Contract law regulates the obligations established by agreement, whether express or implied, between private parties in the United States. The law of contracts varies from state to state; there is nationwide federal contract law in certain areas, such as contracts entered into pursuant to Federal Reclamation Law.
The law governing transactions involving the sale of goods has become highly standardized nationwide through widespread adoption of the Uniform Commercial Code. There remains significant diversity in the interpretation of other kinds of contracts, depending upon the extent to which a given state has codified its common law of contracts or adopted portions of the Restatement (Second) of Contracts.
Formation.
A contract is an agreement between two or more parties creating reciprocal obligations enforceable at law. The elements of a contract are mutual consent, offer and acceptance, consideration, and legal purpose.
Agreement.
Mutual consent, also known as ratification and meeting of the minds, is typically established through the process of offer and acceptance. However, contracts can also be implied in fact, as discussed below. At common law, the terms of a purported acceptance must be the "mirror image" of the terms of the offer. Any variation thereof constitutes a counteroffer.
An offer is a display of willingness by a promisor to be legally bound by terms they specify, made in a way that would lead a reasonable person in the promise’s position to understand that an acceptance is being sought and, if made, results in an enforceable contract. Ordinarily, an offeror is permitted to revoke their offer at any time prior to a valid acceptance. This is partially due to the maxim that an offeror is the "master of his offer."
In the case of options, the general rule stated above applies even when the offeror promises to hold the offer open for a certain period of time. For example, Alice says to Bob, "I'll sell you my watch for $10, and you can have a week to decide." Alice is free to revoke her offer during the week, as long as Bob has not accepted the offer.
However, if the offeree gives some separate consideration (discussed below) to keep the offer open for a certain period of time, the offeror is not permitted to revoke during that period. For example, Alice offers to sell Bob her watch for $10. Bob gives Alice $1 to keep the offer open for a week. Alice is not permitted to revoke during the week.
