Black-letter propositions
- 01
Revocation is ordinarily effective on receipt, directly or through reliable information of inconsistent action.
- 02
A common-law option generally requires consideration; a merchant's signed UCC firm offer can be irrevocable without consideration for the stated or reasonable period, not over three months under the statute.
- 03
Beginning invited performance makes a unilateral offer temporarily irrevocable, but the offeree must receive reasonable time to complete.
- 04
Detrimental reliance reasonably induced by an offer can create option-like protection.
- 05
A rejection or counteroffer terminates an unprotected offer when received, but a mere inquiry does not.
Use this attack sequence under time
Frame the issue
List every termination event chronologically.
Resolve the next checkpoint
Determine when each communication became effective.
Resolve the next checkpoint
Check consideration, merchant firm offer, performance, and reliance.
Finish the conclusion
Distinguish counteroffer from inquiry.
Common wrong turns
- The mailbox rule generally does not apply to revocations.
- Death terminates an ordinary offer even without notice, but not an option contract.
- A firm offer's assurance must be signed; on the offeree's form, the assurance term may require separate signature.
Worked example
A merchant signs a promise to keep an offer to sell goods open for six months, without consideration.
The UCC firm-offer rule can make the offer irrevocable without consideration, but statutory irrevocability is capped at three months. Continued protection afterward needs consideration or another doctrine.
Practice this topic
Firm offers and option contracts
UCC 2-205 says an offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or, if no time is stated, for a reasonable time. In no event may the period of irrevocability exceed three months. A term of assurance on a form supplied by the offeree must be separately signed by the offeror.
Cornell defines an option contract as a promise to keep an offer open for another party to accept within a period of time, during which the offeror may not revoke. Most option contracts require consideration and other formalities, with exceptions. Where a party relies to its detriment on an otherwise unenforceable option, a court may enforce it under promissory estoppel, such as when a general contractor relies on a subcontractor's bid.
How offers end
Cornell's summary of offer says a contract offer can be withdrawn by notification to the offeree of the intent to withdraw before acceptance, and that an offeror generally cannot retract once the other party has accepted. Termination by revocation, rejection, lapse or death or incapacity is analyzed by asking when each event occurred relative to acceptance.
For a goods offer from a merchant, the three-month limit in 2-205 is a statutory ceiling on the promise to hold the offer open, so an assurance that says six months is enforceable only for three.
Frequently asked questions
What is the controlling rule for termination of offers and option protection?+
Offers are revocable until an effective termination or acceptance unless consideration, a merchant's firm offer, beginning performance, or reliance creates protection.
What is a firm offer under UCC 2-205?+
A merchant's signed written offer to buy or sell goods that by its terms gives assurance it will be held open, irrevocable without consideration for the stated time or a reasonable time.
Who must sign a firm-offer assurance on the offeree's form?+
The offeror must separately sign any assurance term that appears on a form supplied by the offeree, under UCC 2-205.
What is an option contract?+
A promise to keep an offer open for another party to accept within a period of time, during which the offeror is not permitted to revoke, per Cornell's summary.
Can reliance make an unenforceable option enforceable?+
Yes, a court may enforce it under promissory estoppel where a party relies to its detriment, such as a general contractor relying on a subcontractor's bid.