What is an Abandonment Option?
Abandonment options are a common clause found within a number of different types of financial agreements. Essentially, the abandonment option provides for the orderly termination of investments of resources by either party should it be determined that the investment is not turning out to be sufficiently profitable to one or both parties. Here are some examples of how the abandonment option can work within different circumstances. In the case of an investment of capital into a corporation, both parties into a financial contract with the expectation that the loan will be repaid under specific circumstances, either in the way of regularly scheduled payments or the payment of a specified number of balloon payments. Usually, there is a fixed period of time in which the payments are to be made, along with any interest charges that have been agreed upon in the text of the loan agreement. Should the lender determine that the company is not utilizing the funds in a manner that will allow them t
