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Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

CHAPTER 2 OFFERS; CREATION AND DURATION OF POWER OF ACCEPTANCE

1-2 Corbin on Contracts § 2.24

§ 2.24 Contract to Keep an Offer Open

Instead of making, in the beginning, a binding promise to convey on specified conditions, it is possible for one to make an offer of a contract with specified terms, and then to make, at the same time or later, a collateral contract not to revoke the offer. Here we have two separate transactions, an offer that creates a power of acceptance, and a contract that certainly makes it the offeror's legal duty not to revoke. The question now is: does that collateral contract also create in the offeree an immunity from revocation-does it deprive the offeror of the power to revoke as well as of the legal privilege to do so?

Such transactions as the above are different in form from the conditional contract discussed in the preceding section. The jural relations that they create are the same.n1 The collateral promise not to revoke the offer may be made enforceable still in some jurisdictions by sealing and delivery, by a consideration given in exchange, by subsequent action in reliance or by compliance with formal requirements laid down by statute. For example, A offers to sell Blackacre to B for $5,000. The next day, in return for ten dollars paid, A promises B not to revoke the offer for thirty days. These two transactions, an offer to sell and a subsequently made contract not to revoke, have the same legal operation as would the single conditional contract previously discussed. By the contract not to revoke, the offer that was theretofore revocable is made irrevocable. B's revocable option to buy has become a binding option.

An obstacle to specific performance in equity has been supposed to exist in case the option (let us suppose an option to buy) is made binding by a contract to hold an offer open instead of being created by a conditional covenant or simple contract to convey. In the latter case there is a completed obligation to convey, and this may be enforced. In the former case there is no such obligation, and none can now be made by an acceptance because the option contract has been broken and the offer has been revoked. This obstacle can be avoided by the simple expedient of not seeing it. The asserted impossibility of doing an act has many a time been disproved by doing it. If by definition the thing is impossible, change the definition. The objection can be met by the easy method of declaring the offer irrevocable and the contract not to revoke unbreakable. That this can be done has already been shown above. There is nothing foreign to our law in the idea of an irrevocable power, and the legal relation resulting from an offer is a legal power. Equity can specifically enforce the offeror's promise not to revoke by the simple process of declaring the revocation inoperative. The power to accept being still alive, the offeree may exercise it and thus create the obligation to convey, all fit and ready for specific enforcement.n2

Legal Topics:

For related research and practice materials, see the following legal topics:

Contracts LawFormationOffersGeneral OverviewContracts LawFormationOffersRevocable OffersContracts LawFormationOffersIrrevocable Offers

FOOTNOTES:

(n1)Footnote 1. See Restatement (Second) of Contracts § 25 ills. 1 & 2.

(n2)Footnote 2. When a broker employed by a vendor obtains an offer from a purchaser, can that offer be made irrevocable for a stated period by a contract between the broker and the purchaser? In Munger v. Foureman, 136 N.E.2d 453, 454 (Ohio App.1953) the court appears to answer this question No; but its only reason is that ''No consideration moved to the plaintiff'' (emphasis supplied). The broker (the promisee) gave consideration to the defendant; and the question is whether or not the plaintiff (owner) should be regarded as a donee beneficiary. See note on this case under § 780.