Exercise: Overview, definition and example
What is exercise?
In contracts, to "exercise" means to use or activate a right, option, or privilege that is outlined in the agreement. For example, if a contract gives you the right to buy a property at a set price by a certain date, you would "exercise" that right when you choose to go ahead with the purchase.
Why is "exercise" important?
Exercise is important because it allows a party to put into action the rights or options they have under the contract. Whether it's opting to renew a lease, buying an asset, or activating a clause, exercising rights is how you make sure the contract terms are fulfilled as agreed. Knowing when and how to exercise your rights keeps you on track with your obligations and ensures you don’t miss out on opportunities.
Understanding "exercise" through an example
Let’s say you sign a lease for office space, which includes an option to extend the lease for another five years. The contract says you must notify the landlord in writing at least three months before the lease ends to "exercise" your option. If you send the notice before the deadline, you’ve exercised your right to extend the lease.
An example of an exercise clause
Here’s how an exercise clause might look in a contract:
“The Tenant shall have the option to exercise a renewal of this Lease for an additional five-year term. To exercise this option, the Tenant must notify the Landlord in writing no less than three months prior to the expiration of the initial term.”
Conclusion
Exercising a right or option in a contract means actively using it to fulfill the terms agreed upon. Whether it’s renewing a contract, purchasing something, or using any other privilege, understanding how and when to exercise these rights ensures you’re making the most of your contract and fulfilling your obligations properly.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.