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A firm offer is an offer that will remain open for a certain period or until a certain time or occurrence of a certain event, during which it is incapable of being revoked. [1] As a general rule, all offers are revocable at any time prior to acceptance, even those offers that purport to be irrevocable on their face.
Also, upon making an offer, an offeror may include the period in which the offer will be available. If the offeree fails to accept the offer within this specific period, then the offer will be deemed as terminated. An offer may also be revoked by operation of law, if an unreasonable amount of time has passed between offer and acceptance. [46]
In the US, section 87(1)(a) of Restatement (Second) of Contracts provides an exception to the firm-offer rule. If an offer includes the details of consideration, and is signed by the offeror, for the purpose of exchange of promises within a reasonable time, then the offer is enforceable, provided that there is nominal consideration. [26]
Ordinarily, an offeror is permitted to revoke their offer at any time prior to a valid acceptance. This is partially due to the maxim that an offeror is the "master of his offer." In the case of options, the general rule stated above applies even when the offeror promises to hold the offer open for a certain period of time.
Day 2: A decides to revoke the offer and puts a letter in the mail to B revoking the offer. Day 3: B puts a letter accepting the offer in the mail. Day 4: B receives A's revocation letter. The letter of revocation can be effective only when received, that is Day 4. However, a contract was formed on Day 3 when the letter of acceptance was posted.
As an offer states the offeror's willingness to be bound to the terms proposed therein, [27] a purported acceptance that varies the terms of an offer is not an acceptance but a counteroffer and hence a rejection of the original offer. The principle of offer and acceptance has been codified under the Indian Contract Act, 1872. [28]
Insiders of a publicly traded company are required to file Form 4 with the Securities and Exchange Commission no later than two business days after a transaction.
An option contract is a type of contract that protects an offeree from an offeror's ability to revoke their offer to engage in a contract. Under the common law, consideration for the option contract is required as it is still a form of contract, cf. Restatement (Second) of Contracts § 87(1).