Contracts - option contract, UCC firm offer rule, revocation

Question 1

Was the homeowner bound by his promise to keep his offer open for a week?

Answer 1

No, because the offer not to revoke was not a valid and enforceable option contract under the UCC or at common law.

Question 2

What are the two bodies of law that govern contracts?

Answer 2

Common Law and the UCC.

Question 3

What does the UCC govern?

Answer 3

Contracts for the sale of goods (moveable tangible items in the stream of commerce).

Question 4

What is the UCC’s firm offer rule?

Answer 4

A merchant’s promise to hold open the offer must be signed in writing and held open for no longer than three months.

Question 5

Who is considered a merchant under the UCC?

Answer 5

A person who is in the business of selling goods of the kind offered.

Question 6

Why is the UCC firm offer rule inapplicable in the homeowner’s case?

Answer 6

Because the homeowner is not a merchant.

Question 7

What is an option contract?

Answer 7

A promise to hold an offer open for a specific period of time, supported by consideration.

Question 8

What is consideration in contract law?

Answer 8

A bargained-for-exchange of promises, performances, or both.

Question 9

Why was the homeowner’s promise to hold the offer open unenforceable?

Answer 9

There was no bargained-for-exchange, as only the homeowner made a promise.

Question 10

Did the neighbor’s statement ‘I accepted your offer’ create a contract?

Answer 10

No, because the homeowner’s original offer was rejected.

Question 11

What happens to an offer when it is effectively rejected?

Answer 11

The offer terminates and ends the offeree’s power of acceptance.

Question 12

What was the homeowner’s offer to the neighbor?

Answer 12

To sell the lawnmower for a specified price of $350.

Question 13

What was the neighbor’s response to the homeowner’s offer?

Answer 13

‘No way.’

Question 14

Why did the neighbor’s subsequent statement ‘I accept your offer’ not create a contract?

Answer 14

Because the neighbor had already rejected the original offer.

Question 15

What is revocation of an offer?

Answer 15

Termination of the offer, which may be communicated directly or indirectly.

Question 16

How was the revocation of the homeowner’s offer communicated to the neighbor?

Answer 16

Indirectly via the acquaintance.

Question 17

What did the acquaintance communicate to the neighbor?

Answer 17

[The homeowner] agreed to sell me his lawn mower for $375.

Question 18

Why was the acquaintance considered a reliable source?

Answer 18

The acquaintance had a written copy of the deal.

Question 19

What did the neighbor’s acceptance occur after?

Answer 19

After the revocation was communicated.

Question 20

True or False: The UCC contradicts the common law regarding revocation.

Answer 20

False.

Question 21

Fill in the blank: An option contract must be supported by _______.

Answer 21

[consideration].

Question 22

Was the homeowner bound by his promise to keep his offer open for a week?

Answer 22

No, because it was not a valid and enforceable option contract under UCC or common law.

This relates to the legal principles governing contract enforceability.

Question 23

What two bodies of law govern contracts?

Answer 23

Common Law and the Uniform Commercial Code (UCC)

The UCC specifically governs contracts for the sale of goods.

Question 24

What does the UCC govern?

Answer 24

Contracts for the sale of goods (moveable tangible items)

The UCC applies to the extent it displaces common law.

Question 25

What is the UCC firm offer rule?

Answer 25

A merchant’s promise to hold an offer open must be signed in writing and held open for no longer than three months.

A merchant is someone in the business of selling goods.

Question 26

Why is the UCC firm offer rule inapplicable to the homeowner?

Answer 26

Because the homeowner is not a merchant.

Only merchants are subject to the firm offer rule under the UCC.

Question 27

What is an option contract at common law?

Answer 27

A promise to hold an offer open for a specific period of time supported by consideration.

Consideration is a bargained-for exchange of promises or performances.

Question 28

What is required for an option contract to be enforceable?

Answer 28

It must be supported by consideration separate from the underlying contract.

If no consideration exists, the promise to hold the offer open is unenforceable.

Question 29

Did the neighbor’s statement ‘I accepted your offer’ create a contract?

Answer 29

No, because the homeowner’s original offer was rejected.

The neighbor’s earlier rejection terminated the offer.

Question 30

What happens when an offeree effectively communicates a rejection?

Answer 30

The offer terminates and ends the offeree’s power of acceptance.

This principle exists under common law.

Question 31

What was the homeowner’s offer to the neighbor?

Answer 31

To sell the lawnmower for a specified price of $350.

The offer was communicated directly to the neighbor.

Question 32

What did the neighbor’s response ‘No way’ signify?

Answer 32

It effectively rejected the homeowner’s terms.

This rejection meant the neighbor did not want to purchase the lawnmower.

Question 33

What constitutes a valid revocation of an offer?

Answer 33

Revocation may be communicated directly or indirectly from a reliable source to the offeree.

This principle is upheld under common law.

Question 34

How was revocation communicated to the neighbor?

Answer 34

Indirectly via the acquaintance who informed the neighbor of the deal.

The acquaintance was considered a reliable source.

Question 35

What did the acquaintance tell the neighbor?

Answer 35

The homeowner agreed to sell the lawnmower for $375 and had a written copy of the deal.

This communication occurred before the neighbor’s acceptance.

Question 36

What was the outcome of the homeowner’s valid revocation?

Answer 36

The neighbor’s subsequent acceptance did not create a contract.

The revocation occurred before the acceptance was communicated.