The Merchant's Firm Offer Rule

The firm offer rule for merchants under the UCC is one that you need to know well. It's just the kind of issue that bar examiners love to test. And the best way to understand the rule is to contrast it with similar rules that apply under the common law of contracts.  

Generally speaking, and this applies both under the common law and the UCC, an offeror can revoke an offer any time prior to the offeree accepting that offer. It's sometimes even stated that the offeror is the "master of the offer." 

Under the common law of contracts, however, the offeree can get a bit more security by preventing the offeror from revoking even prior to acceptance by the offeree. To do so, however, requires that the offeree give consideration to the offeror in exchange for the offeror's promise not to revoke the offer for a stated period of time. This agreement not to revoke the offer is itself a contract: it's called an option contract. The most important thing to remember here is that if the question involves a service (as opposed to the sale of goods) consideration must be exchanged for an option contract to apply. 

Things change with the UCC. As with the common law, an offeree might want that extra bit of security. The offeree may not want the offeror to be the master of the offer; he may want to dictate how long that offer will remain open. Under the UCC, this is still possible, and consideration is not required. 

Specifically, in limited circumstances, the merchant's firm offer rule under the UCC replaces the rule as outlined above for service contracts. Under the merchant's firm offer rule, if a merchant (one who deals in goods of a certain kind) offers in a signed writing to buy or sell goods, and the writing gives assurances to the offeree that the offer will remain open, then the offer will remain open for the time period stated. If no time period is stated in the firm offer, then the offer will remain open for a reasonable period of time not to exceed 3 months. 

A bit to remember for the firm offer rule: 

~ no consideration required

~ must be a merchant (the offeror, not the offeree)

~ must be in writing

~ offer will remain open for the time period stated in the offer

~ if no time period is stated in the offer, the offer will stay open for a reasonable time which cannot exceed 3 months. 

I've noticed over the years a slight preference for testing rules that contrast between the common law and the UCC. This would be one of them, so it's a good idea to get it down well.