Also known as: firm offer · firm offers · option contract · option · irrevocable offer
Written by attorneys · grounded in primary & secondary sources — see below
An offer that the offeror undertakes not to revoke for a stated or reasonable time. At common law such an undertaking is not binding on the offeror unless the offer qualifies as a valid option contract supported by consideration, but under the UCC a firm offer by a merchant is binding without consideration for the stated time.
Frontier Capital sent Fernando Farrell a signed letter offering to sell equipment at a fixed price and stating the offer would remain open for thirty days. Farrell began performance by ordering custom parts that matched the equipment specifications. When Frontier attempted to revoke after two weeks, the firm offer prevented revocation and created an option contract upon tender of beginning performance.
Finn Fletcher raised his fist toward Felicity French while commanding her to step aside or face a strike. French had the realistic option to obey the command and avoid contact. The firm offer analysis did not apply because the scenario involved an intentional act creating apprehension rather than a contractual undertaking not to revoke.
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Fidelity Trust as junior mortgagee obtained a receiver who collected rents from Franklin Foundry's property before any senior receiver was appointed. The receiver applied the rents first to taxes and maintenance. The excess rents could be applied to the junior obligation at the mortgagee's option under the firm offer framework for preserving value.
Freeman Engineering's board adopted a share option plan allowing current employees to purchase stock at a fixed price for a stated period. The plan terms created firm offers that employees could accept by tendering payment within the window. Employees who began the acceptance process locked in the option terms against later revocation by the corporation.
Floyd Franklin's will devised property to a class of grandchildren subject to an unfulfilled condition that could extend beyond the perpetuities period. The option to satisfy the condition within the allowed time created a firm offer equivalent that preserved the gift for ascertained members. Later-born class members could not diminish the interests already locked in by timely acceptance.
Francesca Fowler failed to deliver promised non-monetary property to the partnership. The partnership exercised its option to require Fowler to contribute money equal to the value of the missing contribution. The firm offer to accept the substitute performance bound Fowler once the partnership elected that remedy.
A firm offer binds the offeror not to revoke for the stated period even without consideration when made by a merchant under the UCC. An ordinary offer remains revocable until accepted unless it qualifies as an option contract supported by consideration.
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Under the UCC a signed writing by a merchant offeror that gives assurance the offer will remain open creates a firm offer binding for the stated time up to three months. The common law requires separate consideration to create an irrevocable option.
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When an offer invites acceptance by performance an option contract arises once the offeree tenders or begins the invited performance. That beginning performance renders the offer irrevocable as a firm offer for a reasonable time.
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…that the lot owner had foreclosed Hoffman’s interest in the lot for failure to pay this $5,000. The $1,000 was not paid for the option, but had been paid as part of the purchase price at the time Hoffman elected to exercise the option. This gave him an equity in the lot which could not be legally foreclosed without…