On May 1, an uncle mails to his adult nephew: "I am thinking of selling my pickup truck, which you have seen and ridden in. I would consider taking $7,000 for it." On May 3, the nephew mails: "I will buy your pickup for $7,000 cash." The uncle receives this on May 5 and on May 6 mails: "It's a deal." On May 7, before the nephew had received the May 6 letter, he phones to say he no longer wants to buy due to a suspended driver’s license. Which statement about this exchange is accurate?

On May 1, an uncle mails to his adult nephew: "I am thinking of selling my pickup truck, which you have seen and ridden in. I would consider taking $7,000 for it." On May 3, the nephew mails: "I will buy your pickup for $7,000 cash." The uncle receives this on May 5 and on May 6 mails: "It's a deal." On May 7, before the nephew had received the May 6 letter, he phones to say he no longer wants to buy due to a suspended driver’s license. Which statement about this exchange is accurate?

• A. There is a contract as of May 6.
• B. There is a contract as of May 3.
• C. There is a contract as of May 1.
• D. No contract exists.

Answer: (A)

The key idea is contract formation through offer and acceptance, with the mailbox rule governing when acceptance becomes effective. The nephew’s May 3 message promising to buy the pickup for $7,000 cash is a definite offer. The uncle’s May 6 reply, “It’s a deal,” is acceptance of that offer. Because the offer did not set a different method, and acceptance was communicated by mail, the mailbox rule applies: acceptance is effective upon dispatch. So, the contract is formed on May 6, even though the nephew hadn’t yet received the letter. The nephew’s phone call on May 7 to back out is not effective to defeat the contract, since formation already occurred on May 6. The nephew’s suspended license doesn’t prevent formation or later performance; it could affect performance, but not the existence of the contract itself. The May 1 remark by the uncle was just an invitation to negotiate, not a binding offer.

The key idea is contract formation through offer and acceptance, with the mailbox rule governing when acceptance becomes effective.

The nephew’s May 3 message promising to buy the pickup for $7,000 cash is a definite offer. The uncle’s May 6 reply, “It’s a deal,” is acceptance of that offer. Because the offer did not set a different method, and acceptance was communicated by mail, the mailbox rule applies: acceptance is effective upon dispatch. So, the contract is formed on May 6, even though the nephew hadn’t yet received the letter.

The nephew’s phone call on May 7 to back out is not effective to defeat the contract, since formation already occurred on May 6. The nephew’s suspended license doesn’t prevent formation or later performance; it could affect performance, but not the existence of the contract itself. The May 1 remark by the uncle was just an invitation to negotiate, not a binding offer.