On February 7, 2015, A entered into negotiations with B for the purchase of B's farm. After consulting with an attorney and having the property appraised, B agreed to sell for $750,000. A and B agreed in writing that in exchange for $1,000 then received

Question

from A, B would hold the offer open for nine months. After six months, A wrote B that he was no longer interested in buying the farm. Several days later, A received notice from B that he was negotiating with C to sell the farm for $950,000. A immediately called B, who suggested that if A would agree to pay $875,000 and conclude the deal within 10 days, then B would still be willing to sell to A. A protested that B was driving a hard bargain, but finally agreed by telegram that evening to buy the farm for $875,000 within 10 days. A purchased the farm as agreed and then sought to recover $125,000 from B or alternatively to rescind the purchase (in other words, get out of the contract). What result and why?

Answer 1

?The problem presents a classic case of premature rejection with the offeree then trying to take back the rejection and accept the original offer negotiated into the option. Under the "rejection is rejection" view, B was free to sell to C and free to come up with the $875,000/10?day deal. In this case and under this view, A is stuck and had to pay the $125,000. Under the alternative view, the option remains open for the full nine months regardless of rejection unless the parties agree to waive rights and refund portions of the option payment. In this case, A could still get land for the $750,000 price and is entitled to a refund. Rescission is not possible, since there was a valid offer and acceptance.