Question

Irrevocable Contract

O‌‌‌‍‌‍‌‌‍‌‌‍‍‌‍‌‍‌‍nce again your boss has asked you to review a situation and make recommendations on how to best accomplish his/her stated goal. The situation is as follows: Your company has received a valid contract offer. If you accept this offer you will be able to purchase a large amount of wheat, but, you are uncertain about what market conditions will be in the near future. You need two weeks to do adequate market research before you can accept or reject the current offer. At the same time you are award that the person who extended the offer to you is in conversation with other potential buyers. Your boss asks you if the current offer has to be kept open until you make a decision to accept or reject the offer. Alternately, is there a way the current offer can be made irrevocable during the next two weeks. If there is a way to do this, how should your company go about doing that? use your own words and here is some information: CONTRACTS: NATURE, TERMINOLOGY AND CREATION: contract defined = a legally enforceable promise - law treats it as a legal duty moral obligations - NOT legally enforceable purpose of contracts law? Sources of Contract law:

 1. common law = state law

2. Uniform Commercial Code (UCC) - a national law? Objective theory of contracts - KNOW THIS - based on:

1. words spoken - be very literal

2. actions taken

 

 3. circumstances Requirements for the creation of a valid contract:

1. agreement - normally found in the Offer and the Acceptance

 2. consideration =the bargained for exchange of legal value that induced the parties to enter into the agreement

3. contractual capacity

4. legality Type of Contracts: - handy terms - offer or and offeree -revocation of offer 1. bilateral contracts - exchange of mutual promises of future action - contract created when the promises are exchanged

2. unilateral contracts - a promise of a future action exchanged for a return action - contract created only when the requested action is fully performed

3. formal and informal contracts

4. express contracts - all the terms are stated - either in writing or spoken

 5. implied contracts - (apply the objective theroy of contracts to understand these contracts)

a. implied in fact contract - 3 requirements

 b. implied in law contracts = quasi-contracts - apply ideas of unjust enrichment and quantum meruit Contract Performance Terminology:

1. executed contract

2. executory contract

 3. valid contract

4. voidable contract

5. void contract - no real contract exists

 6. unenforceable contract Agreement in Contracts: agreement = a mutual, voluntary consent to the same bargain - normally you can see this in the offer and the acceptance Requirements for a valid Offer:

1. offer must display a serious intent to be bound to the terms of the offer a. some statements that are NOT offers: - statements made in jest, anger or undue influence - expressions of opinion - statements of future intent - preliminary negotiations - advertisements - auctions - with or without reserve - agreements to agree - preliminary agreements

2. terms must be reasonably certain or definite - must show - who the parties are - the subject matter of the agreement - what work to be done? what quantity of goods? - the consideration to be paid - the time of performance

3. the offer must be communicated to the offeree Termination of an offer - how to kill off an offer so no one can accept it general rule - an offer may be revoked at any time before acceptance 1. termination by offeror: - express re‌‌‌‍‌‍‌‌‍‌‌‍‍‌‍‌‍‌‍vocation = words - implied revocation = actions - how to revoke general unilateral offers Irrevocable offers: - merchants firm offer (UCC) - option contracts - unilateral offer after performance has started

 2. Termination by Offeree: - rejection of the offer - counteroffers - always require an earlier rejection of original offer Note - requests to negotiate DO NOT terminate an offer

 3. Mirror Image Rule - common law

4. Termination by operation of law: - lapse of time - offers only open a "reasonable" amount of time - destruction of subject matter of the offer - death or incompetency of either party - supervening illegality Acceptance of the Offer: - requires a voluntary, unequivocal expression of agreement to terms of the offer - must be communicated to the offeror - silence is normally not acceptance - Mail Box Rule and its impact on acceptances Consideration: consideration defined = bargained for exchange of legal value that induces the parties to enter into the agreement (contract) adequacy of consideration - NOT based only on monetary value effect of grossly disproportionate consideration - this raises questions about the vountary nature of the agreement - courts will look for: fraud duress undue influence unconscionability Agreements that LACK consideration:

 1. a pre-existing duty is used as subsequent consideration - note - effect of unforeseen difficulties

2. past consideration is used as subsequent consideration

3. illusory promises note - requirements and outputs contracts are enforceable note

- agreements to settle "claims" (debts)

- key is whether the debt is a "liquidated debt" or an "unliquidated debt" Promissory Estoppe

 - is an exception to the consideration requirement; elements of promissory estoppel:

1. one person makes a clear and definite promise that they expect other person to rely upon

 2. the promise was reasonable relied upon

3. the reliance was substantial and detrimental

 4. it would be "unfair" to not enforce the promise Capacity and Legality Requirements: capacity refers to a person legal power to enter into a contract - some people's power to do so is limited by the law and law does act to protect those who lack capacity these contracts are "voidable" by party that lacked capacity - they can rescind the contract

- or that person can enforce the contract (ratify it) after the condition that created the lack of capacity is resolved Those lacking capacity: 1. mental incompetents

 - use the "understanding test"

 - note the legal consequence between a person lacking lacking mental capacity and someone a court has already ruled is mentally incompetent

2. intoxicated persons

- again use the understanding test

 - can rescind or ratify after they sober up

- is there a difference based on what substance was the source of the intoxication? 3 minors = anyone under age of majority = legal adulthood

 - can rescind (return all consideration they still have) at any time before they reach age 18

 - or they can ratify after they reach age 18 Legality:

- law will not enforce a contract that requires a person commit a crime

 - these are "void" contract public policy = promote competition - so most contracts that restrain trade (monopolies and trusts) are illegal can have contracts to not compete in limited situation can have exculpatory contracts = contract to "hold harmless

 - in limited situations -unconscionable contracts are illegal -adhesion contract are illega‌‌‌‍‌‍‌‌‍‌‌‍‍‌‍‌‍‌‍ 

Expert Solution

Contract offers are presented as commitments between a business and potential customers. Given that a possible change in purchasers is impending due to an extension policy created in this case, the company in issue must make their existing offer irreversible. Therefore, the corporation demands that the present offer be kept available until a choice has been reached regarding whether to approve or disapprove it. Although a stated period is given for deliberation, it is evident that the proposal not made under seal and without consideration may be withdrawn at any time before it is accepted in this situation. This is because, according to common law, the provision of a period is merely a pledge to negotiate in good faith, which is not legally binding. After all, it is made without deliberation. It has been reaffirmed that even an offer made under seal or for review to stay open for a specific period may always be withdrawn before that period has passed, rendering a subsequent acceptance—given within that time—ineffective. As a result, an irreversible agreement can only be achieved through a legally binding contract. Therefore, it is critical to evaluate the scenario between the seller and the company to determine the best action to make the contract irrevocable during the deliberation phase.

Whether one enters into a relationship with a customer, a provider, or a freelancer, contracts are a part of conducting business. They serve as legally enforceable agreements that protect specific interests, making them crucial to everyone. As mentioned earlier, the offer, acceptance, and consideration in the situation will result in an irrevocable clause requiring a binding contract. When made, an offer is frequently accepted until it is retracted. The irreversible provision outlines the day and hour when the request is considered final. Therefore, the entity making the offer is not permitted to revoke it before the specified time on the selected date.The offer expires and ceases to be effective after the time and date specified in the irrevocable clause. In the instance of the company, a contract was formed between the contracting parties, and it was enforceable in law due to a valid offer, consent, and agreement, as well as enough consideration, capacity, and legality. Consequently, there have been cases where an offer was made and accepted by the parties. In this view, the demonstration of the irrevocability of the terms of the relationship necessitates the exchange of something of significance for something of equal worth. The wheat, in this instance, may be sold for anything else of value to prevent the seller from creating new trading relationships to which they may trade the commodity whatever they like. Therefore, a resource exchange might aid the business in establishing an irreversible clause in the contract.It is critical to evaluate the scenario between the seller and the company to determine the best action to make the contract irrevocable during the deliberation phase. Given that a potential change in purchasers is impending due to an extension policy created in this case, the company in issue must make their existing offer irreversible. The corporation demands that the current bid be kept available until a choice has been reached regarding whether to approve or disapprove it. As a result, an irreversible agreement can only be achieved through a legally binding contract where the exchange of something of significance for something of equal worth is needed. Therefore, the contract can be irrevocable through resource exchange and legally binding features to prohibit the seller from trading the wheat to potential buyers.

References

Johnson, A. (2019). Irrevocable gift promises and promises inducing reliance: a mandate for the return of the seal in contract law [Ebook]. https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=3267&context=nlr.

Verne, U. (2021). Contract Law – how to create a legally binding contract - the University of La Verne small business development center (sbdc). The university of la verne small business development center (SBDC). https://lavernesbdc.org/news/contract-law-how-to-create-a-legally-binding-contract/#:~:text=Generally%2C%20to%20be%20legally%20valid,pledge%20to%20exchange%20these%20items.

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