Contracts - option contract, UCC firm offer rule, revocation Flashcards
contract formation
Was the homeowner bound by his promise to keep his offer open for a week?
No, because the offer not to revoke was not a valid and enforceable option contract under the UCC or at common law.
What are the two bodies of law that govern contracts?
Common Law and the UCC.
What does the UCC govern?
Contracts for the sale of goods (moveable tangible items in the stream of commerce).
What is the UCC’s firm offer rule?
A merchant’s promise to hold open the offer must be signed in writing and held open for no longer than three months.
Who is considered a merchant under the UCC?
A person who is in the business of selling goods of the kind offered.
Why is the UCC firm offer rule inapplicable in the homeowner’s case?
Because the homeowner is not a merchant.
What is an option contract?
A promise to hold an offer open for a specific period of time, supported by consideration.
What is consideration in contract law?
A bargained-for-exchange of promises, performances, or both.
Why was the homeowner’s promise to hold the offer open unenforceable?
There was no bargained-for-exchange, as only the homeowner made a promise.
Did the neighbor’s statement ‘I accepted your offer’ create a contract?
No, because the homeowner’s original offer was rejected.
What happens to an offer when it is effectively rejected?
The offer terminates and ends the offeree’s power of acceptance.
What was the homeowner’s offer to the neighbor?
To sell the lawnmower for a specified price of $350.
What was the neighbor’s response to the homeowner’s offer?
‘No way.’
Why did the neighbor’s subsequent statement ‘I accept your offer’ not create a contract?
Because the neighbor had already rejected the original offer.
What is revocation of an offer?
Termination of the offer, which may be communicated directly or indirectly.
How was the revocation of the homeowner’s offer communicated to the neighbor?
Indirectly via the acquaintance.
What did the acquaintance communicate to the neighbor?
[The homeowner] agreed to sell me his lawn mower for $375.
Why was the acquaintance considered a reliable source?
The acquaintance had a written copy of the deal.
What did the neighbor’s acceptance occur after?
After the revocation was communicated.
True or False: The UCC contradicts the common law regarding revocation.
False.
Fill in the blank: An option contract must be supported by _______.
[consideration].
Was the homeowner bound by his promise to keep his offer open for a week?
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.
What two bodies of law govern contracts?
Common Law and the Uniform Commercial Code (UCC)
The UCC specifically governs contracts for the sale of goods.
What does the UCC govern?
Contracts for the sale of goods (moveable tangible items)
The UCC applies to the extent it displaces common law.
What is the UCC firm offer rule?
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.
Why is the UCC firm offer rule inapplicable to the homeowner?
Because the homeowner is not a merchant.
Only merchants are subject to the firm offer rule under the UCC.
What is an option contract at common law?
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.
What is required for an option contract to be enforceable?
It must be supported by consideration separate from the underlying contract.
If no consideration exists, the promise to hold the offer open is unenforceable.
Did the neighbor’s statement ‘I accepted your offer’ create a contract?
No, because the homeowner’s original offer was rejected.
The neighbor’s earlier rejection terminated the offer.
What happens when an offeree effectively communicates a rejection?
The offer terminates and ends the offeree’s power of acceptance.
This principle exists under common law.
What was the homeowner’s offer to the neighbor?
To sell the lawnmower for a specified price of $350.
The offer was communicated directly to the neighbor.
What did the neighbor’s response ‘No way’ signify?
It effectively rejected the homeowner’s terms.
This rejection meant the neighbor did not want to purchase the lawnmower.
What constitutes a valid revocation of an offer?
Revocation may be communicated directly or indirectly from a reliable source to the offeree.
This principle is upheld under common law.
How was revocation communicated to the neighbor?
Indirectly via the acquaintance who informed the neighbor of the deal.
The acquaintance was considered a reliable source.
What did the acquaintance tell the neighbor?
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.
What was the outcome of the homeowner’s valid revocation?
The neighbor’s subsequent acceptance did not create a contract.
The revocation occurred before the acceptance was communicated.
