On May 1, a medical-device distributor emailed a clinic: “We offer to sell you 30 Model Z patient monitors for $2,000 each. We will hold this offer open through May 20.” The distributor's sales director typed her name and title at the end of the email. The distributor regularly sells medical devices, and the clinic gave no consideration for the promise to keep the offer open. On May 10, before the clinic responded, the distributor attempted to revoke the offer because its acquisition cost had increased. The clinic wants to accept immediately. Which of the following is the lawyer's strongest conclusion?

The offer remained irrevocable until May 20 because the signed assurance was made by a merchant and stated a definite period.

The offer remained irrevocable only if the clinic gave the distributor consideration for the assurance.

The offer was revocable because the distributor had not yet obtained the monitors when it made the assurance.

The offer was irrevocable for three months because Article 2 supplies that period whenever a merchant signs an offer.

On March 1, a machine manufacturer sent a signed email to a retailer offering to sell 20 standard generators for $8,000 each. The email stated, "This offer will remain open through April 15." Both parties regularly deal in generators. The retailer gave no consideration for the promise to keep the offer open. On March 20, the manufacturer emailed, "Market prices have increased, so I withdraw my offer." The retailer received that message immediately. On March 25, the retailer emailed an unconditional acceptance of the March 1 terms. The manufacturer refused to deliver, asserting that the offer had been revoked. The retailer asks whether an enforceable contract was formed. Which of the following is the most appropriate advice?

A contract was formed because the signed merchant's assurance made the offer irrevocable when the retailer accepted within the stated period.

No contract was formed because an offeror may revoke any unaccepted offer unless the offeree paid consideration for an option.

No contract was formed because the retailer did not accept before the manufacturer communicated its attempted revocation.

A contract was formed only if the retailer can prove foreseeable reliance on the promise that the offer would remain open.

Formation of contracts — Bar Exam Lessons

The Formation Floor: From Invitation to Offer

The essential vocabulary is offer, power of acceptance, revocation, rejection, lapse, option, firm offer, acceptance, consideration, promissory estoppel, restitution, modification, and gap filling. The ordinary order is: identify the governing law, decide whether there is an offer, check whether its power of acceptance survived, identify an effective acceptance, and then test consideration or a formation substitute.

Run a fact pattern in this order:

Identify common law or Article 2, using the transaction’s legal character.
Find a communicated commitment with sufficiently definite terms and objective intent.
Check whether revocation, rejection, lapse, death, an option, or a firm offer affects the power.
Decide whether acceptance occurred by promise, performance, silence, or an authorized method.
Test consideration, then promissory estoppel or restitution if an ordinary bargain fails.
If goods are involved and terms are open, test Article 2 formation and gap filling.
If an existing deal was changed, apply the modification rule for the governing law.

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An offer requires an objective manifestation of present commitment, communication to the intended offeree, and enough definiteness that acceptance would identify the promised exchange. The question is not what the speaker secretly intended. It is what a reasonable recipient would understand from words and conduct.

Advertisements, catalogues, and general price quotes ordinarily invite customers to make offers because they lack commitment or leave quantity and other essential matters open. An advertisement can function as an offer when it is specific, definite, and limited-for example, a stated quantity offered to the first identified number of respondents.

Common-law definiteness usually requires the subject matter, the quantity or scope of performance, and a workable basis for identifying the promised exchange. Price need not always be mathematically exact if the language and circumstances show commitment and provide an objective method for determining it. Article 2 is more flexible about open terms, but quantity remains central.

A standalone MCQ may isolate one trigger, such as whether a revocation was received before acceptance or whether an open-price sales agreement formed. Read supplied authority for operative language and exceptions.

An integrated question set may combine formation facts with communications, documents, negotiation, or client advice. Keep the sequence intact: offer, surviving power, acceptance, bargain or substitute, and any Article 2 gap.

A performance task may require you to advise whether a client has a contract, identify the strongest formation theory, or draft a response addressing a proposed modification. State the controlling facts and connect each conclusion to the supplied authority.

Keeping Acceptance Power Alive: Doors That Close

A revocation ends the power of acceptance when the offeree receives it. It may be direct, such as “I withdraw the offer,” or indirect when the offeree reliably learns that the offeror took definite action inconsistent with continuing the offer. Merely hearing a rumor is not enough.

A rejection ordinarily terminates the power when received by the offeror. A counteroffer does the same because it proposes a different bargain, but a request for information-“Would you consider a lower price?”-is not necessarily a rejection or counteroffer. An offer also lapses when its stated deadline passes or, without a stated deadline, after a reasonable time measured by the subject, market, communication method, and circumstances.

Death or incapacity of the offeror ordinarily ends an ordinary offer before acceptance, even if the offeree does not know of the event. An option is different: the option power generally survives the offeror’s death or incapacity during its protected period.

An option makes an offer irrevocable for the agreed period, ordinarily because the offeree gave consideration for that protection. An option acceptance is effective on receipt, not dispatch. This is an important exception to the ordinary mailbox rule.

A merchant’s firm offer under Article 2 is also irrevocable without consideration when a merchant signs a writing assuring that the offer will remain open. The stated period controls, or a reasonable period applies if none is stated, but the irrevocability cannot exceed three months. A term on a form supplied by the offeree requires a separate signature by the merchant.

The facts often reveal the issue through phrases such as “withdraw,” “I heard she sold it,” “I reject,” “I will keep this open,” “for the first week,” “merchant,” “signed writing,” or “before the deadline.” Ask what event occurred, when it became effective, and whether an option or firm-offer rule displaced the ordinary revocability rule.

A supplied acceptance provision should be read narrowly. If it says an acceptance is effective on dispatch except for options, identify three things: the communication method, whether the offer required receipt, and whether the offer was an option. Do not let the fact that revocation was sent earlier replace the rule’s stated receipt requirement.

Acceptance by Word or Deed: Mail, Promise, Performance

Under the common-law mailbox rule, an authorized acceptance is generally effective when dispatched, unless the offer requires receipt, the parties otherwise provide, or the offer is an option. A rejection sent first and an acceptance sent later creates a special timing problem: the rejection may control if received before the acceptance, while the acceptance may control if received first. Always read the supplied rule if one is given.

The mirror-image rule applies to common-law contracts. Acceptance must correspond to the offer rather than add a materially different bargain. A response changing price, subject matter, or essential performance is usually a counteroffer, not acceptance. A mere inquiry or request for a better term does not necessarily defeat acceptance.

Article 2 is more accommodating. A definite and seasonable expression of acceptance can form a sales contract even though it contains additional or different terms. The formation question is therefore not automatically defeated by every variation in language. Read the supplied Article 2 provision for the treatment of the added terms.

Acceptance can occur by performance when the offer invites performance rather than a return promise. For a unilateral offer, completing the requested performance ordinarily accepts the offer. Beginning the invited performance can create protection against revocation, but the requested performance generally must be completed before the offeree can demand the offered exchange.

Silence is ordinarily not acceptance. It can operate as acceptance when the offeree takes the offered benefit while having reason to know payment is expected, when the parties’ prior dealings make silence a recognized method, or when the offeree expressly agrees that silence will count. Keeping silent after receiving an unsolicited offer does not ordinarily create a contract.

A supplied rule should control over a general recollection. In the following item, the operative words are “effective when dispatched,” the exception is “option contract,” and the separate revocation rule is “only when received.”

An acceptance is effective when dispatched if:

(1) the offer does not specify that acceptance must be received;

(2) the acceptance is sent by a reasonable means; and

(3) the offer is not an option contract.

If the offer is an option contract, acceptance is effective only when received. A revocation is effective only when received. A rejection is effective when received.

On Monday, Lee offered by letter to paint Priya’s storefront for $10,000. The letter stated, “Your acceptance must be mailed by Friday.” Priya mailed an unconditional acceptance on Tuesday. On Wednesday, Lee mailed a revocation, which Priya received on Thursday. Lee received Priya’s acceptance on Friday. The offer was not an option contract, and mail was a reasonable means of acceptance.

Practice

Which answer best states when the contract was formed?

The Bargained-for Exchange: Value in Return

Consideration requires a bargain: the promisee’s performance or return promise must be sought by the promisor in exchange for the promisor’s promise, and the promisee must provide it as the requested exchange. A legal detriment or benefit is useful vocabulary, but the central question is reciprocal inducement.

A gratuitous promise is not supported by consideration. “I will give you $500 next month because you are my friend” lacks a requested exchange. A past act also does not ordinarily furnish consideration because it was not bargained for when performed. “I will pay you for helping me last year” is a promise based on gratitude, not a bargain.

An illusory promise makes no real commitment. A statement such as “I will buy as much as I want, if I want any” leaves performance entirely optional. A promise can still be definite despite some discretion when the discretion is constrained by good faith, objective standards, or a stated minimum.

The preexisting-duty rule denies consideration when a party merely promises to do what that party already owes. Paying a contractor the original price for the same promised work supplies no new consideration for a later promise to perform that work.

Consideration need not be equal in economic value. Courts generally do not weigh whether the exchange was a good deal. But a nominal or sham exchange may reveal that no bargain occurred. A recited “one dollar” that was never requested or exchanged is not consideration merely because the document uses that label. The question is whether the alleged consideration was actually bargained for.

Reliance When Bargain Formation Fails: Promise, Benefit, Recovery

Promissory estoppel can make a promise enforceable without ordinary consideration when four questions point toward enforcement: was there a promise, was reliance reasonably foreseeable, did the promisee actually and reasonably rely, and is enforcement necessary to avoid injustice? The promise must be more than a vague prediction or expression of hope.

Concrete triggers include a promise to make a gift followed by a foreseeable change of position, a promise of employment followed by moving expenses, or a promise to keep negotiations open followed by costly preparation specifically induced by that promise. The remedy is shaped by justice and may be limited to what the reliance requires.

Restitution is a different formation substitute. It addresses a benefit conferred on another when the recipient knew or appreciated the benefit and retention without payment would be unjust. The benefit must not be an unsolicited or officious intervention. No bargain or enforceable promise is required.

Keep the doctrines distinct. Promissory estoppel centers on a promise and reliance. Restitution centers on a benefit and unjust retention. A person who receives no benefit may have a reliance claim but not a restitution claim; a person who receives and keeps a valuable service without a bargain may present a restitution claim even without a promise.

Changing the Deal: New Duties and Good Faith

First identify whether the parties are changing an existing duty or ending it. A modification leaves the contractual relationship in place but changes one or more duties. A promise that simply ends duties presents a different question and should not be analyzed as a new consideration problem.

Under common law, a modification ordinarily requires new consideration. A party cannot demand more money merely for promising to do the same work already required. An exception can apply when an unanticipated circumstance makes the adjustment fair and the modification is made without improper pressure.

Under Article 2, a modification does not require consideration, but it must be made in good faith. Good faith prevents a party from using a contract modification as a vehicle for opportunistic coercion or an unjustified demand unrelated to legitimate commercial reasons.

Modification question	Common law	Article 2
Must new consideration support the change?	Ordinarily yes	No
What limits the change?	Fair adjustment and recognized exception	Good faith
What fact is decisive?	New duty or qualifying unexpected circumstance	Honest commercial reason rather than pressure

A modification can be express or inferred from conduct when the parties objectively act as though they changed the deal. Do not treat every later conversation as a modification: determine whether it changes an existing obligation, merely confirms performance, or proposes a new transaction.

Article 2 Before the Terms Are Complete: Contract Amid Gaps

Article 2 permits a sales contract to form “in any manner sufficient to show agreement,” including conduct recognizing a contract. The parties must objectively intend to contract, and the agreement must identify a quantity. Price, delivery time, payment time, and similar terms may remain open when the evidence shows commitment.

Quantity is the crucial limit. A stated quantity supports formation. An output or requirements quantity can also work because the parties’ actual output or good-faith requirements supply the measure. A writing or conversation that leaves quantity entirely uncommitted generally does not establish a sales contract.

When intent and quantity exist, Article 2 can supply reasonable terms. An omitted price can be a reasonable price at the relevant time; omitted delivery details can be supplied by a reasonable delivery term; and payment timing can follow the statutory default. These are formation-stage tools for completing an otherwise sufficiently demonstrated sales agreement.

Do not confuse a missing term with an absent agreement. “We will buy 500 units, with price and delivery to be settled later” can show a present commitment if the circumstances support it. “We may buy some units if we later agree” usually shows negotiation, not formation. Language of present commitment, conduct, quantity, and commercial context decide the difference.

A retailer emailed a supplier, “We agree to purchase 1,000 pounds of flour for delivery next month; we will settle the price later.” The supplier accepted and began preparing the order. Is a sales contract formed? Yes. The stated quantity and present commitment establish formation, and Article 2 can supply a reasonable price despite the open price term.

Treating an advertisement as an offer despite no quantity, limit, or commitment language misses the invitation-to-deal problem.
Calling a request for a lower price a rejection overlooks that a question can leave the original power of acceptance alive.
Applying the mailbox rule to an option ignores the supplied exception making option acceptance effective only on receipt.
Treating a mailed revocation as effective on dispatch ignores the rule that revocation requires receipt.
Calling a promised gift consideration because the promisee later performed a past favor confuses gratitude with a bargain.
Finding an Article 2 contract with no quantity overlooks the quantity requirement even when price and delivery are supplied.

High-Yield Points - ⚡ Biggest Takeaways

An offer requires communicated commitment, objective intent, and sufficiently definite terms. Revocation requires receipt, while ordinary acceptance generally becomes effective on dispatch. Options require receipt of acceptance, and firm offers require a signed merchant assurance. Consideration is a bargained-for exchange, not a gift, past act, or illusory promise. Article 2 can fill open terms, but formation still requires intent and quantity.