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MyWikiBiz, Author Your Legacy — Friday March 07, 2014
In the United States, a firm offer allows merchants to make offers to buy or sell irrevocable for up to three months provided that the offer be put down in writing or otherwise authenticated. Such offers are defined by UCC § 2-205 of the Uniform Commercial Code of the United States.
A firm offer in effect creates an option contract without requiring any consideration from the prospective buyer. Because the firm offer holds the seller to a higher standard than the potential buyer, it reflects a change from traditional common law, which treated all parties to a contract the same way, to a more modern view that holds certain parties to a higher standard of behavior.
There are two versions of the UCC firm offer rule in effect. The old UCC § 2-205 states that an offer is firm and irrevocable if:
- it is an offer to buy or sell goods
- it is made by a merchant
- it is a signed writing
There are at least two additional requirements. First, in no event will the period of irrevocability be longer than three months. Second, if the offeree submits a form on which the offeror is supposed to set out the offer, then the irrevocability condition must be separately signed by the offeror. If all of these conditions are met, then the offer will be irrevocable either for the period stated in the offer, or for a reasonable time if no time is stated in the offer.
Thus, if there is a stated time period of 6 months, then the 3 month limit applies and the offer ceases to be legally enforceable after 3 months. If a reasonable time period would be longer than 3 months, the limit nevertheless applies and terminates the offer's enforceability after 3 months.
The new UCC § 2-205 does away with the "signed writing" requirement. Instead, it requires an "authenticated record." Also, instead of a separate signature for form offers, the proposed UCC § 2-205 requires separate "authentication." This is slightly broader language - a signature qualifies as authentication, but so does any other visual mark or sound intended to indicate adoption of the terms; a signed writing is an authenticated record, but so is any other inscription in a tangible or electronic medium that may be retrieved in a perceivable form.
These changes are intended to make the UCC provision more similar to the U.N. Convention on Contracts for the International Sale of Goods, and to clear up any ambiguities that may exist as to whether a firm offer may be made electronically.