Contract Law: Revocation of an Offer
Offers can only be revoked by an offeror. An offer is nothing more than an informal agreement and, as such, is binding as a bargain only if supported by consideration.Comment A, §42 Restatements of Contracts 2d. In other words, a promise without consideration is not binding. Thus, an offeror must be entitled to the same freedom as the offeree, holding that an offer is revocable within any specified time limit for which the offer is said to be open. Communication of the revocation of an offer does not have to be by or on behalf of the offeror. Communication of revocation of an offer from a third-party is sufficient.
“The word “revoke” is not essential to a revocation. Any clear manifestation of unwillingness to enter into the proposed bargain is sufficient. Thus a statement that property offered for sale has been otherwise disposed of is a revocation. But equivocal (unclear) language may not be sufficient.” Comment D, §42 Restatements of Contracts 2d.
However, ”once the offeree has exercised his power to create a contract by accepting the offer, a purported revocation is ineffective as such.” Comment C, §42 Restat. of Contracts 2d.
The Following Types of Offers are Irrevocable:
- Where the offeree pays the offeror for the promise to keep the offer open (option contract)
- Where reasonable reliance is shown. “Reasonable reliance serves to hold the offeror in lieu of the consideration ordinarily required to make the offer binding. Drennan v. Star Paving Co., 333 P.2d 757 (1958). See also Restat. of Contracts 2d §90.
- Where a firm offer has been made under UCC §2-205, which states “An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
- Where the offeree has either partially performed or began performance. Note the exception for preparation of performance See §45 (comment F).
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