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Contracts • Contract Formation
K#023
Legal Definition
Under the UCC, if (1) a merchant (2) offers to sell goods in a signed writing and (3) the writing assures it will be held open, then the offer is not revocable during the time period stated, or for a reasonable time if no time is stated. The time period cannot exceed 3 months.
Plain English Explanation
Generally speaking, an option contract requires the offeree to pay some sort of consideration in order for the offer to be held open. Under the UCC, however, no consideration is required if the offeror is a merchant, and they provide a signed document that says they will keep the offeror open. This is called a "firm offer," and will either stay open for as long as explicitly stated in the signed document from the merchant, or a reasonable amount of time. It cannot be longer than 3 months.
Hypothetical
Hypo 1: Bob is a teacher. He wants to get some extra money, so he puts his car up for sale. Sam is interested in buying the car, but needs time to think about it. Bob writes and signs a note that says, "I will sell you this car for $1,000, and this offer will be good for 7 days." 4 days later, Amy offers to buy the car from Bob. Bob accepts Amy's offer. Result: There's no issue here, because Bob isn't a merchant and Sam didn't pay any consideration to create an option contract. Had Sam paid money for the note promising to keep the offer open, then Bob would be in breach. Likewise, if Bob were a merchant that regularly sold cars, his note would be a valid firm offer, which would prevent him from selling to Amy.
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Related Concepts
Are offers assignable?
Are pre-existing duties valid consideration?
Can partial payment of a debt be consideration for release of that debt?
How can an offeree reject an offer?
How do courts assess the adequacy of consideration?
How may an offer be revoked?
Though offers can generally be freely revoked, what are the 4 exceptions?
Under battle of the forms, what happens to additional or different terms in an acceptance when at least one of the parties is a non-merchant?
Under battle of the forms, what happens to additional terms in an acceptance between two merchants?
Under battle of the forms, what happens to different terms in an acceptance between two merchants?
What are consideration substitutes?
What are illusory promises and how do they affect a contract?
What are requirement and output contracts?
What are the methods of terminating an offer?
What are the requirements of an offer?
What are the UCC Gap Fillers?
What is acceptance?
What is a contract?
What is an option contract?
What is consideration?
What is detrimental reliance?
What is promissory estoppel?
What is required to form a valid, binding contract?
What is the effect of a conditional acceptance on an offer?
What is the effect of a contract that contains vague or ambiguous terms?
What is the effect of a contract that is missing price terms?
What is the effect of a contract that is missing quantity terms?
What is the effect of a counteroffer on an offer?
What is the effect of a lapse of time on an offer?
What is the effect of an offeree beginning to perform in response to an offer?
What is the effect of a seller sending non-conforming goods?
What is the effect of including additional or different terms to an offer?
What is the effect of part performance of a unilateral contract?
What is the effect of the death of a party prior to acceptance of an offer?
What is the Mailbox Rule and when does it apply?
When are advertisements valid offers?
When are price quotes valid offers?
When is past or moral consideration valid?
Who controls the method of acceptance, and what are the typical ways that an offer is accepted?
