Story Case

Henry Mock wished to buy some horses which John Armstrong desired to sell. But Mock had not entirely decided whether he should buy one or two teams. On Thursday, in a conversation with Armstrong, he said, "I do not know just what I want to do yet. Will you hold the proposition open till Saturday?"

Armstrong replied, that he would not sell the teams until he heard from Mock, provided he would promise to buy at least one team. Mock promised definitely to buy the gray team and perhaps the blacks. On Friday, Armstrong sold the teams for a higher offer than Mock's. On Saturday, Mock told Armstrong that he had decided to buy both teams. When he learned that the teams were sold, he brought suit against Armstrong for breaking his contract to keep the horses until Saturday.

Armstrong replied, that the promise was only an option which is revocable at will. Is this a good defense?

Ruling Court Case. Ide Vs. Leiser, Volume 10 Montanta Reports, Page 5; Volume 24 American State Reporter, Page 17

Leiser was the owner of certain land. On September 24, 1889, he agreed in writing to give Ide the sole right to purchase that land for $1,000, if the latter chose to exercise the right within ten days from the date of the agreement. This agreement recited that Ide had paid Leiser $1 for this right to buy within the ten days, as mentioned above. Ide did not exercise the right within the ten days from the date of the agreement. By a subsequent memorandum noted on the original agreement, Leiser stated: "I hereby extend the above option for a period of ten days." Before the ten days had passed, Leiser withdrew his offer. Ide at once attempted to accept the offer under the terms of the option, but Leiser refused to comply and to make the conveyance. Thereupon, Ide brought this suit.

The defense of Leiser consisted in the fact that the agreement to extend the time, within which Ide might purchase the land, was without consideration and not binding upon him; therefore, no damages can be recovered for his failure to convey the land.

Decision

An offer may be withdrawn at any time before it is accepted. But if the offeror agrees for a consideration to hold an offer open for a given length of time, he may not withdraw it before that time. Such an agreement to hold an offer open is an option. But if the agreement is not supported by a consideration, the offeror may withdraw it, notwithstanding his promise, and the person to whom he made the offer has no right to damages for its withdrawal. In this case, the agreement to extend the time within which it might be accepted, was unsupported by any consideration, and might be withdrawn at any time by the offeror. Having been withdrawn before the offer was accepted, Ide cannot claim any damages.

Therefore, judgment was given for the defendant, Leiser.

Ruling Law. Story Case Answer

If one person gives a consideration to another for his promise to hold an offer open, the relationship amounts to a completed contract at that moment, called an option. The contract consists of terms whereby one party agrees to enter into another contract if the other party chooses to do so at a subsequent date.

In the Story Case, Mock, by promising to buy the gray team, gave a consideration in return for Armstrong's promise or option to hold the proposition open. Therefore, Armstrong could not legally withdraw his option until Saturday. An option is not revocable at will when the other party gives a consideration for it. Therefore, the defense in the Story Case is ineffective.