R2d § 87
Option Contract
(1) An offer is binding as an option contract if it (a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or (b) is made irrevocable by statute. (2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
Professor's notes
Elements: an offer is binding as an option contract if it (a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or (b) is made irrevocable by statute. Subsection (2): an offer the offeror should reasonably expect to induce action of a substantial character before acceptance is binding as an option contract to the extent necessary to avoid injustice.
87(2) is the construction-bid case (sub-bid reliance, Drennan-style). It is § 90 deployed inside the offer-revocation problem.
Common misunderstanding: students think the recital of consideration in 87(1)(a) requires actual payment. It does not: even a peppercorn recital suffices. The signed writing is doing the work, not the consideration.
Text
R2d § 87. Option Contract.
(1) An offer is binding as an option contract if it
(a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or
(b) is made irrevocable by statute.
(2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
[VERIFICATION REQUIRED: subsection text drafted from memory; cite-check against ALI Restatement (Second) of Contracts official text before publication]