Revocation: Contracts Practice Question

Try this practice question to test your knowledge of offer revocation.

Sharon was in the market for a new bicycle. She saw an ad online for a nice used bike being sold by Barron who was looking to sell his old bike so he could upgrade to a new StreetRipper 1000. Sharon met with Barron at his house on Monday and he said the price is $150. Being the first bike she had seen, Sharon was hesitant to make the deal. She said, “Can I have some time to think about it?” to which Barron replied, “Yeah, no problem, I promise I will not sell the bike before Sunday.”

(A) Barron got a better offer on Tuesday and sold the bike to another buyer. Has Barron breached a contract?

(B) If instead of his response above, Barron had said, “This bad boy has had a lot of interest, I promise not to sell it before Sunday, but you need to give me $10 now to keep the offer open.” Sharon paid the $10 and Barron sold the bike to another buyer on Tuesday. Has Barron breached a contract?

(C) Sharon instead decided to go to a bike shop to buy her new bike. She looked at a nice RedGlider for $200 and spoke to the salesman, Rick, about it. Still unsure, Sharon left the bike shop without buying anything. That evening, Sharon emailed the bike shop and explained that she was interested in the bike, but needed more time to make a decision. Rick emailed her back and wrote, “It’s not a problem. Since you were interested, I promise to hold it for you until Sunday.” Another buyer came into the bike shop on Thursday and Rick sold them the RedGlider. Has Rick breached a contract?

Answer A

(A) No, there is no breach here. An offeror can generally revoke his offer at any time before acceptance. Here, even though Barron made a promise not to sell the bike, that promise is not legally enforceable because it lacks consideration. Therefore, Barron is free to revoke his offer and sell the bike to another buyer.

Answer B

(B) Yes, there is a breach of an option contract. The agreement created here between Sharon and Barron is an option contract. An option contract was created when Sharon gave consideration (the $10) in return for Barron's promise to leave the offer open until Sunday. An option contract limits an offeror's ability to revoke his offer. Here, Barron breached the option contract by selling the bike to another buyer before the time specified in the option contract had lapsed. In other words, Barron was not free to revoke his offer before Sunday.

Answer C

(C) Yes, there is a breach here. The agreement between Sharon and Rick constitutes a firm offer. A firm offer under the UCC functions similarly to an option contract in that it limits the ability of a merchant to sell his goods once he has promised to hold them for sale to a particular customer. A firm offer must be made by a merchant (a person who regularly deals in the goods involved in the sale), it must be in a signed writing, and it must give assurances that the offer will be held open. Here, Rick is a merchant of bikes because he is a salesman of bikes, the email will suffice as a signed writing, and Rick made an assurance that he would leave the offer open until Sunday. Once a firm offer is made, the merchant cannot revoke the offer until the lapse of the time stated. Here, Rick was not free to sell the bike until after Sunday.