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Contract Formation: Offer, Acceptance, the Mailbox Rule, and UCC 2-207

How to use this lesson

  1. Decide which law applies: sales of goods follow UCC Article 2; services, land and everything else follow the common law.
  2. Find the offer: would a reasonable person in the other side's position think that saying "yes" closes the deal?
  3. Check whether the offer ended before the acceptance: rejection, counteroffer, revocation, lapse of time, or death or incapacity. An option or a merchant's firm offer can't be revoked during its time.
  4. Test the acceptance. Use the mirror-image rule for the common law and UCC 2-207 for goods. Then time it: an acceptance usually counts when sent; a revocation counts when received.
  5. Set a 5-minute timer for the four practice questions. A few days later, redo the misses with the cards (spaced repetition).

Answer first: In general, a contract forms when one party makes an offer, the other accepts it before the offer ends, and the deal is supported by consideration (a bargained-for exchange). If the parties then put their deal in a writing they intend as final, the parol evidence rule lesson covers when earlier or same-time side agreements can and can't be used to change its terms. Under the common law, an acceptance must match the offer exactly (the mirror-image rule), and a mailed acceptance usually takes effect when it's sent. For sales of goods, UCC §2-207 relaxes the mirror-image rule. An acceptance can create a contract even when it adds or changes terms. The question then becomes which terms are in the contract.

MBE is a trademark of NCBE. Not affiliated with or endorsed by NCBE or any bar-review course. NCBE describes the Multistate Bar Examination on its site (NCBE — MBE — verified 2026-10-23).

Which law applies?

Article 2 governs sales of goods. The common law governs services, land, and everything else. For mixed contracts, most courts use the predominant purpose test. Variable: a minority of courts split the contract and apply each body of law to its own part.

Rule statements

  1. Offer. An offer shows a willingness to be bound, with terms definite enough that the other side understands that saying "yes" closes the deal. Restatement (Second) of Contracts §24. Ads are usually invitations to bargain, not offers. The exception is an ad that is specific and leaves nothing open, like "first three customers."
    • Objective test: what matters is what a reasonable person in the other party's position would understand, not anyone's secret intent. Lucy v. Zehmer, 196 Va. 493 (1954).
  2. Ending an offer. An offer ends through rejection, a counteroffer, revocation (effective when received), lapse of time, or the death or incapacity of either party. Restatement (Second) §§36–43, 48. The how to brief a case guide uses Boyle v. Anderson, the 2022 Virginia trust-arbitration opinion whose footnote 1 makes this point about death, as its worked case-brief example.
    • Irrevocable offers: option contracts supported by consideration; the UCC §2-205 merchant's firm offer (signed writing, up to 3 months, no consideration needed); an offer the offeree has relied on in a foreseeable way (Restatement §87(2)); and a unilateral offer once the offeree has started performing (Restatement §45).
  3. Acceptance. Acceptance is a clear agreement to the offer's terms, made in the manner the offer invites. Under the common law, any change to the terms makes the response a counteroffer (the mirror-image rule). Restatement (Second) §§50, 59. For a sale of goods, the UCC 2-207 battle of the forms lesson covers when an acceptance that adds or changes terms still forms a contract, and which terms end up in it.
  4. Mailbox rule. An acceptance sent by a reasonable method is effective when sent. Restatement (Second) §63. A revocation or a rejection (including a counteroffer) takes effect on receipt.
    • The mailbox rule doesn't apply to option contracts. Acceptance of an option is effective on receipt (Restatement §63(b)). Minority: some states apply the mailbox rule to options too. California is one: unless the option says otherwise, exercising it by mail takes effect when the notice is deposited in the mail. Cal. Civ. Code §§1582–1583; Palo Alto Town & Country Village, Inc. v. BBTC Co., 11 Cal. 3d 494 (1974).
    • If the offeree sends a rejection first and an acceptance after it, whichever one arrives first controls.
    • If the offeree sends an acceptance first and a rejection after it, there is generally a contract when the acceptance is sent. Estoppel may apply if the offeror relied on the rejection.
    • The offer itself can override the rule, for example by saying "effective only when received."
  5. UCC §2-207 (battle of the forms), at a high level.
    • A definite expression of acceptance works even if it states additional or different terms. The exception is an acceptance expressly conditioned on the offeror agreeing to the new terms (§2-207(1)).
    • Additional terms: between non-merchants, they're proposals. Between merchants, they become part of the contract unless the offer limits acceptance to its own terms, the new terms materially alter the deal, or the offeror objects within a reasonable time (§2-207(2)).
    • If the writings don't form a contract but the parties act as though they have one, the contract consists of the terms the writings agree on, plus UCC gap-fillers (§2-207(3)).
    • Different (conflicting) terms: Split of authority. The majority "knockout" rule cancels both conflicting terms and fills the gap with UCC defaults. Some courts treat a different term like an additional one, and others keep the offeror's term.

Common traps

Mnemonic

Only YES flies is LearnFun original packaging of public doctrine.

"Only YES flies." An acceptance takes effect when it's sent: it flies. A revocation or a rejection counts only when it lands. Two key exceptions: the offer can require receipt, and in most states an option is exercised only when the notice is received.

How an offer ends: "Rita Can't Really Love Dave." Rejection, Counteroffer, Revocation, Lapse of time, Death or incapacity of either party.

Spaced-rep cards

# Front Back
1 "Only YES flies" means? An acceptance is effective when sent. Revocations and rejections are effective when received.
2 Rita Can't Really Love Dave? The ways an offer ends: Rejection, Counteroffer, Revocation, Lapse of time, Death or incapacity.
3 "Would you take less?" is a…? An inquiry, not a counteroffer. The offer stays open.
4 Mirror-image rule or §2-207? Mirror image for the common law (services, land). §2-207 for sales of goods.
5 Merchant's firm offer lasts how long? The time it states (or a reasonable time), but never more than three months. It needs a signed writing, not consideration.

Timed practice questions (original)

Timer: 5 minutes. Made-up facts. Set a timer and answer all four before you read any key. Write down every miss and why you missed it.

Q1. On March 1, a seller emails a buyer an offer to sell a used tractor for $9,000 and says the buyer may accept by email or by letter. On March 3, the buyer mails a letter accepting. On March 4, before the letter arrives, the seller emails the buyer revoking the offer. The letter arrives March 6. Is there a contract?
(A) No, because the revocation arrived before the acceptance did.
(B) Yes, because the acceptance took effect when it was mailed on March 3.
(C) No, because email offers must be accepted by email.
(D) Yes, but only if the seller is a merchant.

Show answer

Answer: B. Under the mailbox rule, the acceptance was effective on dispatch, before the revocation arrived. (A) applies a receipt rule to the acceptance. (C) is wrong because any reasonable method is allowed unless the offer specifies one. (D) is wrong because merchant status doesn't matter here.

Q2. A widget distributor sends a purchase order. The manufacturer replies with an acknowledgment form that says "Accepted," and it adds a clause requiring a 1.5% monthly late-payment charge. Both are merchants. The purchase order doesn't limit acceptance to its own terms, and the distributor never objects. Is the late charge part of the contract?

Show answer

Answer: It is, unless a court finds that the charge materially alters the deal. Under §2-207(2), additional terms between merchants become part of the contract unless an exception applies. UCC Official Comment 5 to §2-207 gives a clause providing for interest on overdue invoices, within the range of trade practice, as an example of a term that is not a material alteration, but courts decide this case by case.

Q3. A homeowner offers to sell a used piano to a neighbor for $1,200 and says the offer is open until Friday. On Wednesday the neighbor asks, "Would you take $1,000?" The homeowner says no. On Thursday the neighbor says, "All right, I accept at $1,200." Is there a contract?

Show answer

Answer: Yes, probably. Asking whether the homeowner would take less was an inquiry, not a counteroffer, so the offer stayed open and Thursday's acceptance came in time. If the neighbor had said "I'll pay $1,000," that counteroffer would have rejected the original offer, and Thursday's "I accept" would only have been a new offer.

Q4. Trap. On June 1, a building-supply dealer signs and sends a contractor a letter: "I offer you 200 bags of cement at $12 a bag. This offer is firm for six months." The contractor pays nothing for the promise. On October 15 the dealer emails a revocation, and the contractor reads it that day. On October 20 the contractor tries to accept. Is there a contract?
(A) Yes, because the dealer promised to keep the offer open for six months.
(B) No, because a merchant's firm offer can't stay irrevocable for more than three months, and the revocation came after that.
(C) Yes, because a merchant's signed offer can never be revoked.
(D) No, because an offer can't be made irrevocable without consideration.

Show answer

Answer: B. The trap is trusting the six-month promise. A merchant's signed written promise to hold an offer open for goods works without consideration, but only for the time stated and never more than three months. After early September the dealer could revoke, and the October 15 revocation ended the offer before the contractor tried to accept. (C) overstates the rule, and (D) ignores the firm-offer exception. Only YES flies: the revocation counted when the contractor received it, on October 15.

Diagram: when each message counts

OfferAcceptance: when sentRevocation: when received

Next lessons

UCC 2-207 battle of the forms · Parol evidence rule mnemonic · Bar exam mnemonics under the clock · IRAC exam answers under time · All bar lessons

Sources

Last checked: 2026-10-23