The Firm Offer That Was Dead on Arrival
On March 1, Priya, who owns a furniture store, mails a signed letter to Owen, a chair wholesaler: "I offer to buy 500 oak chairs at $80 each, delivery by May 1. This offer will be held open for 30 days." Owen receives it March 3. On March 10 Owen mails a signed acceptance, which arrives March 14. On March 12, after oak prices jump, Priya calls Owen and says, "The deal is off." Owen gets that call the same day. On March 11, relying on the order, Owen signed a $20,000 contract with a lumber mill to buy the oak. Owen now sues for breach. Priya argues she revoked before acceptance and that her promise to keep the offer open was unenforceable for lack of consideration.
1. Was Priya's March 12 telephone call an effective revocation?
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No, and it fails for two independent reasons.
Reason one - the acceptance came first. The mailbox rule makes an acceptance effective on dispatch, not receipt. Owen dispatched his acceptance on March 10. Priya's revocation did not reach him until March 12. The fact that the letter physically arrived on March 14 is irrelevant; acceptance had already occurred. A revocation is effective only on receipt, and it can only cut off an offer that is still open.
Reason two - the offer was irrevocable anyway. This is a sale of goods, so UCC § 2-205 applies. Priya is a merchant, the promise to hold the offer open is in a signed writing, and 30 days is within the three-month statutory ceiling. No consideration is required. Her "option" is therefore binding until March 31 regardless of the mailbox rule.
A well-organized answer should surface both grounds; students who stop after the firm-offer analysis lose the easier point.
2. Suppose Priya had never promised to hold the offer open. Would the outcome change?
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Not here - but the reasoning changes, and that is what is being tested.
Without the firm-offer clause, § 2-205 does nothing. The offer would be freely revocable. It would still be revocable only on receipt, however, and Owen's acceptance was dispatched on March 10, two days before the call. So the acceptance still wins. A revocation that arrives after dispatch is simply too late.
The one caveat worth flagging: if Owen's letter had never been sent and he had tried to accept after the March 12 call, Priya would prevail, and Owen's lumber contract would then be relevant only as a reliance argument. Note also that a firm offer under § 2-205 cannot exceed three months; a 30-day term is comfortably inside that line, but a promise to hold open for a year would be enforceable only for its first three months.
3. If Owen prevails, what is his measure of recovery, and does the lumber contract matter?
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Owen is the buyer, Priya the seller in breach (she repudiated). His primary remedy is expectation: the difference between the market price of 500 oak chairs at the time he learned of the breach and the contract price of $80 each, plus incidental and consequential damages.
Importantly, the lumber contract is not consequential damages here. Owen bought raw lumber to resell chairs to Priya - that is his cost of performance under a contract of sale, and he cannot recover his own cost of goods in addition to market-based damages without double counting. He would instead use the cover price or market price.
The lumber contract matters in one narrow respect: if Owen had to argue promissory estoppel as a fallback (for example, if the writing were defective), it would be his reliance showing. Under a reliance measure his recovery would be capped at out-of-pocket loss, typically less than expectation. That difference in measure - not the entitlement itself - is why the fact is included.