Contracts and Sales Multistate Bar Practice Exam

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What is an example of detrimental reliance in the context of an offer?

A party ignores the offer waiting for a better one
An offeree begins substantial preparations based on an offer
A party accepts an offer without any understanding
An offeree responds with contradictory terms

The correct answer is: An offeree begins substantial preparations based on an offer

Detrimental reliance, also known as estoppel, occurs when a party takes significant action based on an offer, leading to a change in position that would cause harm if the offer were revoked. When an offeree begins substantial preparations based on an offer, this creates a reliance on the expectation that the offer will be honored. In such cases, the offeree invests time, resources, or effort into fulfilling the terms of the anticipated agreement, demonstrating a commitment that is not easily reversed. This reliance can effectively bind the offeror, especially in situations where the offeree's preparations have been substantial, making it unfair or inequitable for the offeror to withdraw the offer after the offeree has taken these steps. Therefore, this scenario exemplifies detrimental reliance as it captures the essence of reliance-based legal principles within contract law.