Question

On May 2, Lace Corp., an appliance wholesaler, offered to sell appliances worth $3,000 to Parco, Inc., a household appliances retailer. The offer was signed by Lace's president and provided that it would not be withdrawn before June 1. On May 29, Parco mailed an acceptance of Lace's offer. Lace received the acceptance June 2. Which of the following statements is true if Lace sent Parco a telegram revoking its offer, and Parco received the telegram on May 25?

A. Lace's revocation was ineffective because the offer could not be revoked before June 1.
B. Lace's revocation effectively terminated its offer on May 25.
C. No contract was formed because Lace received Parco's acceptance after June 1.
D. A contract was formed on May 2.

Answer 1

A contract was formed when Parco mailed the acceptance on May 29, as per the mailbox rule. Lace's attempt to revoke the offer on May 25 was ineffective because they had entered into an option contract, which prevented the offer from being revoked before June 1.

Step-by-step explanation:

When Lace Corp., an appliance wholesaler, offered to sell appliances to Parco, Inc., and stated that the offer would not be withdrawn before June 1, they created an option contract. In contract law, an option contract is a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer. On May 29, Parco mailed an acceptance of the offer which, according to the mailbox rule, became effective when the acceptance was dispatched, not when it was received by Lace. Thus, even though Lace sent a revocation on May 25 and Parco received it on the same day, the revocation was ineffective because the option contract protected Parco's right to accept the offer until June 1. Therefore, the answer to the question is A. Lace's revocation was ineffective because the offer could not be revoked before June 1.