An irrevocable offer in contract law is a proposal the person making it cannot pull back for a set period, even if they change their mind or get a better deal elsewhere. Ordinary offers can be revoked at any point before acceptance. Irrevocable ones flip that control: the offeror is locked in and the recipient holds the power during the protected window. Three mechanisms produce this result, each with its own requirements.
Option Contracts
The cleanest way to make an offer irrevocable is an option contract. The Restatement (Second) of Contracts defines it as a promise that meets the usual requirements for forming a contract and limits the offeror’s power to revoke.1H2O. Restatement (Second) of Contracts 25 – Option Contracts The recipient pays something for the offeror’s promise to keep the deal available for a specific time.
How little that “something” can be often surprises people. Under § 87(1), an offer is binding as an option contract when it is in writing, signed by the offeror, recites a purported consideration, and proposes an exchange on fair terms within a reasonable time. The official commentary goes further: even if the recited consideration was never actually paid, the option still holds. The Restatement illustrates this with a written option to buy land for $15,000 reciting “one dollar in hand paid,” and treats the option as irrevocable whether or not that dollar ever changed hands.2Open Casebook. Restatement (Second) of Contracts 87 – Option Contract The written formality does the work, not the dollar amount.
Real estate option fees are common and typically range from a few hundred dollars up to a percentage of the purchase price. A buyer might pay $1,000 for a 60-day option while arranging financing and inspections; the seller cannot accept other bids during that period. The option fee is not the same as earnest money. Option fees usually go directly to the seller and are non-refundable. Earnest money sits in escrow, is often applied toward the purchase price at closing, and may be refundable if a contingency fails. Treating the two as interchangeable can cause real trouble when a deal falls apart.
Firm Offers Under the UCC
Commercial sales of goods follow a different rule. Under UCC § 2-205, a merchant can create an irrevocable offer without receiving any consideration. Three conditions must line up: the offeror has to be a merchant who regularly deals in that kind of goods, the offer has to be in a signed writing, and it has to explicitly promise to stay open.3Legal Information Institute. UCC 2-205 – Firm Offers When those are met, the offer is irrevocable for the stated period or, if none is stated, for a reasonable time.
The statute caps the irrevocability period at three months regardless of what the writing says.3Legal Information Institute. UCC 2-205 – Firm Offers A manufacturer who promises in writing to hold a price for six months is legally bound only through the 90-day mark; after that, the offer is freely revocable. Because the merchant received nothing in exchange, the law keeps the exposure in check.
A merchant who needs a longer hold has a direct workaround: take separate consideration for the extended period. Once something is paid for the promise, the arrangement becomes an ordinary option contract under common law, and the three-month ceiling no longer applies.
One protective detail trips up merchants who sign buyer-supplied forms. If the firm offer language sits on a form drafted by the recipient rather than the merchant, the merchant must separately sign or initial that specific clause.3Legal Information Institute. UCC 2-205 – Firm Offers Without that separate signature, the firm offer term is unenforceable. The rule stops buyers from slipping irrevocability language into their own purchase orders and binding a merchant who skimmed the document.
When Reliance Locks In an Offer
An offer can also become irrevocable because the recipient reasonably acted on it. Under Restatement (Second) of Contracts § 87(2), an offer is binding as an option contract when the offeror should reasonably expect the recipient to take substantial action before formal acceptance, and the recipient actually does so.2Open Casebook. Restatement (Second) of Contracts 87 – Option Contract The protection runs only as far as needed to avoid injustice.
Construction bidding is where this rule gets its heaviest use. A subcontractor submits a bid for $75,000 of electrical work, knowing the general contractor will fold that number into a larger project proposal. The general contractor wins the project on the strength of that figure. If the subcontractor then tries to withdraw the bid or raise the price, courts routinely hold the bid irrevocable for a reasonable period. The general contractor built its entire proposal around that number, and letting the subcontractor walk would cause concrete financial harm.
Reliance has to be reasonable, and a bid that is obviously too low can destroy that reasonableness. If a subcontractor quotes $75,000 when every other bid for the same scope lands between $140,000 and $160,000, the general contractor should suspect a mistake. Courts have refused to apply promissory estoppel in that situation, treating reliance on a suspiciously low bid as unreasonable as a matter of law. The contractor who grabs the bargain number without questioning it takes the risk.
How an Irrevocable Offer Ends
Every irrevocable offer runs out eventually. The most straightforward ending is the stated deadline: when the 60-day option window closes or the three-month firm offer period expires, the offeror is free again. If no date is stated, the offer stays open for a reasonable time based on industry practice and subject matter. A firm offer on perishable goods has a shorter reasonable window than an option on commercial real estate.
Counter-Offers Do Not Kill the Option
This is where irrevocable offers break hardest from ordinary ones. A counter-offer by the recipient normally destroys the original offer. Option contracts work differently. Under Restatement (Second) of Contracts § 37, the power of acceptance under an option contract is not terminated by rejection, counter-offer, revocation, or even the death or incapacity of the offeror. The option holder can negotiate, float counter-proposals, step away, and still return to accept the original terms before the deadline. Buying that flexibility is one of the main reasons to pay for an option in the first place.
Death or Incapacity of the Offeror
An ordinary offer dies with the offeror. An option contract survives. Because the option is itself a binding contract, the offeror’s estate inherits the obligation. If a property owner grants a 90-day option and dies during that period, the option holder can still exercise, and the estate must perform. This rule applies to options supported by consideration. For firm offers under UCC § 2-205, the law is less settled, though the prevailing scholarly view is that firm offers should be treated the same way.
The Mailbox Rule Does Not Apply
Under the ordinary mailbox rule, acceptance takes effect when dispatched. Options are the exception. Acceptance of an option must actually reach the offeror before the deadline. Dropping a letter in the mail on the last day of the option period does not count if it arrives two days later. Anyone exercising an option near the deadline should use a delivery method that provides proof of receipt.
Remedies if the Offeror Revokes Anyway
When someone revokes an irrevocable offer in breach of the agreement, the recipient has legal recourse. The remedy depends on what the underlying deal was about.
For most commercial transactions, the standard remedy is money damages. The recipient recovers the difference between the contract price and the market price at the time of breach, plus foreseeable consequential losses. If a merchant revokes a firm offer to sell inventory at $50,000 and the buyer has to pay $62,000 on the open market, damages start at $12,000.
Real estate works differently because courts treat every parcel of land as unique. When a seller revokes an option contract and refuses to close, a court can order specific performance, requiring the seller to complete the sale rather than just pay damages. The remedy is available when the option was valid, the buyer performed or stood ready to perform, and no adequate monetary substitute exists. Specific performance is discretionary, but courts grant it routinely in real estate disputes because no two properties are interchangeable.
In reliance cases, the remedy is usually limited to the losses the reliance actually caused. A general contractor who had to hire a replacement at a higher cost after a subcontractor pulled a bid recovers that price difference. Courts tailor the remedy to prevent injustice rather than enforce the full terms of the withdrawn offer.