R5 M1: Contract Part I Flashcards
On June 15, Peters orally offered to sell a used lawn mower to Mason for $125. Peters specified that Mason had until June 20 to accept the offer. On June 16, Peters received an offer to purchase the lawn mower for $150 from Bronson, Mason’s neighbor. Peters accepted Bronson’s offer. On June 17, Mason saw Bronson using the lawn mower and was told the mower had been sold to Bronson. Mason immediately wrote to Peters to accept the June 15 offer. Which of the following statements is correct?
A. Mason’s acceptance would be effective when mailed.
B. Peters’ offer had been revoked and Mason’s acceptance was ineffective.
C. Mason’s acceptance would be effective when received by Peters.
D. Peters was obligated to keep the June 15 offer open until June 20.
Explanation
Choice “B” is correct. Peters’ offer was already revoked. To be effective, an acceptance must be received before the offer is terminated. An offer may be terminated by the offeror at any time unless the offeree gave consideration to keep the offer open. Mason gave no consideration to keep the offer here open; thus Peters could revoke. An offer is considered to be revoked if the offeree obtains information from a reliable source that the subject matter of the offer has been sold. Here, Mason received the information of the sale before he attempted to accept. Therefore, his attempted acceptance came too late and was ineffective.
Choice “A” is incorrect. Although the normal rule is that an acceptance will be effective upon dispatch, to be effective, an acceptance must also come before the offer is terminated. Here the offer was terminated before the letter was sent because Mason received reliable information that the subject matter of the offer had already been sold.
Choice “C” is incorrect. The normal rule for contracts is the mailbox rule—an acceptance is effective upon dispatch rather than upon receipt.
Choice “D” is incorrect. An offer will be irrevocable only if the offeree gives consideration to keep the offer open (an option contract) or the offer is a merchant’s firm offer. Here, Mason did not give consideration to keep the offer open, and firm offers must be in writing and made by a merchant, yet the offer here was oral and nothing indicates that Peters is a lawn mower merchant.
Which of the following statements is correct regarding the formation of a unilateral contract?
A. A unilateral contract does not require performance.
B. Only one party to a unilateral contract makes a promise.
C. A unilateral contract may be formed without consideration.
D. Only one party to a unilateral contract receives a benefit or suffers a detriment.
Choice “B” is correct. In a unilateral contract situation, only one promise is made—by the offeror. By the terms of the offer, the offeree can accept only by performing the act requested in the offer; the offer cannot be accepted by making a counter-promise.
Choice “A” is incorrect. By definition, a unilateral contract is a contract that is formed when performance is given in exchange for a promise made in an offer.
Choice “C” is incorrect. All contracts (e.g., unilateral, bilateral, express, implied, etc.) require consideration (or a substitute for consideration) to be binding.
Choice “D” is incorrect. In a unilateral contract, the promisor receives the benefit of performance by the offeree and suffers the detriment made in the promise; the offeree receives the benefit of the promise and the detriment of whatever performance the offeree gives.
Opal offered, in writing, to sell Larkin a parcel of land for $300,000. If Opal dies, the offer will:
A. Remain open for a reasonable period of time after Opal’s death.
B. Automatically terminate despite Larkin’s prior acceptance.
C. Terminate prior to Larkin’s acceptance only if Larkin received notice of Opal’s death.
D. Automatically terminate prior to Larkin’s acceptance.
Explanation
Choice “D” is correct. The death of an offeror prior to acceptance terminates the offer by operation of law without notice to the offeree.
Choice “A” is incorrect, because the offer terminated by operation of law upon Opal’s death.
Choice “B” is incorrect, because if the offeree accepts prior to the offeror’s death, the offer cannot be revoked because a contract was formed.
Choice “C” is incorrect, because notice is not necessary for an offer to terminate by operation of law.
