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2. Which of the following is an accurate statement as of October 10 after the wholesaler rejected the shovels?
The wholesaler did not cancel the order, and the manufacturer shipped the shovels to the wholesaler on September 15. When the shovels, conforming to the order in all respects, arrived on October 10, the wholesaler refused to accept them.
On July 18, a shovel manufacturer received an order for the purchase of 500 snow shovels from a wholesaler. The wholesaler had mailed the purchase order on July 15. The order required shipment of the shovels no earlier than September 15 and no later than October 15. Typed conspicuously across the front of the order form was the following: «[the wholesaler] reserves the right to cancel this order at any time before September 1.» The manufacturer's mailed response, saying «We accept your order,» was received by the wholesaler on July 21.
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A promise that reserves for the promisor several alternative performances is generally consideration only if each of the alternative performances would have been consideration if it had been bargained for alone. However, consideration will be found if one of the alternative performances would be consideration and there is a substantial possibility that before the promisor makes his choice, events will eliminate the alternatives.
A is correct. An illusory promise may become adequate consideration if the time during which the promisor could choose alternative performances has passed. Although reserving the right to terminate a contract for a specified period makes a promise illusory, the promise becomes consideration once the period for exercising the right to terminate has passed. Because the wholesaler did not exercise the right to cancel the order, the manufacturer became bound to the contract as of September 1.
B is incorrect. In a typical option contract, the seller agrees to keep an offer open for a certain amount of time. A potential buyer has to give the seller some payment in exchange. In other words, in an option contract, the seller is agreeing to keep the «option» open for the buyer. Both parties became bound to a contract as of September 1. Before that date, the promise was still illusory because the wholesaler had an unrestricted right to cancel.
C is incorrect. A condition subsequent is an event that, if it happens, will defeat or modify an existing arrangement or discharge an existing duty. In a contract, a condition subsequent can often terminate the duty of one party to perform under the agreement. There is no language that indicates the existence of condition subsequent, and even if there were such language, the failure of a condition subsequent would not create an enforceable contract.
D is incorrect. While illusory promises cannot be consideration, they can be converted into consideration if one of the alternative promises would be consideration and events have eliminated all other alternatives. As explained above, the illusory promise to buy the shovels converted into consideration after the right to terminate passed and the manufacturer and wholesaler were bound by a contract on September 1.