A buyer in Detroit submits an offer on a property with an expiration clause stating the offer is valid until 5:00 PM on Friday. The seller signs and accepts the offer at 4:45 PM on Friday but the buyer's agent is not notified until Saturday morning. Under Michigan law, is there a binding contract?
Correct Answer
B) No, because the buyer's agent was not notified until after the offer had expired
Under Michigan contract law, acceptance must be communicated to the offeror (or the offeror's agent) within the time specified in the offer to form a binding contract. Even though the seller signed the acceptance before 5:00 PM Friday, the acceptance was not communicated to the buyer or the buyer's agent until Saturday morning, after the offer had expired. Because communication of acceptance did not occur before the deadline, no contract was formed.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
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