Paralegal Certification PrepContracts and Business LawMedium
A software developer, Alice, sends an email to a potential client, Bob, offering to design a custom mobile application for $15,000, stating, 'This offer is valid for 10 days.' Two days later, Alice realizes she underestimated the complexity and sends another email to Bob stating, 'I revoke my previous offer; the price will now be $20,000.' Bob receives the revocation email five minutes before he sends an email accepting the original $15,000 offer. Which of the following is true regarding the formation of a contract?
- AA contract is formed at $15,000 because Bob's acceptance was dispatched before he read the revocation.
- BA contract is formed at $20,000 because Alice revoked the original offer before acceptance.
- CA contract is formed at $15,000 because Alice's offer was irrevocable for 10 days.
- DNo contract is formed because Alice's revocation was effective before Bob's acceptance.
Show answer & explanationAnswer & explanation
Correct answer: D. No contract is formed because Alice's revocation was effective before Bob's acceptance.
An offeror can generally revoke an offer at any time before it is accepted, even if they promised to keep it open, unless consideration was given to keep it open (an option contract). The revocation is effective when received by the offeree. Since Bob received the revocation before dispatching his acceptance, the original offer was terminated.
Why the other options are wrong
- A. The 'mailbox rule' (acceptance effective upon dispatch) applies to acceptance, but revocation is effective upon receipt. Bob received the revocation before dispatching acceptance.
- B. No contract is formed at $20,000; Alice merely made a new offer, which Bob did not accept.
- C. Alice's statement 'This offer is valid for 10 days' is not an option contract unless Bob gave consideration to keep it open, which he did not.
Offer Revocation
An offeror can revoke an offer at any time before it has been accepted by the offeree. Revocation is generally effective when it is received by the offeree.
- Offeror controls the offer and can terminate it.
- Revocation must be communicated to the offeree.
- Revocation is effective upon receipt by the offeree.
- An offer stating a time limit is not irrevocable unless it's an option contract (supported by consideration).
Memory trick: Offers can vanish if the message arrives before the 'yes'.