Contracts -
Offer and
Acceptance
Mutual Assent –
Requirements of an Offer
An offer is a proposal by an offeror to do
something, provided the offeree does something
in return. To create a valid offer:
1. The offeror must appear to intend to create a
legal obligation
2. The terms must be clear and complete
Intention to Create A Legal
Obligation
Test of the reasonable person
would a reasonable person interpret
the conduct as an offer? Doesn’t
matter what you think or even the
words you say, but how you appear.
If you were joking but a reasonable
person would interpret the conduct
as intending to contract, you have
made an offer.
If you were serious, but a reasonable
Intention to Create a Legal
Obligation Continued
Facts and Circumstances- actual words spoken may indicate an
offer but facts and circumstances don’t.
For example, words spoken in obvious jest, frenzied terror, or anger
wouldn’t be interpreted as an intended offer.
Preliminary Negotiations- Sometimes we say things just to see
if another party is interested in selling something. “I think I’m interested in selling my laptop for around $1000. Is anyone interested? This is not an offer.
Social Agreements- social agreements made with friends do
The Offer Must Be Complete
And Clear
The amount of essential information
depends on the complexity of the transaction. Nearly all offers must identify the price, subject matter, and quantity.
Advertisements- ads in newspapers,
Offer Must Be Communicated
To The Offeree
A person who is not the intended offeree
cannot accept the offer. It has to be
How Can Offers Be Ended?
Revocation By The Offeree
Offerer can revoke anytime before offeree accepts even if offeror promised to keep it open for a length of time. The right to withdraw before acceptance is called revocation. It must be communicated to the offeree.
Time Stated In The Offer
The offeror may state how and when the offer must be accepted. If the acceptance does not arrive in the form or time as stipulated, there is no contract.
Reasonable Length Of Time
Ending Offers Continued
Rejection By The OffereeWhen the offeree clearly rejects the offer, it is terminated. Even if the time limit has not expired on the offer, a rejection ends the offer.
Counteroffer
Generally an offeree must accept it exactly as made. If the offeree changes the terms in important ways, a counteroffer
results. Legally, the counteroffer is a new offer. Unless renewed by the original offeror, the offeree cannot accept the first offer.
Death Or Insanity Of Either Party
Death or insanity terminates their offers.
Destruction Of Subject Matter
How Can An Offer Be Left
Open?
Generally, an offeror is not obligated to keep an offer open for a specified time even if they promised to do so. Why? Because the offeree has given nothing in exchange for the promise.
Options
Contract where the offeree gives the offeror something of value in return for a promise to keep the offer open. This offer may not be withdrawn during the period of the option. Generally, the offeror keeps the payment for the option even if the offeree decides not to accept the offer. Usually, if the offeree does accept, the option is applied to the purchase price.
Firm Offers
An offer by a merchant for the sale or purchase of goods stating in a signed writing how long it is to stay open is a called a firm offer. A firm offer may be open for three months.
How Are Acceptances Created?
Acceptances occur when a party
to whom an offer has been made, agrees to the proposal. To create an enforceable contract, the
acceptance must:
1. be made by the person or persons to whom the offer was made
2. match the terms in the offer
Valid Acceptance
Who Can Accept An Offer?
Offers can only be accepted by the person it was offered to. Sometimes however, an offer is made to a group or to the public. Anyone who knows of the offer may accept it by doing whatever the offer requires. Ex: Rewards
Acceptance Must Match The Offer
The offeror may specify the terms of the acceptance and the offeree must comply with such terms. This is called the
“mirror image” rule.
Acceptance Must Be Communicated To The Offeror
Valid Acceptance Continued
Unilateral Acceptance
In some offers, the offeror requires that the offeree
indicate acceptance by performing his or her
obligations under the contract. These are unilateral
contracts.
Bilateral Acceptance
Most offers are bilateral. This means that the offer
implies that it can be accepted by giving a promise
instead of performing the contracted-for act.
Valid Acceptance Continued
When Acceptance Is Effective
All contractual communications (offers, acceptances,
counteroffers) can be communicated orally, in person, by phone, in writing, by mail, delivery service, e-mail, or fax machine. When the communication takes time
(mail), the question of when the communication is effective is important.
All forms of contractual communication but one take
place when received except acceptances, which are effective when sent. Acceptances sent by mail are effective when properly posted (place, with correct
address and sufficient postage, under the control of the US Postal Service). However, the offeror may specify that an acceptance will not be binding until it is actually received. This helps avoid some confusion.
