Contracts Formation Part 2 Flashcards
Termination by Offeror: Revocation
General Rule: Offeror can revoke an offer anytime before acceptance.
How can an offeror revoke?
1) Direct revocation: “I revoke”
2) Indirect revocation: offeree gets reliable info from 3rd party/source that the offer is no longer valid
When is revocation effective?
Generally, revocation is effective when received.
When revocation happens by publication, it is effective when published.
Limitations on Offeror’s Power to Revoke
Offers can be revoked at will by the offeror, except in the following scenarios:
1) Option Contracts = this is a type of contract where an offeree gives consideration for a promise by the offeror not to revoke an outstanding offer
2) Merchant’s Firm Offer = Under Art 2 UCC, a promise to keep an offer open is enforceable even if no consideration has been paid to keep it open IF:
a) a merchant
b) offers to buy or sell goods in a signed writing; AND
c) the writing gives assurances that it will be held open (“this offer is good for 20 days”)
The merchant’s firm offer is not revocable for lack of consideration during the time stated but it has a maximum duration of 3 months.
3) Detrimental Reliance = when the offeror could reasonably expect that the offeree would rely to his detriment on the offer, and the offeree does rely, the offer will be held irrevocable as an option K for a reasonable length of time.
4) Beginning Performance in response to true Unilateral Contract = becomes irrevocable once performance has begun. Unilateral K not formed until the total act is complete. However, once the offeree begins to perform, he is given reasonable time to complete performance during which the offer is irrevocable. The offeree doesn’t have to complete performance though. The offeree must have embarked on performance, not just prepared to perform, in order for the offer to become irrevocable in this way. CAVEAT: substantial prep might count as detrimental reliance!
Termination by Offeree: Rejection
1) Express Rejection
2) Counteroffer as Rejection = an offer made by the offeree instead of an acceptance. Same subject matter as original offer but differing terms. Counteroffer serves as rejection + new offer at the same time. DISTINCTION: a mere inquiry won’t terminate the offer when it’s consistent with the idea that the offeree is still keeping the original proposal under consideration. The test is whether a reasonable person would believe the original offer had been rejected.
3) Revival of Offer = if rejected, offeror may restate the same offer and that would technically be a new offer
4) Rejection of Option = rejecting an option’s offer does NOT terminate the offer. the offeree can still accept the original offer within the option period unless the offeror has detrimentally relied on the offeree’s rejection
Termination by Offeree: Lapse of Time
1) Must accept within specified or reasonable time = the offeree must accept the offer within the time period specified or, if no time period is specified, within a reasonable time. If she does not do so, then she will have allowed the offer to terminate.
2) Look to when offer is received by offeree = if the offer provides that it will expire within a particular time period, that period commences WHEN THE OFFER IS RECEIVED by offeree. If the offer is delayed in transmission and this fact is or should have been apparent to the offeree, the offer terminates at the time it would have expired had there been no delay.
Termination by Operation of Law
1) Termination by Death or Insanity = if either party dies or is adjudicated insane before acceptance, the offer is terminated. It’s NOT necessary that the death or insanity be communicated to the other party. EXCEPTION: the offer will not terminate in this fashion if the rules limiting an offeror’s power to terminate are applicable (option K)
2) Termination by Destruction of Subject Matter = if the subject matter (usually thing being sold) is destroyed, that ends the offer
3) Termination because it’s Illegal
