Monday, August 13, 2012

How It's Tested: Revocation of Unilateral Offers

Knowing the content is half the battle on the MBE. The other half is having an understanding of how the content has been tested in the past. Once you've done enough practice questions you'll begin to realize that, in fact, there are a limited number of ways that each testable concept is presented on the exam, and once you begin to become comfortable with the limited number of ways the concepts are tested, you'll see your score increase *significantly.* The purpose of the "How It's Tested" series is to help you reach that level.

Topic:  Revocation of Unlilateral Offers

An area you'll need to be familiar with in regards to offers is the rule regarding the acceptance of unilateral offers.  Assume, for example, that X offers to pay Y $45 if Y will wash X's car.  Y begins the job, and then when Y has completed half the job, X attempts to revoke the offer.

A few things should come to mind. In a bilateral contract once the offeree has promised to perform, the right to revoke the offer is no longer available. But this contract is unilateral. It might seem that because Y's acceptance of X's offer requires Y to perform (rather than promise to perform,) X should have the right to revoke his offer anytime prior to Y completing performance.  Y did not provide X with any consideration to keep the offer open, so we do not have a traditional option contract for Y to rely upon.

The rule, however, will not allow X to revoke this offer. A unilateral offer becomes irrevocable once the offeree begins performance. As a result, the offer from X to pay Y the $45 became irrevocable the moment Y began to wash X's car. Since the offer is irrevocable, X's attempt to revoke the offer is ineffective.

Some of the notes on this topic speak to the legal fiction that once the offeree begins to perform under a unilateral contract, an option contract is created, allowing that party a reasonable time to complete performance.  Though there are different methods for arriving at the same conclusion, for MBE purposes you'll need to know that an offer such as this one is irrevocable once performance by the offeree has begun.

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