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8. As of March 22, which of the following is a correct statement?
On March 1, an apartment complex received a letter from a retailer offering to sell the apartment complex 1,200 window air conditioners suitable for the apartments in the complex's buildings. The retailer's offer stated that it would remain open until March 20, but that the apartment complex's acceptance must be received on or before that date. On March 16, the apartment complex posted a letter of acceptance. On March 17, the retailer telegraphed the apartment complex to advise that it was revoking the offer. The telegram reached the apartment complex on March 17, but the apartment complex's letter did not arrive at the retailer's address until March 21.
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The mailbox rule is followed by most courts and holds that an acceptance is effective upon proper dispatch. This means that when a letter is deposited in the mail, the acceptance becomes effective, and applies to acceptances dispatched by means other than letters, including telegrams and emails.
An ordinary offer is revocable at the will of the offeror, even if he has promised not to revoke for a certain period.
However, there are several exceptions to the general rule allowing revocation: (i) the standard option contract; (ii) firm offers under the UCC; and (iii) temporary irrevocability as the result of the offeree's part performance or detrimental reliance.
Article 2 of the UCC allows for circumstances in which a promise to keep an offer open is enforceable (i.e., the offer becomes irrevocable), even if no payment has been made to keep it open (i.e., no consideration) under § 2-205, if:
(i) the offer is made by a merchant (a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction);
(ii) the merchant's offer is in a signed writing; AND
(iii) the writing gives explicit assurance that the offer will be held open (e.g., «this offer will be held open for 10 days»).
When an offer meets these three criteria, it will be held irrevocable even though there is not consideration given for keeping it open.
If the UCC firm offer states a time period for how long the offer remains open and irrevocable, that time period governs how long the offer remains irrevocable. If the firm offer did not state a period of time, it will be held irrevocable for a reasonable time. A firm offer cannot be made irrevocable for more than three months, even if contracted to remain open for longer.
D is correct. This was a UCC firm offer because it was: (i) made by a merchant (the retailer); (ii) the offer was in a signed writing (the offer letter); and (iii) the writing explicitly stated the offer would remain open until March 20. As such, the offer was irrevocable until March 20.
Additionally, the offer stated that the apartment complex's acceptance must be received on or before March 20, which means the mailbox rule does not apply.
When the retailer attempted to revoke, it was ineffective because of the irrevocability under this firm offer. When the apartment complex tried to accept, it was ineffective under the terms of the offer because it was not received until March 21.
A is incorrect. Although the general rule is that an offeror is free to revoke his or her offer at any time before it is accepted, this is not true for firm offers.
This case involved a UCC firm offer and as such, the retailer's revocation was not effective. The original offer was irrevocable until March 20. The fact that the acceptance wasn't received until March 21 is the basis for finding that there was no contract; it was an ineffective acceptance under the terms of the offer (that the acceptance must be received by March 20).
B is incorrect. On the contrary, for a UCC firm offer such as the one in this question, consideration is not required to be irrevocable. Here, the offer remained open and irrevocable, despite a lack of consideration, until March 20.
C is incorrect. The means of revocation are of no consequence here, where the UCC firm offer was irrevocable until March 20.
As an aside, while it is true that the maker of the offer can specify how he wants to be notified that the other party has accepted, this rule does not extend to revocation. Generally, revocation can be effectuated by any means.