Contracts

Question 1

CL option K rule statement

Answer 1

In general, an offer can be revoked by the offeror at any time prior to acceptance. However, an enforceable option will render the offer irrevocable. An option is 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 offeree’s power to accept. Under the common law, 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.

Question 2

UCC firm offer rule statement

Answer 2

The UCC provides an alternative to the common law option rules if three requirements are met. 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. Unlike the common law, no separate consideration is required to keep the offer open under the UCC firm offer rule.