Contract Termination | Business Law | CPA Exam REG

In this video, I discuss contract termination.
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To establish a contract, two essential steps must be followed: an offer must be presented and then accepted before it is withdrawn or ends. There are several ways an offer can end:
Actions by Either Party:
Revocation by the Offeror: This is when the person who made the offer (offeror) decides to withdraw it. They can do this at any point before the offer is accepted, as long as they inform the person to whom the offer was made (offeree).
Rejection by the Offeree: The offeree, or the person receiving the offer, can also terminate the offer by rejecting it.
By Operation of Law:
This refers to automatic termination due to legal reasons, like the death of either the offeror or the offeree.
It's important to note that generally, an offeror has the freedom to revoke their offer at any time before it is accepted, even if they initially promised to keep the offer open. This principle applies unless there are specific exceptions, which are not detailed here. In simple terms, until an offer is accepted, it can usually be withdrawn by the person who made it.
In contract law, an offer can be withdrawn by the person who made it (the offeror) before it is accepted by the recipient (the offeree). This withdrawal is known as revocation, and it can happen in two main ways:
Direct Revocation: This occurs when the offeror explicitly informs the offeree that the offer is withdrawn. For example, the offeror might call or email the offeree to say they no longer wish to uphold the offer.
Indirect Revocation: This happens when the offeree learns from a reliable source that the offeror has taken actions inconsistent with the offer, indicating that they no longer intend to keep it open. For instance, if the offeror sells the item to someone else, and the offeree finds out about this sale, it's considered an indirect revocation.
An example of indirect revocation could be this scenario: Alex offers to sell his car to Bob for $500. Bob asks for time to consider the offer. The next day, Carol, who is Bob's friend, shows up in the very car Alex offered to sell to Bob, having bought it from Alex. In this case, the fact that Alex sold the car to Carol serves as an indirect revocation of his offer to Bob.
The revocation becomes effective when the offeree receives it. If the revocation is announced publicly, it's effective from the time of publication.
However, there's an important exception to the rule that offers can be revoked: the existence of an option contract. In an option contract, the offeror agrees to keep the offer open for a specified period in exchange for some form of payment or consideration from the offeree. This type of agreement legally binds the offeror to keep the offer open for the agreed duration, making the offer irrevocable during that time.
Rejection by the offeree effectively ends an offer and prevents its later acceptance. There are two main ways an offeree can reject an offer:
Express Rejection: This is a straightforward refusal, where the offeree directly states they don't accept the offer. For example, if someone offers to sell a car for a certain price and the other party simply says "No," the offer is terminated. If the offeree later decides they want to accept the offer, it's too late; any subsequent acceptance is actually a new offer.
Counteroffer: This is more complex. When the offeree responds to an offer by proposing different terms, it's both a rejection of the original offer and a new offer in itself. For instance, if someone offers to sell a car for $450 and the other party responds with, "No, but I'll give you $425," this is a counteroffer. The original offer is terminated, and the roles are reversed: the original offeror is now the offeree who can accept or reject the new terms.
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