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31. Which of the following, if proved, best support the buyer's suit against the owner for breach of contract?
On April 1, an owner and a buyer signed a writing in which the owner, in consideration of $100 to be paid to the owner by the buyer, offered the buyer the right to purchase Greenacre for $100,000 within 30 days. The writing further provided, «This offer will become effective as an option only if and when the $100 consideration is in fact paid.» On April 20, the owner, having received no payment or other communication from the buyer, sold and conveyed Greenacre to a citizen for $120,000. On April 21, the owner received a letter from the buyer enclosing a cashier's check for $100 payable to the owner and stating, «I am hereby exercising my option to purchase Greenacre and am prepared to close whenever you're ready.»
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An option promise, which makes an offer irrevocable during the time stated, requires consideration to be enforceable. Even if consideration is not furnished, however, the offer can be accepted by the offeree unless the offer lapses or the offeree receives notice of revocation by the offeror.
An option contract transforms a unilateral contract into a bilateral one because it provides some guarantee to any party providing an agreement to the contract that their actions will receive compensation. The compensation may begin immediately after the action is begun or may only come into effect once a significant portion of the work is completed. The party who has engaged an action leading to the partial performance of the contract may be able to claim detrimental reliance upon the belief that the offeror would provide payment.
A is correct. The requested consideration had not been paid, which means the owner's April 1 letter was not effective as an option when the owner conveyed Greenacre to the citizen. Because the offer was not set to lapse until April 30, on April 21, the buyer was still free to accept the owner's offer, unless it could be shown that the buyer received notice that the owner conveyed Greenacre to a third party (which would effectively revoke the offer because it demonstrates the owner's inability to enter into the contract).
B is incorrect. The buyer's reliance on the offer in applying for a loan was unreasonable under the circumstances because he could have simply paid the $100 to protect himself and create the option contract.
C is incorrect. While the modern rule holds recitals of consideration sufficient, this is not a recital of consideration. This is «sham» consideration intended to give a gratuitous promise the protection of a legal contract.
D is incorrect. The parties' status as professionals is not relevant to whether the buyer accepted the owner's offer in time.