option contracts

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Wakelaw15
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Joined: Mon Jul 23, 2012 7:13 pm

option contracts

Postby Wakelaw15 » Mon Dec 17, 2012 9:47 am

this is a very basic question that I'm uncertain of: if an oral or written offer for an option contract is made for a specific period of time, and the offeror says that it will not be revoked during that period, can it still be revoked?

under UCC firm offer (in writing, between merchants, no consideration, signed, period less than 3 months) this can happen, but I'm finding a conflict between what I seem to find in my textbook and in a supplement.

thanks

musicfor18
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Joined: Mon Feb 09, 2009 9:15 pm

Re: option contracts

Postby musicfor18 » Mon Dec 17, 2012 10:02 am

As long as its in writing, signed by the offeror, and recites that consideration has been paid for the option, it can't be revoked. Even if no consideration is actually given. That's the whole point of an option.

Wakelaw15
Posts: 108
Joined: Mon Jul 23, 2012 7:13 pm

Re: option contracts

Postby Wakelaw15 » Mon Dec 17, 2012 10:24 am

sorry, i was unclear. I understand how a firm offer works.

hypo: I say to you "I will sell you 100 horses for $500,000 if you respond by December 24, 2012 at 12pm. After that I will probably look for another buyer" you think about it for a while, and on December 20th pick up the phone to call me, at the same time that you get buzzed on your phone with an email. Its from me, and I say "sorry, I found another buyer and since i hadn't heard from you, I decided to take their price since the market is volatile."

my question is: the email is a revocation, but is it effective? there is no consideration, so my understanding is that the answer is yes--it can be revoked. my understanding is that if the other party had initially responded and said "okay, I'm interested in the horses. let me give you $25,000 as a deposit while I think about it, and i will get back to you before dec 24th at 12pm" then the offer would be irrevocable during the specified time period.

is this correct or am i missing something?

musicfor18
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Joined: Mon Feb 09, 2009 9:15 pm

Re: option contracts

Postby musicfor18 » Mon Dec 17, 2012 10:28 am

Actually, under UCC, a firm doesn't need consideration, or even a recital of consideration. The signed writing has to give explicit assurance that the offer will be held open. Firm offers can't be revoked.

But they have to be in writing. So, in your hypo (which appears to just be a conversation) there is no firm offer.

Wakelaw15
Posts: 108
Joined: Mon Jul 23, 2012 7:13 pm

Re: option contracts

Postby Wakelaw15 » Mon Dec 17, 2012 10:32 am

musicfor18 wrote:Actually, under UCC, a firm doesn't need consideration, or even a recital of consideration. The signed writing has to give explicit assurance that the offer will be held open. Firm offers can't be revoked.

But they have to be in writing. So, in your hypo (which appears to just be a conversation) there is no firm offer.


I understand what a firm offer is. yes, this is a conversation, so its not a firm offer. my question is how revocation works with an option contract, and whether it is the way I put it above or whether i'm wrong.

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dood
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Joined: Tue Apr 21, 2009 11:59 am

Re: option contracts

Postby dood » Mon Dec 17, 2012 10:35 am

musicfor18 wrote:Actually, under UCC, a firm doesn't need consideration, or even a recital of consideration. The signed writing has to give explicit assurance that the offer will be held open. Firm offers can't be revoked.

But they have to be in writing. So, in your hypo (which appears to just be a conversation) there is no firm offer.


a firm offer under the UCC =/= an option K

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dood
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Re: option contracts

Postby dood » Mon Dec 17, 2012 10:37 am

Wakelaw15 wrote:sorry, i was unclear. I understand how a firm offer works.

hypo: I say to you "I will sell you 100 horses for $500,000 if you respond by December 24, 2012 at 12pm. After that I will probably look for another buyer" you think about it for a while, and on December 20th pick up the phone to call me, at the same time that you get buzzed on your phone with an email. Its from me, and I say "sorry, I found another buyer and since i hadn't heard from you, I decided to take their price since the market is volatile."

my question is: the email is a revocation, but is it effective? there is no consideration, so my understanding is that the answer is yes--it can be revoked. my understanding is that if the other party had initially responded and said "okay, I'm interested in the horses. let me give you $25,000 as a deposit while I think about it, and i will get back to you before dec 24th at 12pm" then the offer would be irrevocable during the specified time period.

is this correct or am i missing something?


yeah thats right. as long as there is consideration, even if offeror dies, u still have the option to K

musicfor18
Posts: 692
Joined: Mon Feb 09, 2009 9:15 pm

Re: option contracts

Postby musicfor18 » Mon Dec 17, 2012 11:08 am

OK. I think I'm finally understanding what you're asking. First of all, if this offer had been in a signed writing, it would have been irrevocable up through Dec. 24. The email sent by the seller would not be an effective revocation, even without consideration.

But, since it wasn't in writing, it would need consideration. Since there wasn't any, the offer is revocable, as long as the buyer receives the revocation before dispatching his acceptance.

I'm not sure how this all fits into the statute of frauds, though. The sale of the horses would have to be in writing, or the seller could raise a statute of frauds defense. I'm not sure if an oral option would be a problem under the statute of frauds. My guess is that it would, so the entire contract is probably voidable.

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dood
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Re: option contracts

Postby dood » Mon Dec 17, 2012 5:46 pm

musicfor18 wrote:OK. I think I'm finally understanding what you're asking. First of all, if this offer had been in a signed writing, it would have been irrevocable up through Dec. 24. The email sent by the seller would not be an effective revocation, even without consideration.

But, since it wasn't in writing, it would need consideration. Since there wasn't any, the offer is revocable, as long as the buyer receives the revocation before dispatching his acceptance.

I'm not sure how this all fits into the statute of frauds, though. The sale of the horses would have to be in writing, or the seller could raise a statute of frauds defense. I'm not sure if an oral option would be a problem under the statute of frauds. My guess is that it would, so the entire contract is probably voidable.


bro, is this a flame? ur understanding of Ks is fundamentally flawed. u need to review the basic FORMATION of Ks.

also, the SoF is completely inapplicable (how can u enforce a non-existent K?) and even if there existed a K that didnt meet the SoF, its not "voidable", its unenforceable. i.e. can still be enforced by full performance, admissions in court, promissory estoppel.




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