(A)(3) Offer and Acceptance - Termination of Offers Flashcards
when can an offer be accepted?
an offer can be accepted when it is still outstanding (i.e., before the offer is terminated)
what are the different ways offers can be terminated?
(1) lapse of time in offer;
(2) death or mental incapacity;
(3) destruction or illegality;
(4) revocation
lapse of time in offer
if the offer specifies a date on which the offer terminates, then the time fixed by the offer controls
lapse of time in offer - # of days
if the offer states that it will terminate after a specified number of days, the time generally starts to run from the time the offer is received—not sent—unless the offer indicates otherwise
lapse of time in offer - delay in the transmittal of the offer
if the offeree is aware (or should have been aware) that there is a delay in the transmittal of the offer, the offer expires when it would have expired had there been no delay
lapse of time in offer - no specified time limit
if the offer does not set a time limit for acceptance, the power of acceptance terminates at the end of a reasonable period of time
what is a reasonable period of time?
what is considered a reasonable period of time is a question of fact and depends on a variety of factors including:
- the nature of the contract;
- the purpose and course of dealing between the parties; and
- trade usage
reasonable period of time - offer received by mail
for an offer received by mail, an acceptance that is sent by midnight of the day of receipt generally has been made within a reasonable period of time
reasonable period of time - offer in person or via telephone
unless otherwise agreed upon, if the parties bargain in person or via telephone, the time for acceptance does not ordinarily extend beyond the end of the conversation
death or mental incapacity
an offer terminates upon the death or mental incapacity of the offeror or offeree, even if the offeree does not learn of the offeror’s death or mental incapacity until after the offeree has dispatched what he believes is an acceptance
death or mental incapacity exception
an exception to termination of offer due to death or mental incapacity is if that offer is an option, which does not terminate upon death or mental incapacity because consideration was paid to keep the offer open during the option period, and the offer is therefore made irrevocable during that period
accepted offer + death or mental incapacity
if an offer has been accepted, death of the offeror, does not automatically terminate the contract—the contract may be enforceable unless there is some reason, such as impracticability, that justifies discharge of the contractual obligation
termination by destruction
an offer involving a subject matter that is destroyed is terminated
termination by illegality
an offer that becomes illegal is terminated
revocation (generally)
an offer can be revoked by the offeror at any time prior to acceptance
when is an offer considered to be revoked?
when the offeror makes a manifestation of an intention not to enter into the proposed contract
manner and means of revocation
a revocation may be made in any reasonable manner and by an reasonable means
when is a revocation effective?
a revocation is effective once communicated
when is a revocation by mail effective?
a revocation sent by mail is not effective until received
when is a written revocation considered to be received under common law?
at common law, a written revocation (as well as a written rejection or acceptance) is received when:
- it comes into the possession of the person addressed or the person authorized to receive it on his behalf; or
- when it is deposited in some place he has authorized for deposit for this or similar communications
when is a written revocation considered to be received under the UCC?
under the UCC, a person receives notice when:
(i) it comes to that person’s attention; or
(ii) it is duly delivered in a reasonable form at the place of business or where held out as the place for receipt of such communications
when is a written revocation considered to be received by an organization?
receipt by an organization occurs at the time it is brought to the attention of the individual conducting the transaction or at the time it would have been brought to that individual’s attention if due diligence were exercised by the organization
revocation by definite action inconsistent with the offer
if the offeree acquires reliable information that the offeror has taken definite action inconsistent with the offer, the offer is automatically revoked (i.e., a constructive revocation occurs)
how may an offeror’s power to revoke an offer be limited?
- option (promise not to revoke)
- UCC firm offer rule
- promissory estoppel
- partial performance
what is an option (promise not to revoke)?
an independent promise to keep an offer open for a specified period of time—such a promise limits the offeror’s power to revoke the offer until after the period has expired, while also preserving the oferee’s power to accept
requirements for promise not to revoke an offer to enter a new contract
if the option is a promise not to revoke an offer to enter a new contract, the offeree must generally give separate consideration for the option to be enforceable
requirements for promise not to revoke an offer to enter a new contract - exception
if the option is within an existing contract, no separate consideration is required
how can an offeree’s power of acceptance be terminated when an option contract is in effect?
while the option contract is in effect, the offeree’s power of acceptance cannot be terminated by rejection, counteroffer, revocation, or by death or incapacity of the offeror, UNLESS the requirements are met for the discharge of a contractual duty
what is the UCC firm offer rule?
under the UCC, an offer to buy or sell goods is irrevocable if:
(i) the offeror is a merchant;
(ii) there is an assurance that the offer is to remain open; and
(iii) the assurance is contained in a signed writing from the offeror
consideration under UCC firm offer rule
no consideration by the offeree is needed to keep the offer open under the UCC firm offer rule
UCC definition of merchant
a merchant includes not only a person who regularly deals in the type of goods involved in the transaction or otherwise by their occupation holds themselves out as having knowledge or skill peculiar to the practices or goods involved in the transaction, but also any businessperson when the transaction is of a commercial nature
UCC firm offer time period
if the time period during which the option is to be held open is not stated, a reasonable term is implied
UCC firm offer - maximum period of irrevocability
irrevocability cannot exceed three months—regardless of whether a timer period is stated or implied UNLESS the offeree gives consideration to validate it beyond the three-month period
UCC firm offer rule - signed writing
the primary purpose of the signed writing requirement is to ensure that the merchant deliberately makes a current firm offer binding
is a full handwritten signature always required under the UCC firm offer rule?
no - a full handwritten signature is not always required, such as when merely initialing the relevant clause is appropriate under the circumstances OR when the offeror handwrites on her letterhead that she “confirms” that a firm offer was already made
UCC firm offer rule - firm offer prepared by offeree
a firm offer in a form prepared by the offeree must be separately signed by the offeror to protect against inadvertent signing
when does promissory estoppel (detrimental reliance) apply?
when the offeree reasonably and detrimentally relies on the offeror’s promise prior to acceptance, the doctrine of promissory estoppel may make the offer irrevocable
burden of proof for promissory estoppel (detrimental reliance)
it must have been reasonably foreseeable that such detrimental reliance would occur in order to imply the existence of an option contract
offeror liability for promissory estoppel (detrimental reliance)
the offeror is liable to the extent necessary to avoid injustice, which may result in holding the offeror to the offer, reimbursement of the costs incurred by the offeree, or restitution of the benefits conferred
partial performance - unilateral contract
if the offer is for a unilateral contract, the offeror cannot revoke the offer once the offeree has begun performance
partial performance - requiring completion of performance: unilateral contract
once performance has begun, the offeree will have a reasonable amount of time to complete performance but cannot be required to complete performance—a unilateral contract is not formed until performance is complete
partial performance - bilateral contract
commencement of performance of a bilateral contract operates as a promise to render complete performance
partial performance - knowledge
whether the contract is bilateral or unilateral, the offeree must have had knowledge of the offer when she began performance
what is a general offer?
an offer made to a large number of people, generally through an advertisement
revocation of general offers
a general offer can be revoked only by notice that is given at least the same level of publicity as the offer
effectiveness of revocation of general offers
so long as the appropriate level of publicity is met, the revocation will be effective even if a potential offeree does not learn of the revocation and acts in reliance on the offer
what happens if a person has actual knowledge of the intent to revoke but they did not see the notice? (general offers)
the revocation will be effective
rejection by offeree
an offer is terminated by rejection—aka the offeree clearly conveys to the offeror that the offeree no longer intends to accept the offer
when is a rejection by offeree effective?
a rejection by offeree is usually effective upon receipt
offeree acceptance of terminated offer
an offeree cannot accept an offer once it has been terminated
rejection by offeree - counteroffer
a counteroffer acts as a rejection of the original offer and creates a new offer
rejection by offeree - counteroffer exception
an exception exists for an option holder, who has the right to make counteroffers during the option period without terminating the original offer
revival of offer
a terminated offer may be revived by the offeror—as with any open offer, the revived offer can be accepted by the offeree
