Exam 19: The Formation of Sales and Lease Contracts

Correct Answer:

Verified

Clean's contention that there is no contract between it and Dealer is correct. An offeror can revoke an offer at any time before acceptance without liability unless the offer is irrevocable. For this offer to be considered irrevocable, Dealer would have to prove that it had an option, which requires consideration, or that the offer was irrevocable under the UCC provision that applies to merchants' firm offers. Neither of these applies. Dealer gave no consideration for the offer to be kept open, and thus no option was created. And, for the offer to be irrevocable without consideration, Clean-a merchant-would have had to give assurance that the offer would remain open for ninety days in a signed writing. Because the assurance was made orally, the offer was revocable. Thus, Dealer's receipt of Clean's revocation (withdrawal) of the offer before Dealer's acceptance terminated the offer, and no contract was formed.
Clean's contention that even if a contract was created, the contract is unenforceable is also correct. Under the UCC's Statute of Frauds, any contract for the sale of goods priced at $500 or more must be in writing, be supported by written evidence such as a memorandum, or be the object of an applicable exception (such as written confirmation between merchants, specially ordered or manufactured goods, admission under oath, or partial performance completed) to be enforceable. The contract in this question is for a sale of goods (washing machines) priced at $500 or more ($15,000). It was not in writing; nor is there a writing signed by Clean that an oral contract was formed. Also, none of the exceptions apply. Thus, even if Dealer could prove that an oral contract had been made, the contract could not be enforced against Clean's defense of the Statute of Frauds.