MBE Trap: Option Contracts

There's a trap that appears with relative frequency on the MBE involving option contracts both under the common law and under the UCC. The idea is that for some reason an attempted option never comes about. Under the common law, it's generally because consideration isn't paid for the option. Under the UCC, the time limit for exercising the option has expired. The offeror, thinking that there is no option, then goes ahead and makes that same offer to another (usually someone who is not on notice of the original offer: a "BFP").

The key to not falling for this trap is to remember the following: there is a difference between a revoked offer and a revocable offer.

So, for example, imagine a situation under the common law in which the offeror promises to hold open the offer for x amount of time provided that the offeree give the offeror $100 to hold the offer open. The money is never paid. 

All this means is that the offeror is not bound to hold the offer open: it's revocable. But the fact that the offer is revocable does not mean that the offer is revoked. The offeree, even though no consideration was paid to effectuate the option, can still accept the offer, and if the offeror makes the same offer to another without first revoking the initial offer, the original offeree can accept that initial offer and then potentially sue for breach. 

The same holds for a UCC "firm offer" which is the equivalent of an option contract under the common law. Once that time has run (3 months if not modified downward by the parties) the offer becomes revocable. But it's not revoked. The offeror still must revoke the offer even when the option fails. The key difference is that the offeror is not bound to hold that offer open if no option is involved: the offeror is free to revoke, but still must do so.