Exercise of option

Exercise of option is the notice by which a party invokes a contractual right it holds, most often an option to extend a time charter, an option to purchase the vessel, or a redelivery option. The clause fixes the declaration window and the manner of notice; a late or defective declaration loses the option, since charter options are construed strictly. On a time charter with a one-year option, the charterer must declare within the stated period, and on exercise the hire rate and terms for the optional period apply. The same mechanic governs purchase options in bareboat and lease structures.