option-exercise payment on the date of the option's expiration?
*1126 I.
As a general rule, the interpretation or legal effect of a contract is a question of law to be determined by the Court. Kokomo Veterans, Inc. v. Schick (1982), Ind.App.,
IL
The intention of the parties controls our decision with respect to the substance of agreements. Scott v. Anderson Newspapers, Inc., id. at 559. That intention is expressed by the clear language of the contract. Id. If the parties' intention is discernible from the written contract, and the terms of the contract are clear, we will not construe the contract, but will merely apply its provisions. Id. The unambiguous terms of the contract are conclusive. Id.
The parties to this transaction have prescribed precisely how Howard, the option holder, must exercise the option in order to bind the Romains to sell the real estate.
Grantee shall exercise this option ... on or before [12-80-85] by paying Grantor ... $5,000.00 and either (a) delivering Grantor written notice ...
or
(b) mailing such [written] notice ... (emphasis added).
The language indicates, and the parties agree, that it takes two events to effectively exercise the option-the making of payment and the giving of notice within the time specified. While the parties are in agreement that the option contract permits the requirement of notice to be fulfilled by means of mailing, the Romains insist, with regard to the payment requirement, that the parties intended "paying" to mean "delivering" of payment within the life of the option. We believe that such an interpretation is mandated by the language and grammatical construction of the provision. Furthermore, the rationale for using the option contract as a means of contracting for the purchase and sale of real estate necessitates that we conclude, in the absence of a specific statement in the agreement to the contrary, that the parties intended the "option-exercise payment" be paid, i.e. delivered, to the Romains before the option's expiration.
As a general rule, language in a contract is given its plain and ordinary meaning, that is, that meaning given to the language by the community and ordinary reader. Washington National Corporation v. Sears, Roebuck & Co. (1985), Ind.App.,
Looking at the context in which the language at issue appears, we observe that the provision has been constructed in such a way as to be indicative of only one intent: only the requirement of notice could be effectuated by mailing before the option's expiration. Initially, we note that the parties separated the requirement of payment from the requirement of notice with the *1127 conjunction "and." The correlative conjunctive pair "either ... or'", appearing completely on the notice side of the conjunction, thus applies only to the requirement of notice. Additionally, the object of the gerund "mailing" is "notice", not "notice and payment."
We find further reason in paragraph fourteen of the option agreement to interpret "paying" as the delivery of payment. That section provides that the option shall be interpreted according to the laws of Indiana. The Indiana Supreme Court addressed the question whether payment was effective upon mailing in Guardian National Bank v. Huntington County State Bank (1933),
We find no indication in the option contract, express or implied, that the option giver intended payment to be effective upon mailing. Rather, the absence of direction with respect to the manner by which payment could be effectuated juxtaposed with the express statement that notice could, alternatively, be accomplished by mailing within the life of the option buttresses our conclusion that the parties intended payment to be received by the optionor before December 80, 1985. 1
Finally, we believe the very nature of an option contract compels us to view the "mailbox rule" of acceptance as inapplicable particularly as in this case where the parties have specified that time is of the essence of the agreement.
An option to purchase real estate is a contract by which the owner of the realty agrees with another person that the latter shall have the power to purchase such property at a fixed price within a certain period of time. Bandy v. Myers (1967),
Time is of the essence of the contract, in the broadest sense of the rule, where a contract leaves it optional with one party to do a certain thing at a specified time. Bond v. Peabody Coal Co. (1983) Ind.App.,
Under an option contract then, the option holder has a firm and dependable basis for decision. His power of acceptance is absolute for the time agreed upon in the option contract. The option holder has no interests needing protection. He can act promptly and with confidence in reliance on the contract. There is thus no reason to extend the rule that acceptance is operative upon mailing since the option contract device itself fulfills the same purpose. See 1 A. Corbin, supra, § 78 at 836-837; G. Grismore, on Contracts § 52 at 108 (J. Murray Jr. 2d rev. ed. 1974). To impose such a rule, where the parties have not expressly provided, would alter the agreement by binding the option giver longer than originally agreed and would inflict upon the option giver the risk of delay avoided by entering into the option contract.
Accordingly, we conclude that the option agreement between the Romains and Howard was not effectively exercised within the time specified in the option. The judgment of the trial court directing specific performance of the contract is therefore reversed.
Notes
. We also find support for this outcome in the following sources: RESTATEMENT (SECOND) OF CONTRACTS § 63, comment f (1979); 1A A. Corbin, A Comprehensive Treatise on the Working Rules of Contract Law § 264 at 521 (1963); G. Grismore, On Contracts § 52 at 103 (J. Murray Jr. 2d rev. ed. 1974); W. Page, The Law of Contracts § 2802, 2804, 2826 (2d ed. 1920).