Contracts Learning - 1

A wholesale seller of widgets telephoned a retail seller of widgets and told him that he had 5,000 pounds of widgets ready for delivery at $5,000. The retailer agreed to purchase the widgets, but stated that he wanted the wholesaler to deliver 2,000 pounds now and 3,000 pounds next month. There were no further communications between the parties. What is the most likely result of the conversation between the wholesaler and the retailer? A A contract was formed to deliver 2,000 pounds now and 3,000 pounds next month. B A contract was formed to deliver 5,000 pounds now. C No contract was formed, because the retailer's response was merely a counteroffer and a rejection. D No contract was formed, unless the wholesaler notified the retailer within a reasonable time of his assent to the proposed schedule of delivery.

A The conversation created a contract for 2,000 pounds of widgets now and 3,000 pounds next month. Because the contract is for the sale of goods, the UCC governs. Under the UCC, a contract is formed whenever it appears from the parties' communications that they intended to enter into a contract. Here, it is clear that the parties intended to enter into a contract, but the acceptance contained terms additional to the offer terms. When this occurs, the UCC provides for which terms govern: If the contract is between merchants, the additional terms in the acceptance are included in the contract, unless (i) the additional terms materially alter the contract, (ii) the offer expressly limits acceptance to the terms of the offer, or (iii) the offeror objects within a reasonable time. Here, both parties are merchants, and it does not appear that the delivery terms materially alter the contract. There is no indication that the offer limited acceptance to the terms of the offer or that the wholesaler objected to the terms; thus, there is a contract containing the additional terms. (B) would be correct if one of the parties were not a merchant, because under the UCC, when an acceptance proposes additional terms, a contract would be formed under the terms of the offer unless both parties are merchants. (C) would be correct if the UCC did not apply, because under the common law, an acceptance must mirror the offer (the "mirror image" rule); if new terms are added in the acceptance, it is treated as a counteroffer. (D) is incorrect because, under the UCC, no notice was necessary to form the contract. Notice would be required, however, if the wholesaler did not want to be bound by the additional terms. Note that the fact that this was an oral conversation does not prevent formation of the contract. To be enforceable, any contract for the sale of goods priced at $500 or more must be evidenced by a writing signed by the party to be charged. This affects enforceablility, not formation. For this contract to be enforceable, some form of signed writing (e.g., a merchant's confirmatory memo) would be necessary.

A small business owner decided to retire, so she offered her long-time employee a chance to buy the business for $1 million. She promised in writing to keep the offer open to him for 90 days and to give him enough time to secure financing once he accepted the offer. Over the next few days, the employee cashed out all his retirement accounts and took a second mortgage on his home to raise the funds to purchase the business. When he approached the business owner to discuss the details of the sale, she said that she changed her mind and was revoking her offer because she did not want to retire after all. Was the owner's revocation of her offer proper? A Yes, because it was an offer that could be revoked at will. B No, because the owner created an option contract by promising to keep the offer open for 90 days. C No, because the employee detrimentally relied on the offer. D No, because the offer constitutes a merchant's firm offer.

A The owner's revocation of her offer was proper because the offer could be revoked at will. Generally, offers can be revoked at will by the offeror, even if she has promised not to revoke for a certain period of time. There are limitations on the offeror's power to revoke, but none of those exceptions apply in this case. (B) is incorrect because an option contract requires that the offeree give consideration for the promise by the offeror to keep the offer open, and no consideration is indicated by the facts. (C) is also incorrect. Detrimental reliance can limit an offeror's power to revoke where the offeror could reasonably expect that the offeree would rely to his detriment on the offer, and the offeree does so rely. However, this usually is limited to those situations in which the offeror would reasonably contemplate reliance by the offeree in using the offer before it is accepted; e.g., when a general contractor uses a subcontractor's bid in making its own offer. Here, the offer itself included a promise by the owner to give the employee time to secure financing after the offer was accepted. Therefore, the owner had no reason to anticipate that the employee would take immediate steps to raise the purchase money before he even accepted the offer. (D) is incorrect because these facts are not an example of a merchant's firm offer. A merchant's firm offer does not apply to any offer by a merchant; it applies only to an offer under the UCC for the sale of goods where a signed writing gives assurances that the offer will be held open.

Option Contracts

An option contract is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer for a period of time. An offer normally can be revoked at will by the offeror. An option contract is a distinct contract in which an offeree gives consideration for a promise by the offeror not to revoke an outstanding offer. Even if an offeror gives written assurances regarding a promise not to revoke for a certain period, the revocation-at-will rule applies unless the offeror's power to terminate the offer has been limited in some way, such as by the creation of an option contract. Note that if the offeror could reasonably expect that the offeree would rely to her detriment on the written assurances and the offeree does so rely, the offer could be held irrevocable as an option contract, but the assurances alone are generally not enough to make an offer irrevocable. Under the Merchant's Firm Offer rule in Article 2, a promise to keep an offer open will be enforceable without the payment of consideration when a merchant offers to buy or sell goods in a signed writing that gives assurances that the contract will be held open for a specified period of time. This is not the same as an option contract, which is a distinct contract and generally requires that the offeree give some consideration for the promise not to revoke.

A letter of revocation of an offer becomes effective at the moment it is __________. A Dispatched by the offeror B Received by the offeree C Read by the offeree D Signed by the offeror

B A letter of revocation of an offer is effective when it is received by the offeree. At common law, a written communication is considered to have been "received" when it comes into the possession of the person addressed (or of someone authorized by him to receive it) or when it is deposited in some place authorized as the place for this or similar communications to be deposited. Similarly, under the UCC, a person receives notice when it comes to his attention, or it is delivered at a place of business through which the contract was made or another location held out by that person as the place for receipt of such communications. An organization receives a communication at the time it is brought (or should have been brought) to the attention of the individual conducting the transaction. Thus, the written revocation need not be actually read by the offeree to be effective. A revocation generally is effective when received while, in contrast, an acceptance generally is effective when dispatched (i.e., the mailbox rule). Under the mailbox rule, if the offeree dispatches an acceptance before he receives a revocation sent by the offeror, a contract is formed.

Which of the following statements regarding revocation and acceptance of contract offers is correct? A A revocation generally is effective when dispatched, and an acceptance generally is effective when dispatched. B A revocation generally is effective when received, and an acceptance generally is effective when dispatched. C A revocation generally is effective when dispatched, and an acceptance generally is effective when received. D A revocation generally is effective when received, and an acceptance generally is effective when received.

B A revocation generally is effective when received and an acceptance generally is effective when dispatched (i.e., the mailbox rule). Under the mailbox rule, if the offeree dispatches an acceptance before he receives a revocation sent by the offeror, a contract is formed. QUESTION ID: K0027 QUESTION ID: AMP_K0027

At common law, a written communication revoking an offer is considered "received" by an offeree at the moment: A The offeree reviews the contents of the revocation B It comes into the offeree's physical possession C The offeror dispatches the communication, provided that the mail is properly addressed and stamped D The offeror relinquishes possession of the communication

B A written revocation of an offer is effective when it is received by the offeree. At common law, a written communication is considered to have been "received" as soon as it comes into the physical possession of the person addressed (or of someone authorized by him to receive it) or when it is deposited in some place authorized as the place for this or similar communications to be deposited. The offeree need not review the contents of the revocation for it to be effective. The rule for revocation is different from the rule for acceptance, which generally creates a contract at the moment of dispatch, provided that the mail is properly addressed and stamped. QUESTION ID: K0027C QUESTION ID: AMP_K0027C

Which of the following best states the result when, in a contract between merchants for the sale of goods, the acceptance does not match the terms of the offer? A Additional terms may be knocked out of the contract, but different terms will be included unless the offeror has already objected to the particular terms. B Additional terms that do not materially alter the original terms of the offer will be included in the contract, but different terms may be knocked out of the contract. C Neither additional terms nor different terms are ever included in the contract. D Additional terms are never included in the contract, but different terms will be included unless the offer expressly limits acceptance to the terms of the offer.

B Additional terms that do not materially alter the original terms of the offer will be included in the contract. In a contract between merchants for the sale of goods, additional terms in the acceptance will be included in the contract unless they materially alter the original terms, the offer expressly limits acceptance to the terms of the offer, or the offeror has already objected to the particular terms or objects within a reasonable time. Different terms may be knocked out of the contract. There is a split of authority on different terms. Some states follow the same rules as for additional terms, but others employ the knockout rule. Under the knockout rule, conflicting terms are knocked out of the contract and gaps are filled by the UCC gap-filler provisions. Conflicting terms are subject to the knockout rule; additional terms are never subject to the knockout rule.

Under Article 2, when an offeree proposes additional or different terms as part of an otherwise valid acceptance, the acceptance __________. A Fails under the mirror image rule B Is effective, unless the acceptance is expressly made conditional on assent to the additional or different terms C Is deemed a rejection and counteroffer D Fails under the battle of the forms

B The Article 2 battle of the forms provision provides that the proposal of additional or different terms by the offeree in a definite and timely acceptance is effective as an acceptance, unless the acceptance is expressly made conditional on assent to the additional or different terms. Whether the additional or different terms become part of the contract depends on whether or not both parties are merchants. Article 2 has abandoned the mirror image rule, which insists on an absolute and unequivocal acceptance of each and every term of the offer. Under that rule, any different or additional terms in the acceptance make the response a rejection and counteroffer. QUESTION ID: K0035B

Under Article 2, when an offeree proposes additional or different terms during acceptance, the court will apply __________ to determine whether the additional or different terms become part of the contract. A gap fillers B the battle of the forms provision C the mirror image rule D the mailbox rule

B The battle of the forms provision of Article 2 lists specific rules for determining what terms are included in a contract when the terms of acceptance do not match the terms of the offer. Article 2 has abandoned the mirror image rule, which requires an absolute and unequivocal acceptance of each and every term of the offer. Gap fillers are used when certain terms are not included in the contract; it does not apply to additional or different terms in the acceptance. The mailbox rule is applied to determine the timing of acceptance of a contract. QUESTION ID: K0035 QUESTION ID: AMP_K0035

A recent nursing school graduate mailed a letter to a classmate on July 1 telling her that she was moving to take a nursing position in another city and asking her whether she wanted "the stuff in my house" for $2,500. The classmate received the letter on July 2, and on July 3 she sent the newly minted nurse a letter accepting the offer. The next day the classmate changed her mind, called the nurse, and told her to forget the deal. Later that same day, the nurse received the letter that her classmate had sent on July 3. Is there a contract between the nurse and her classmate? A Yes, because the contract is for the sale of goods for more than $500 and the classmate's attempted rejection is oral. B Yes, because the classmate's letter of acceptance was effective when she mailed it. C No, because the classmate's rejection was communicated to the nurse before her letter of acceptance was received. D No, because the description of the subject matter as "the stuff in my house" is not sufficiently definite and certain.

B The classmate accepted the nurse's offer when she mailed the letter on July 3; thus, a contract was formed. Under the mailbox rule, acceptance of an offer by mail creates a contract at the moment the acceptance is posted, properly stamped, and addressed. If the offeree sends both an acceptance and a rejection, whether the mailbox rule will apply depends on which the offeree sent first, the acceptance or the rejection. If the offeree first sends an acceptance and later sends her rejection, the mailbox rule does apply. Thus, even if the rejection arrives first, the acceptance is effective upon mailing (and so a contract is formed) unless the offeror changes his position in reliance on the rejection. Here, the classmate first sent an acceptance, then called with her rejection. The mailbox rule applies, and because there is nothing in the facts to show that the nurse relied on the rejection, a contract was formed. (A) is wrong because it implies that a rejection must be in writing. There is no such requirement. Also, the rejection (absent detrimental reliance) has no effect on the contract because the offer had already been accepted and the contract formed. (C) is wrong because, as stated above, under the mailbox rule the fact that the rejection was received before the acceptance is irrelevant (unless there has been detrimental reliance on the rejection, which was not the case here). The contract was formed when the classmate sent her acceptance. (D) is wrong because the description, although somewhat ambiguous, can be made reasonably certain by evidence of the subjective understanding of the parties and extrinsic evidence of what was in the house, which a court will consider to clarify an ambiguous term.

Under the Article 2 battle of the forms provision, whether additional or different terms proposed by the offeree during acceptance ultimately become part of a contract depends on whether or not __________. A The offeree is a merchant B Both parties are merchants C The offeror is a merchant D One of the parties is a merchant

B Whether the additional or different terms become part of the contract depends on whether or not both parties are merchants. If any party to the contract is not a merchant, the additional or different terms are considered to be mere proposals to modify the contract. They do not become part of the contract unless the offeror expressly agrees. If both parties are merchants, additional terms in the acceptance become part of the contract unless they materially alter the terms of the offer, the offer expressly limits acceptance to the terms of the offer, or the offeror has already objected to the terms (or objects within a reasonable time after notice of them is received). Between merchants, some courts treat different terms in an acceptance the same as additional terms; other courts apply the knockout rule (i.e., conflicting terms are knocked out and replaced by gap-filling terms under the UCC).

On September 15, a manufacturer of office furniture received an email purchase-order form from a retailer of office furniture. The order was for 100 executive leather swivel chairs and specified a delivery date no later than November 1, at a total cost of $10,000, as quoted on the manufacturer's website. Two days later, the manufacturer emailed its own purchase-order acceptance form to the retailer, who was a new customer and had never seen the form before. The purchase-order acceptance form stated that it was an acceptance of the specified order, was signed by the manufacturer's sales manager, and contained all of the terms of the retailer's form, but it also contained an express warranty and a clause disclaiming all implied warranties such as the implied warranty of merchantability. Assuming that there were no further communications between the parties, what is the status of the relationship between the parties? A There is an enforceable contract between the parties, the terms of which are comprised of the language in the manufacturer's form. B There is an enforceable contract between the parties, the terms of which do not include the disclaimer of implied warranties in the manufacturer's form. C There is no enforceable contract between the parties because the manufacturer's form constituted a rejection of the retailer's offer and a counteroffer by the manufacturer. D There is no enforceable contract between the parties because the manufacturer's form added an additional term that materially altered the terms of the retailer's offer.

B The manufacturer and the retailer have a contract without the disclaimer. In contracts for the sale of goods, a definite expression of acceptance operates as an acceptance even if it states additional terms. Between merchants, additional terms proposed by the offeree in an acceptance automatically become part of the contract unless (i) they materially alter the original terms of the offer (e.g., they change a party's risk or the remedies available); (ii) the offer expressly limits acceptance to the terms of the offer; or (iii) the offeror had already objected to the additional terms or objects within a reasonable time. Here, a clause was added by the manufacturer (the offeree) providing for an express warranty and a disclaimer of all implied warranties, including the warranty of merchantability. The disclaimer materially altered the original terms of the offer. Therefore, the disclaimer would not become part of the contract. (A) is therefore incorrect. (C) is incorrect because it reflects the common law "mirror image" rule, which the UCC has rejected in sale of goods cases. (D) is incorrect because under the UCC, the inclusion of a material additional term does not prevent formation of a contract; instead, a contract is formed without the inclusion of that additional term.

A photography buff wrote a letter to his brother-in-law offering to sell him his camera for $1,500, because he knew that he had admired it for a long time. The day after the brother-in-law received the letter, he mailed a letter back to the photography buff agreeing to purchase the camera equipment for $1,500. The next day, after describing the camera to a friend who was very knowledgeable about photographic equipment, the brother-in-law learned that the camera was second-rate and not worth more than $1,200. He immediately telephoned the photography buff and told him that he had no interest in buying the camera. The photography buff received his brother-in-law's letter agreeing to purchase the camera equipment a day after receiving the phone call. If the photography buff brings an action against his brother-in-law for breach of contract, and the brother-in-law defends on the grounds that no contract was formed, how should the court rule? A For the brother-in-law, because the description of the subject matter of the contract was too indefinite to be enforced. B For the brother-in-law, because the photography buff received the telephone call before he received the letter. C For the photography buff, because his brother-in-law's letter accepting the offer was effective when mailed. D For the photography buff, because the contract is for the sale of goods over $500 in value and his brother-in-law's attempted rejection of the offer was oral.

C A contract was formed because the brother-in-law's acceptance was effective on dispatch. Under the "mailbox rule," acceptance by mail or similar means creates a contract at the moment of posting, properly addressed and stamped, unless: (i) the offer stipulates that acceptance is not effective until received; or (ii) an option contract is involved. Here, the brother-in-law dispatched first an acceptance and then a rejection of the photography buff's offer. The mailbox rule applies because the photography buff's offer did not specify that acceptance was not effective until receipt, nor is an option contract involved. Because the brother-in-law dispatched his acceptance before he called with his rejection, the mailbox rule applies. Thus, the brother-in-law's acceptance was effective, thereby creating a contract at the moment it was mailed, and his attempted rejection was ineffective. (B) is incorrect because once the acceptance was effective, the fact that the photography buff received the "rejection" by telephone before he received the acceptance letter has no effect on the formation of the contract. (A) is incorrect because the letter from the photography buff indicates that the subject matter of the contract was his camera that the brother-in-law had admired for some time. This description on its face appears to be sufficiently definite that a court would be able to determine with reasonable accuracy which camera is subject to the photography buff's offer to sell. (D) is incorrect even though it is true that, pursuant to the Statute of Frauds, a contract for the sale of goods of $500 or more is not enforceable unless evidenced by a writing. There is no requirement that a rejection of an offer to enter into such a contract must be in writing.

On July 1, a cattle rancher offered to sell his ranch to a dairy farmer for $150,000. The dairy farmer paid the cattle rancher $1,000 to hold the offer open for a period of 30 days. On July 10, the dairy farmer wrote to the cattle rancher, telling him that he could not pay more than $100,000 for the ranch, and that if he would not agree to accept that amount, he would not go through with the deal. The dairy farmer received no reply from the cattle rancher. On July 29, the dairy farmer mailed a letter to the cattle rancher telling him that he accepted his offer to sell the ranch and enclosed a check for $150,000. The cattle rancher received this letter on August 1. Has a contract been formed between the parties for the sale of the ranch? A No, because the dairy farmer's letter of July 10 terminated the cattle rancher's offer. B No, because the cattle rancher did not accept the dairy farmer's counteroffer of $100,000. C No, because the cattle rancher did not receive the dairy farmer's acceptance within 30 days. D Yes, because the dairy farmer dispatched his acceptance of the cattle rancher's offer prior to the expiration of 30 days.

C No contract was formed because the cattle rancher did not receive the dairy farmer's acceptance within 30 days. Under the mailbox rule, acceptance by mail or similar means creates a contract at the moment of dispatch. However, the mailbox rule does not apply to option contracts. An acceptance under an option contract is effective only upon receipt. [Restatement (Second) of Contracts �63] Here, an option contract existed because the dairy farmer paid the cattle rancher $1,000 to hold the offer open for 30 days. The dairy farmer mailed his acceptance within 30 days but it was not received by the cattle rancher within the 30-day period, so the acceptance was not effective. The option specified the period of time during which the offer would remain open, after which the offer terminated. Thus, (C) is correct, and (D) is wrong. (A) and (B) are wrong because an option contract is irrevocable for the time period stated. Thus, not even the dairy farmer himself could revoke the offer within the 30-day period.

A doll collector knew that an acquaintance from her doll collectors' club coveted one particular doll that she owned. The doll collector mailed a letter to the acquaintance on May 3 offering to sell the doll to her for $750. Her letter arrived on May 4. On May 5, the doll collector changed her mind and immediately mailed a revocation to the acquaintance. This revocation arrived on May 7. As the mail carrier handed it to her, the acquaintance simultaneously handed to the mail carrier her own letter to the doll collector, unequivocally accepting her offer. What is the result of the actions here? A The revocation was effective upon mailing, and the acceptance would be treated as a counteroffer. B The acceptance was effective, as long as the acquaintance had no knowledge of the contents of the doll collector's letter when she handed her letter to the mail carrier. C The outcome would turn on the court's determination as to whether the doll collector's letter had been received by the acquaintance before she had entrusted the letter of acceptance to the mail carrier. D Handing a letter to a mail carrier is not a proper posting of the acceptance, and hence the acquaintance's purported acceptance is not timely.

C The outcome would turn on the court's determination as to whether the doll collector's letter had been received by the acquaintance before she had entrusted the letter of acceptance to the mail carrier. At common law, an acceptance is effective upon dispatch (e.g., upon mailing a properly addressed and stamped letter) under the mailbox rule. The mailbox rule does not apply to revocations, however—revocations are effective only upon receipt. Receipt does not require knowledge of the revocation, but merely possession of it. The communication need not be read by the recipient to be effective. [See Restatement (Second) of Contracts �68] The facts here present a close question as to whether there has been a dispatch of the acceptance before the receipt of the revocation. The outcome of this question will depend on the court's determination as to what came first (the posting of the acceptance or receipt of the revocation). This will decide the existence or nonexistence of the contract. (A) is incorrect because, as indicated above, revocation is effective only upon receipt, not mailing. (B) is incorrect because whether the acceptance is effective depends on whether the revocation was received before the acceptance was dispatched, and whether the revocation was received first is not dependent on whether the acquaintance had knowledge of its contents, but rather it depends on whether she had possession of it. (D) is incorrect because the mailbox rule makes an acceptance effective upon posting, and there is no reason to hold that handing a properly addressed, stamped letter to a mail carrier is not a valid posting.

On July 1, a cattle breeder, who was planning to retire soon, sent a note to his neighbor offering to sell his prize bull for $15,000. On July 10, the neighbor, who was also a cattle breeder, wrote the following note to the retiring breeder: "I have decided to take the bull. I will give you a cashier's check on delivery on Saturday, July 28." The retiring breeder did not respond. The retiring breeder did not want to deliver the bull on July 28 and did not think that the delivery day was agreed to. Instead, he delivered the bull on Monday, July 30. The neighbor refused the delivery and stated that he had found another bull he likes better. The retiring breeder sues the neighbor for breach of contract. Is the retiring breeder likely to prevail? A Yes, because his breach, if any, was minor. B Yes, because the parties had not agreed on July 28 as the delivery date. C No, because there was no contract. D No, because he did not deliver the bull on July 28.

D The retiring breeder will not prevail because he did not deliver the bull on July 28. This is a contract for a sale of goods and thus is governed by the UCC. Under the UCC, an acceptance with additional terms does not constitute a rejection and counteroffer, but rather is an effective acceptance unless made expressly conditional on the assent to the additional terms. Here, the neighbor accepted the offer and added the additional term of a delivery date. Thus, there was a contract. Whether additional terms become part of the agreement depends on whether both parties are merchants. If both parties to the contract are merchants, additional terms in the acceptance will be included in the contract unless they materially alter the terms of the offer, the offer expressly limited the acceptance to its terms, or they are objected to within a reasonable time. Here, both parties are breeders in the cattle business and, thus, are merchants. The change in the delivery date does not materially change the offer (i.e., it does not change a party's risk or remedies), the offer did not limit the acceptance to its terms, and the retiring breeder did not object. Therefore, the July 28 delivery date became part of the contract. By delivering the bull on July 30th, the retiring breeder breached the contract. (A) is incorrect because this is a contract for the sale of goods, which requires perfect tender. Whether the breach was material or minor has no effect. (B) is incorrect because under the UCC, the July 28 term became part of the contract when the breeder failed to object to it. (C) is incorrect because, under the UCC, an acceptance is effective even if it includes additional terms. Thus, the neighbor's letter on July 10 was sufficient to create a contract.

On September 15, a highlighter manufacturer faxed a large office supply company offering to sell the supply company 50,000 highlighters for $25,000. The supply company faxed back the following communication: "We accept your offer. Please box 125 highlighters per case in post-consumer cardboard shipping boxes." Assuming the existence of a valid contract, what would its terms include? response - correct A Only those terms set forth in the manufacturer's fax of September 15, because the manufacturer did not assent to any enlargement of the shipping terms. B All terms set forth in the manufacturer's offer plus consistent additional terms proposed in the office supply company's acceptance. C All terms set forth in the manufacturer's offer plus those in the office supply company's attempted acceptance that did not amount to a material alteration of the manufacturer's offer. D All terms set forth in the manufacturer's offer plus all those in the office supply company's purported acceptance that did not amount to a material alteration of the manufacturer's offer and to which the manufacturer did not object within a reasonable time.

D The language in choice (D) properly states the UCC position regarding the terms of the contract. Under the UCC, if both parties to a contract are merchants, additional terms in an acceptance will be included in the contract unless (i) they materially alter the original contract; (ii) the offer expressly limits acceptance to the terms of the offer; or (iii) the offeror has already objected to the particular terms, or objects within a reasonable time after notice of them is received. [UCC �2-207(2)] The manufacturer and office supply company are both merchants because they regularly deal in goods. [UCC �2-104(1)] Therefore, under Article 2 the contract will include the terms of the manufacturer's offer plus those in the office supply company's purported acceptance that did not amount to a material alteration of the offer or to which the manufacturer did not object within a reasonable time. Note that the manufacturer's offer did not expressly limit acceptance of its terms. (A) is incorrect because this was a contract between two merchants. Contract formation under the UCC for contracts between merchants is governed by the rule stated above. If one of the parties were not a merchant, (A) would be correct—if one of the parties to a contract for sale of goods is not a merchant and the acceptance includes additional or different terms, such terms are considered to be mere proposals that do not become part of the contract unless the offeror accepts. [UCC �2-207(2)] However, because this is a contract between merchants, the office supply company's terms regarding shipping will be included unless they materially alter the offer, as discussed above. (B) is incorrect because it does not fully state the Code's "battle of the forms" provision. The choice fails to mention the manufacturer's power to object within a reasonable time. (C) is incorrect because, like (B), it does not note the manufacturer's power to object within a reasonable time.

The owner of a stationary bicycle wrote a letter to her friend offering to sell her stationary bicycle to him for $150. The friend received the letter on January 18. On January 19, he mailed a letter back saying that he was not interested in purchasing the bike because he had just purchased a gym membership. However, the friend changed his mind the next day and mailed a letter to the owner accepting her offer to sell the bicycle and enclosing a certified check for $150. The owner received the friend's rejection letter on January 21 but put it aside without reading it. The next day, she received the friend's acceptance letter, which she opened and read immediately. Do the parties have a contract? A Yes, because under the mailbox rule an acceptance is effective on dispatch, while a rejection is effective on receipt. B Yes, because the friend paid for the bicycle when he accepted the offer to buy it. C No, because the acceptance was dispatched after the rejection. D No, because the mailbox rule does not apply—whichever is received first controls.

D The parties do not have a contract, because the mailbox rule does not apply when the offeree sends a rejection, followed by an acceptance. In such a case, whichever is received first controls. Under the mailbox rule, acceptance by mail or similar means creates a contract at the moment of posting, with a couple of exceptions not relevant here. Rejection, on the other hand, is effective when received. So, if the mailbox rule had applied, there would have been a contract, because the friend's acceptance was mailed before his rejection letter was received. But because the mailbox rule does not apply here, and the matter is decided based on which letter was received first, there is no contract, because the friend's rejection letter was received by the bicycle owner a day before his acceptance letter was received by her. (A) is incorrect because, as discussed above, the mailbox rule does not apply when a rejection is sent before an acceptance; rather, whichever is received first controls. The fact that the bicycle owner did not read the rejection does not matter; it still was received by her before the acceptance. [See Restatement (Second) Contracts �68] (B) is incorrect because whether the friend paid for the bicycle is irrelevant. He sent the certified check (and his acceptance) after he sent his rejection, and the rejection was received first. (C) is incorrect because when a rejection by mail is followed by an acceptance by mail, the rule is that whichever is received first controls, not whichever is dispatched first. Thus, although it is true that there is no contract between the parties, it is because the friend's rejection letter was received by the bicycle owner first, rather than because it was mailed first.

Merchant Firm Offer

Under Article 2, a merchant's firm offer arises when a merchant offers to buy or sell goods in a signed writing and the writing gives assurances that the offer will be held open. If no specific time frame is stated in the offer, a merchant's firm offer will remain open for a reasonable time (but in no event may such period exceed three months). For a merchant's firm offer, it is not necessary that both parties be merchants; only the offeror must be a merchant. A merchant's firm offer is enforceable even if no consideration has been paid by the offeree to keep the offer open. QUESTION ID: K0032 The difference between option k's and firm offer: An option contract is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer for a period of time. An ordinary option contract is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer. In contrast, under Article 2's merchant's firm offer provision, there are circumstances in which a promise to keep an offer open is enforceable even if no consideration has been paid to keep the offer open: A merchant's firm offer arises when a merchant offers to buy or sell goods in a signed writing and the writing gives assurances that the offer will be held open.