Termination Of Power To Accept

Question 1

What five things terminate a contract?

Answer 1

Revocations
Lapse of time
Death
Rejections
Counteroffers

Question 2

What are the two types of revocation?

Answer 2

Direct and Indirect.

Question 3

What is a direct revocation? What standard is it based on?

Answer 3

One received by the offeree, and the offeror manifests an intention not to enter into the contract. Objective standard (indicates to a reasonable offeree that offeror no longer intends to form contract).

Question 4

What is an indirect revocation?

Answer 4

When an offeror has taken action inconsistent with intent to enter into the proposed contract of the offeree, the offeree learns about it from a reliable source, and the information is correct.

Question 5

List the four types of irrevocable offers.

Answer 5

Traditional option contracts, Restatement 87 option contract, Restatement 45 option contract, and UCC 2-205 Firm Merchant Offers.

Question 6

1. What is an option?
2. What is an option contract?

Answer 6

1. An empty promise; it simply sets the time for offer to lapse and is revocable at any time.
2. Created by the parties when the offeree gives the offeror something in exchange for the promise of keeping the offer open, binding time as specified by the offeror, and makes the offer irrevocable during that time.

Question 7

What does an option contract buy?

Answer 7

Time.

Question 8

Is the power to accept terminated when an offeree buys time and subsequently rejects during the irrevocability period? Is there an exception?

Answer 8

Generally, no. Exception: When the offeror relies on the offeree’s rejection, it terminates the offeree’s power to accept.

Question 9

If an offeree ultimately rejects the offer, will he/she get the consideration back that was used to buy the time? What about if the offeree accepts the offer?

Answer 9

No. Also, no. The consideration used will not be treated as a down payment, thus not deducted from the total purchase price of the contract.

Question 10

Per Restatement 87(1)(a), what four things must an option contract have for validity?

Answer 10

It must be in writing, signed by the offeror, recite a purported consideration (minority view find this false recital of consideration a sham), and propose an exchange on fair terms.

Question 11

If an offer invites acceptance by performance (unilateral offer) and not by giving a promise (bilateral offer), an ____________ _____________ (one that is irrevocable by the offeror) is created when the offeree begins the invited performance (e.g., partial performance).

Answer 11

Option contract, per Restatement 45.

Question 12

Is mere preparation to perform enough to keep a unilateral offer irrevocable?

Answer 12

No, what is begun must be part of the actual performance invited.

Question 13

An offeree can terminate performance on a ____________ contract at any time (offeror must give the offeree opportunity to complete, which operates as an option contract, per Restatement 45). An offeree cannot terminate performance on a ____________ contract or _____________ contract once offeree has begun to perform.

Answer 13

Unilateral, bilateral, ambiguous.

Question 14

If an offer invites performance to accept, does the offeree need to notify the offeror of acceptance to be effective? Is there an exception?

Answer 14

No. Exception: When the offeror requests notification.

Question 15

The contractual duty of an offeror is discharged if the offeree knows/should have known the offeror doesn’t have the means of reasonably learning of the performance. What are the three exceptions?

Answer 15

1. Offeree was reasonable and diligent in notifying offeror.
2. Offeror learned of performance in a reasonable time.
3. Offer states notice not required.

Question 16

What are the six elements of a firm merchant offer?

Answer 16

Offer
Buy or sell goods
By a merchant
Signed
Writing (Record, per 2022 UCC 2 update)
Adequate Assurances

Question 17

What is the maximum amount of time a firm merchant offer can remain irrevocable?

Answer 17

Three months.

Question 18

What three elements must a firm merchant offer have for validity?

Answer 18

Communicated, commitment, and definite terms.

Question 19

What is a firm merchant offer for?

Answer 19

To buy or sell goods.

Question 20

For a firm merchant offer, the offeror must be a “merchant.” What are the three definitions of merchant for one to qualify?

Answer 20

1. A person who deals with goods of the kind.
2. A person who holds himself out as having knowledge/skill peculiar to the practices/goods involved in the transaction based on his occupation.
3. A person employs an agent, broker, or other intermediary who holds himself out as having knowledge/skill peculiar to the practices/goods involved in the transaction, based on his occupation.

Question 21

1. Define “signed”, per UCC 2.
2. What is meant by “writing”, per UCC 2.

Answer 21

1. Any symbol executed or adopted with present intention to adopt or accept a writing.

*Note: A complete signature is not necessary. The symbol may be printed, written, or stamped. This includes initials, a thumbprint, billhead, or letterhead, and can be found on any part of the document.

2. Printing, typewriting, or any other intentional reduction to tangible form.

Question 22

What is meant by adequate assurances?

Answer 22

There must be an explicit and unequivocal assurance that the offer will be held open.

Question 23

In a firm merchant offer, when an offer becomes irrevocable for a time not stated, how long does it remain irrevocable?

Answer 23

A reasonable time not to exceed three months.

Question 24

Do offers ever expire? If so, when?

Answer 24

Yes, within a “reasonable time.”

Question 25

What is the substantially equal publicity rule?

Answer 25

If you put an offer out there, absent a natural expiration date, you need to revoke it in the same medium/method. If the original method is no longer available, you must do your best to reach the same audience.

Question 26

During face-to-face or telephonic conversations, after a valid offer is made, when does the power of acceptance terminate? Is there an exception?

Answer 26

When the face-to-face or telephonic conversation ends. Exception: When the offeror leads the offeree to believe the offer would still be on the table when the conversation was over.

Question 27

Death, per Restatement 48:

1. Death of _______ party terminates an offer/power to accept the offer.
2. Does death terminate an existing contract?
3. Does death terminate an option contract or Firm Merchant Offer?

Answer 27

1. Either
2. No
3. No

Question 28

Unless the offeror has manifested contrary intention, the offeree’s power of acceptance is terminated by?

Answer 28

His rejection of the offer.

Question 29

A manifestation of intention not to accept an offer is a __________ unless the offeree manifests an intention to take it under further advisement.

Answer 29

Rejection.

Question 30

Is there a rejection if an offeree states he/she rejects the offer at present but will reconsider at a future time?

Answer 30

No.

Question 31

Is there a rejection if the offeror is justified to infer the offeree will not accept the offer (based on words or conduct)?

Answer 31

Yes.

Question 32

A counteroffer ___________ the power of acceptance.

Answer 32

Terminates.

Question 33

Does a counteroffer terminate the power of acceptance if the offeror manifested a contrary intention (e.g., offer states it will continue in effect despite a counteroffer)?

Answer 33

No.

Question 34

Does a counteroffer terminate the power of acceptance if the counteroffer manifests a contrary intention to the offeree (e.g., counteroffer while considering the original offer)?

Answer 34

No.

Question 35

What two types of contracts does the Mailbox Rule not apply to?

Answer 35

Option contracts and Firm Merchant Offers.

Question 36

What kind of mail does the Mailbox Rule apply to?

Answer 36

USPS (although some jurisdictions allow UPS, FedEx, email, etc.)

Question 37

What is the Mailbox Rule?

Answer 37

If mail is an appropriate medium of acceptance, it is effective upon dispatch when properly stamped and addressed.

Question 38

Using the Mailbox Rule, acceptance is effective on dispatch unless?

Answer 38

The offeror gets the rejection first and changed position in reliance.

Question 39

If an offeree sends acceptance before receiving a revocation sent by the offeror (even if revocation sent before), is the acceptance effective? If so, when?

Answer 39

Yes, upon dispatch.

Question 40

An acceptance is properly addressed, stamped, and sent by mail. Is acceptance valid? If so, when is it effective?

Answer 40

Yes, upon dispatch.

Question 41

Using the Mailbox Rule, if an offeree sends an acceptance and then sends a rejection, what happens?

Answer 41

The acceptance is effective upon dispatch unless the offeror gets the rejection first and changed position in reliance.

Question 42

Using the Mailbox Rule, if an offeree sends a rejection and then sends an acceptance, what happens?

Answer 42

Acceptance is effective when received.

Question 43

Using the Mailbox Rule, if an offer states acceptance is not effective until it’s received and the acceptance is sent, what happens?

Answer 43

Acceptance is effective when received.

Question 44

Using the Mailbox Rule, if an offer is an option contract/Firm Merchant Offer and the acceptance is sent, what happens?

Answer 44

Acceptance is effective when received.