contract law assignment offer and acceptance

Offer and Acceptance: Legal Definition, Revocation, Rejection and Invitation to Treat under Contract Law

What is an offer and acceptance.

In legal terms, an offer is a clear, definitive, and communicated proposition by one party (the offeror) to enter into a contract on specified terms to be bound once accepted. An acceptance is an unequivocal indication by the party to whom the offer is made (the offeree) that they agree to the exact terms of the offer, thereby creating a binding contractual relationship.

Offer and Acceptance Legal Definition

Offer and Acceptance : Contract law forms the foundation of our daily transactions, ensuring the legal enforcement of promises or agreements between parties . Two of the most fundamental concepts in contract law are offer and acceptance.

At first glance, offer and acceptance may appear self-explanatory, but they have unique legal connotations that dictate how contractual relationships are formed.

What is an Offer?

An offer is a clear, unequivocal indication by one person (the offeror) to another (the offeree) of their willingness to enter into a contract on certain specified terms without further negotiations – see Ramsgate Victoria Hotel Co Ltd v Montefiore (1866) .

The offer demonstrates a present intention to be bound by a contract if the terms are agreed upon.

Key Characteristics of an Offer

• Specificity: An offer must have definite terms. A general statement of intention or a mere price quotation doesn’t constitute an offer.
• Communicated: The offer must be communicated to the offeree. A person cannot accept an offer about which they are unaware.
• Revocation: An offer can be withdrawn or revoked by the offeror at any time before it is accepted unless it is an irrevocable offer.

What is Acceptance?

Acceptance is a final and unqualified expression of agreement to the terms of an offer. It demonstrates a clear intention to be bound by the terms of the offer – see Adams v Lindsell (1818) .

Key Characteristics of Acceptance

• Mirror Image Rule: The acceptance must match the terms of the offer exactly. Any variation from the terms constitutes a counteroffer and not an acceptance.
• Communication: Acceptance must be communicated to the offeror unless the offeror has indicated that no communication is required or the contract is of a type where acceptance is typically inferred from conduct.
• Mode of Acceptance: Acceptance can be communicated through various means, including orally, in writing, or by conduct, depending on the circumstances.

Distinguishing Offers from Invitations to Treat

Not every expression of willingness to contract is an offer. Sometimes, it’s merely an ‘invitation to treat. Inviting to treat is a preliminary stage in the negotiation process, inviting others to make an offer.

• Goods on Display: Items displayed in a shop window or on shelves are generally considered invitations to treat. When customers bring an item to the counter, they make an offer to buy, which the retailer can accept or reject.
• Auctions: When an auctioneer invites bids, it’s typically considered an invitation to treat. The bid is the offer, and the auctioneer accepts when they bring down the gavel.

Revocation, Rejection, and Lapse

• Revocation: As mentioned earlier, an offer can be revoked anytime before acceptance. For revocation to be effective, it must be communicated to the offeree before they accept.
• Rejection: If the offeree rejects the offer, it cannot be accepted later.
• Lapse: An offer can lapse after a specified time or a reasonable time, rendering it void.

Offer and Acceptance in Electronic Contracts

The digital age has introduced complexities to the concepts of offer vs acceptance. The ‘mailbox rule’ (which states that acceptance is effective upon dispatch) can be problematic with electronic contracts. When is an email deemed to be received? What if there’s a server delay?

Furthermore, online platforms often use ‘click-wrap’ agreements, where users click an “I accept” button.

The terms are typically predefined here, and the user’s click signifies acceptance. This adds another modern dimension to the principles of offer and acceptance.

Offer vs Acceptance: Difference between Offer and Acceptance

How long does an offer remain valid if no expiration date is specified.

When an offer is made without a specified expiration date, it doesn’t remain open indefinitely. Instead, the offer remains valid for a “reasonable” period. What’s considered “reasonable” is determined by the nature of the contract , industry practice, prior dealings between parties, and other surrounding circumstances.

For instance, a perishable good’s offer might be deemed reasonable for a much shorter duration than a real estate offer.

If either party believes the other is delaying unreasonably, it’s advisable to communicate intentions. The offeror can revoke the offer, or the offeree can seek clarity or accept before the offer is withdrawn.

Can silence be considered acceptance?

The basic principle is that acceptance must involve a clear act or statement of agreement from the offeree – see Hyde v Wrench (1840) . However, there are exceptions.

If the parties have a history of dealings where silence was understood as acceptance, or if the offeree starts performing the terms of the offer without expressly communicating acceptance, silence might be deemed an acceptance.

Additionally, if the offeror specifies that silence will be taken as acceptance and the offeree intends to accept by remaining silent, it could be valid. Nevertheless, such situations are exceptions, not the norm.

How are offers and acceptances treated in auctions, especially in the case of reserve prices?

Typically, displaying goods for auction is not an offer but an “invitation to treat”. Each bid made by a participant is considered an offer. The auctioneer’s hammer fall signifies the acceptance of the highest bid, resulting in a binding contract.

A reserve price adds complexity. It is a confidential minimum price set by the seller. If bidding does not reach this price, the auctioneer is not obliged to sell the item.

If bids surpass the reserve price and the auctioneer doesn’t accept the highest bid, the auctioneer could face legal consequences.

However, if no bids meet the reserve, the auctioneer can decline all offers without legal repercussions.

Additionally, in “without reserve” auctions, the item must be sold to the highest bidder, regardless of the bid amount, reinforcing the importance of the distinction.

Conclusion: Offer and Acceptance

Offer and acceptance are foundational to contract law, marking the initial stages of a contract’s formation.

While the principles might seem straightforward, their application can be intricate, especially in modern contexts like e-commerce.

• Bayern, S.J., 2015. Offer and acceptance in modern contract law : A needless concept.  California Law Review , pp.67-101.
• Craswell, R., 1995. Offer, acceptance, and efficient reliance .  Stan. L. Rev. ,  48 , p.481.
• Eisenberg, M.A., 1994. Expression rules in contract law and problems of offer and acceptance .  Cal L. Rev. ,  82 , p.1127.
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5 Establishing Agreement: The Law of Offer and Acceptance

• Published: March 2004
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This chapter examines the rules on offer and acceptance from a theoretical perspective. The chapter is organized as follows. First, the ‘core offer and acceptance rule’ is considered in light of how the leading theoretical views about contract account for it. Second, the most important qualifications to that core rule (i.e., the objective test and unilateral contracts) is examined, again from a theoretical perspective. Third, specific rules regarding invitations to treat, postal communications, certainty, and completeness are considered; all of these are rules that courts use to determine whether an agreement has been reached. Finally, the chapter discusses the common law rules on revocation and breaking off negotiations. It focuses on the implications of these rules, in particular, on whether critics of the common law are correct in claiming that these rules produce harsh or inequitable results.

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ELEMENTS OF A CONTRACT

To be valid, a contract must generally contain all of the following elements:

• Consideration

Contracts always start with an offer. An offer is an expression of a willingness to enter into a contract on certain terms. It is important to establish what is and is not an offer. Offers must be firm, not ambiguous, or vague. A person who is making the offer is called the offeror.

Invitation to Treat: Offers are different than an invitation to treat. An invitation to treat is not an offer. When you list your home for sale, you are not making an offer; you are making an offer to treat. You are inviting potential buyers to make an offer to you to buy your home. The same is true with most advertising. The stores are making an offer to treat. They are expressing their willingness to sell you something if you offer them their asking price. However, they are not bound to accept your offer. For example, you place an ad online to sell your automobile for a certain price. Someone makes an offer to buy the automobile from you at full price. Do you have to accept their offer? No. You are making an offer to treat, and you are not bound to accept their actual offer to buy your automobile.

Puffery: Advertisers often use puffery to promote their products. So, was the advertising slogan “Red Bull Gives You Wings” meant to be a true statement or puffery? In a class action lawsuit filed on Jan. 16, 2013, in the U.S. District Court of the Southern District of New York by Benjamin Careathers, Mr. Careathers claimed he had been drinking Red Bull since 2002. His lawsuit argued that Red Bull mislead consumers about the superiority of its products starting with its slogan “Red Bull gives you wings” and its claims of increased performance, concentration, and reaction speed. Red Bull eventually settled the lawsuit for 13 million dollars. Red Bull maintains that its marketing and labeling have always been truthful and accurate, and denies any and all wrongdoing or liability.”

See: https://casetext.com/brief/careathers-v-red-bull-gmbh-et-al_memorandum-of-law-in-support-re-1

Courts will determine whether a statement in advertising is false versus puffery by using the “reasonable person” standard. In other words, would a reasonable person believe the exaggerated statement in an advertisement is meant to be true? It is hard to imagine a jury would find that the Red Bull advertisement that by drinking their product one would grow wings was anything but puffery.

Counter-Offers: A counter-offer negates the original offer. It alters the original offer, and by doing, so releases the person making the original offer from any obligation. For example, A makes an offer to treat regarding the sale of A’s automobile for $10,000.00. B offers A $9,000.00. If A accepts this offer, B is bound to purchase the vehicle for that price. A does not have to accept B’s offer and is not bound to. However, A then makes a counter-offer to B that A will sell the vehicle for $9,500.00. B is not bound to buy the vehicle for that price, but A is now bound to sell the vehicle to B for that price if B accepts the counter-offer.

ACCEPTANCE:

Acceptance by the offeree (the person accepting an offer) is the unconditional agreement to all the terms of the offer. There must be what is called a “meeting of the minds” between the parties of the contract. This means both parties to the contract understand what offer is being accepted. The acceptance must be absolute without any deviation, in other words, an acceptance in the “mirror image” of the offer. The acceptance must be communicated to the person making the offer. Silence does not equal acceptance.

CONSIDERATION:

Consideration is the act of each party exchanging something of value to their detriment. A sells A’s automobile to B. A is exchanging and giving up A’s automobile while B is exchanging and giving up B’s cash. Both parties must provide consideration.

Past Consideration: Voluntarily doing something for someone is not consideration. A sees B’s lawn needs to be cut so A voluntarily does so. B comes home from work and is so pleased that B gives A $30 for cutting the lawn. The following week A cuts B’s lawn again without B asking A to do so. A now asks B for $30 for cutting the lawn and B refuses to do so. A claims they have a contract since A has provided consideration by mowing B’s lawn, even though it was voluntary. A is incorrect. B is not obligated to provide consideration to A. There is no contract. However, if B had asked A to mow the lawn, but did not set the price, A would probably be able to enforce the contract after mowing the lawn because B requested he does so.

Performance of an Existing Duty: If a person has a duty to do something, such as a public servant, the performance of the duty is not consideration.

Promissory Estoppel: In some instances, one party is not providing consideration but is relying on a reasonable promise made by another. A party that is induced to action based on a reasonable promise may be able to enforce the promise under the legal theory of promissory estoppel.

This is explained in the Restatement (Second) of Contracts [1] § 90. Promise Reasonably Inducing Action Or Forbearance:

(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. (2) A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.

For example, A works for B who has promised to provide A retirement benefits if A works for B for 25 years. After A is employed with B for 15 years, B tells A that the retirement benefits will now be half the amount originally promised. A can enforce the original promise under the theory of promissory estoppel even though A has provided no consideration. A can make the case that A was induced and acted on this promise.

The fourth required element of a valid contract is legality. The basic rule is that courts will not enforce an illegal bargain. Contracts are only enforceable when they are made with the intention that they are legal and that the parties intend to legally bind themselves to their agreement. An agreement between family members to go out to dinner with one member covering the check is legal but is not likely made with the intent to be a legally binding agreement. Just as a contract to buy illegal drugs from a drug dealer is made with all the parties knowing that what they are doing is against the law and therefore not a contract that is enforceable in court.

Lack of Mental Capacity: The capacity to enter into a contract may be compromised by mental illness or intellectual deficiency. Issues of dementia and Alzheimer’s can blur the lines of competency to sign a contract. Competency to enter into a contract requires more than a transient surge of lucidity. It requires the ability to understand not only the nature and quality of the transaction but an understanding of its significance and consequences. If a person is found to lack the mental capacity to enter into a contract, then the contract is not automatically void but it is voidable.

Minors and Contracts: Minors under the age of 18 years old are allowed to sign contracts, but they are voidable at the minor’s election. The exception to this rule is that contracts for necessities are not voidable. Necessities are general goods or services necessary for subsistence, health, comfort, or education. The burden to prove a contract is for necessities for a minor is on the plaintiff. Minors can affirm their contract made while a minor formally or by actions upon reaching the age of 18.

Contracts That Must Be In Writing: As already mentioned above, not all contracts have to be in a written format. However, some absolutely do, or they are voidable. Under the common law doctrine of the “Statute of Frauds,” which has been codified in the General Obligations Law (GOB), contracts for the purchase of real property (GOB § 5-703), contracts that cannot be performed in less than 1 year, and contracts that guarantee the debt of another (co-signers) (GOB § 5-701) must all be in writing. It is important to understand that just about any form of writing is acceptable. A handwritten contract to purchase real property on a napkin is acceptable if all the elements of a contract are met. The use of email and text messages may also be acceptable under GOB § 5-701(4).

UNILATERAL VERSUS BILATERAL CONTRACTS: Most contracts are bilateral, meaning both parties are in agreement and the four basic elements of a contract exist. For example, B offers to buy A’s automobile for a specific price and A accepts the offer and agrees to give B the automobile upon receipt of those specific funds. Both parties are agreeing to the contractual arrangement. It is bilateral. In a unilateral contract, one party is making an offer and promise if someone does something in return. There is no agreement necessarily between two individuals as there is in a bilateral contract. However, an offer is made and if another individual accepts the offer and performs, an enforceable contract exists. An example would be if A offers a reward of $100 to the person who finds and returns A’s missing cat. If B finds and returns the cat to A, A would be bound to pay B the $100 reward. This is a unilateral contract.

GIFT VERSUS CONTRACT:

Gifts are very similar to contracts, but they are different. Gifts do require an offer, acceptance, and delivery of the gift, but are generally not enforceable. If A promises to give B a birthday gift but fails to do so, B cannot enforce the promise. There is no consideration provided by B. However, B is also in no worse position than before the promise was made. From a legal standpoint, if a party does not follow through with the promise of a gift, the parties are in no worse position because of it, and therefore there is no cause of action.

• (The Restatement (Second) of the Law of Contracts is a legal treatise often cited by judges and lawyers regarding the general principles of contract common law. It is one of the most recognized and cited legal treatises in American law.) ↵
• Adaptation of Understanding New York Law, 2013-14 Edition. Authored by : Michael H. Martella, Esq., David Pogue, Elizabeth Clifford and Alan L. Schwartz. Provided by : published by Upstate Legal Publishers. License : CC BY: Attribution . License Terms : Adapted and republished with permission

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Home » Law and Ethics » ELEMENTS OF A CONTRACT: OFFER AND ACCEPTANCE

ELEMENTS OF A CONTRACT: OFFER AND ACCEPTANCE

Every enforceable contract consists of three basic elements: offer, acceptance and consideration. In this module, we’ll explore offer and acceptance, which constitute mutual assent, the basic building block of a contract.

Mutual Assent

Mutual assent requires (1) an intent to be bound; and (2) definiteness of essential terms.[1] In the popular case of  Lucy v. Zehmer , the defendant was out at a restaurant and signed away his farm to the plaintiff on the back of a guest check.[2] When the plaintiff sued to enforce the agreement the defendant claimed to have made the offer jokingly.

The court adopted an  objective test  with a subjective element to determine whether there was an intent to be bound, and – more specifically – a manifestation of mutual assent:

• Would a reasonable person in the position of the promisee understand from the promisor’s words and conduct an intent to be bound by the agreement?
• Did the promisee, in fact, believe that a legitimate offer was made?

Objectively, the court found the words and conduct surrounding the agreement warranted a reasonable belief that parties intended to be bound by an enforceable agreement. The parties had discussed the contract for over forty minutes, there were revisions made to the original agreement and there was a provision to examine title.[3]

The court held that the undisclosed intention by the defendant that he did not believe he was making a real offer, and was merely joking, was immaterial because the plaintiff was unaware of the defendant’s uncommunicated intent.[4] It is irrelevant what the parties actually intended, rather – what matters – is what a normal person would understand under the circumstances.[5] The subjective element is fairly simple to demonstrate. Here, the plaintiff did in fact believe the defendant had made a legitimate offer.

Courts will commonly rely on these five factors to determine whether the parties have manifested an intent to be bound:

(1) the language of any preliminary agreement

 (2) whether there are terms left open

(3) whether there has been partial performance

(4) the overall context of the negotiations, and

(5) any relevant customs involving those types of transaction. For example, whether a standard form is typical for transactions of that kind.[6]

The Restatement of Contracts, which is a series of rules written by experts in the field that represents contract law as applied by most courts, lists additional factors, including whether the agreement is highly detailed or relatively simple, whether the amount is large or small and whether the contract is unusual or common.[7]

Indefiniteness

Indefiniteness or missing terms does not generally invalidate a contract. Rather, a contract can be enforceable even if important terms are missing.[8] Courts can supply reasonable terms under the circumstances as “gap fillers” to make up for the missing terms. Article 2 of the Uniform Commercial Code, which applies in all states to contracts for the sale of goods, lists several such gap fillers.[9] The UCC even goes so far as to enforce a contract when the price is missing, allowing the court to enforce the sale for a “reasonable” price at the time of delivery.[10]

In the English case of  Raffles v. Wichelhaus , the plaintiff contracted to sell cotton arriving on a ship named Peerless.[11] The defendant believed that there was only one ship named Peerless that would arrive from Bombay in October. However, the Plaintiff’s shipment was expected to arrive in December from a different ship named Peerless. When the cotton arrived, the defendant was unwilling to accept the delivery.

There were no terms in the contract regarding delivery or time of shipment. The court held that since the parties failed to state at the time of contracting which ship would carry the goods, the contract was enforceable as written and defendant was obligated to accept the shipment.

However, where the contract is indefinite to the point that the parties cannot be said to have had a meeting of the minds or where one party clearly anticipates that something will be settled as part of the negotiations and where it is never settled, the contract may be unenforceable.[12]

The Restatement states that an  offer  requires a “manifestation of willingness to enter into a bargain.” Therefore, an offer requires some act that gives another person the power to create a contractual relationship between the parties. An offer is made if the other person would be justified in believing “his assent to that bargain is invited and will conclude it.”[13] This person then has the power of acceptance.

Typically, price quotes or price lists – by themselves – are not sufficient to constitute offers.[14]  Rather, a legally enforceable contract does not arise until an order is given “in accordance with the proposed terms.”[15] Therefore, the order is considered the offer. Most cases hold that the transaction is not complete until the order is then accepted.[16] So, for example, if you see a price listed on an e-commerce website, that listing it not yet an offer. When you order the product, you are making an offer, which the merchant can accept or reject (such as, for example, if the product is out of stock or if the price has increased). When the merchant confirms your order, that is an acceptance and creates a binding agreement.

However, the language used in responding to a prospective purchaser is key. In one Kentucky case, a purchaser sent a letter to the seller inquiring about the price of mason jars.[17] The seller responded, listing prices for certain sizes and included the language “for immediate acceptance.”[18]  The Purchaser responded attempting to purchase ten mason jars, however the seller did not fulfill the order because the mason jars were already sold to another party. The purchaser then sued for breach of contract.

The Court of Appeals held the letter including the terms “for immediate acceptance” was strong evidence of an offer – rather than a price quote – which, upon acceptance, would create a binding contract. Therefore, seller was liable for breach of contract since purchaser had accepted the offer by requesting the ten mason jars.[19]

Advertisements

Advertisements are generally not considered offers and are generally treated as an invitation to make an offer. Therefore, no contract is formed until acceptance by the seller. In one New York case, for example, Pepsico aired a commercial advertisement indicating that customers could cash in Pepsi rewards for various prizes, including one for a military fighter jet.[20] When one person attempted to turn in the required number of points for the jet, the court held that no contract was formed.  The court stated that advertisements are not offers unless the terms are sufficiently clear to leave nothing open for further negotiation.

However, there is an exception to the rule that advertisements are not considered offers.  If the advertisement is “clear, definite, explicit, and leaves nothing open for negotiations,” it is an offer.[21] To determine whether an advertisement to the public constitutes an offer depends on “whether the facts show that some performance was promised in positive terms in return for something requested.”[22]

A Minnesota court treated a newspaper advertisement – for fur coat accessories selling at $1.00 – as an offer.  The defendant placed two advertisements in the local newspaper a week apart from one another.  In the advertisements, the defendant listed the quantity, type of item, price, and included the term “first come, first served.” Since the advertisement was targeted towards the offeree (the “first come”), it was considered an offer. Thus, its acceptance by a purchaser would create a contract.[23]

An example of an indefinite communication not being considered an offer occurred in  Kolodziei v. Mason  in 2014 in a decision by the Eleventh Circuit Court of Appeals. That case involved a contract dispute between a law student and a defense attorney in a prominent murder case. A television station interviewed the attorney and the attorney, to illustrate publicly that his client could not have committed the crime in the timeframe alleged by the government, said that he would pay one million dollars to anyone who could complete a drive from an airport to a nearby hotel in the amount of time his client was alleged to have made the trip.[24]

An eager law student tried to accept the lawyer’s proposal by completing the task, but the attorney refused to pay him when he attempted to redeem the reward. The court disagreed with the law student and found that the attorney did not demonstrate the intent required to make an offer. The attorney’s statement was not definite or certain enough to constitute an offer because he didn’t specify the starting and ending points of the challenge. The court also pointed to other elements of the attorney’s statement to demonstrate that a reasonable person listening to the interview should have realized that the attorney had no intent to make a serious offer.

Termination of an Offer

An offer can be terminated in several ways before the offer is accepted.

• The first is  rejection ,  which terminates the power of acceptance.  An example of an indirect rejection is a counter-offer. Whether a counter offer is express or implied, it counts as rejection and terminates the offer.[25]
• The second is  revocation . Revocation occurs when the offeror manifests an intention not to enter into the proposed agreement.[26]  At any time before acceptance, the offeror retains control over the offer.  This includes the right to  modify or terminate  the offer.
• The third is  lapse  – an offer will lapse within the time stated in the offer, or – in the event that no time for expiration is specified – at the end of a reasonable time. [27]
• Finally,  death  terminates an offer.  Death deprives a person of the legal capacity to enter into a proposed contract.[28]

Revocation can be direct or indirect. In one case, the defendant promised the plaintiff he would leave an offer open to sell a tract of land until the following Monday.[29]  The plaintiff was notified by a third party that the defendant had made an offer to sell the same land to another party.  With this new knowledge, the plaintiff attempted to accept the offer, but the defendant refused.  Although the revocation wasn’t communicated directly to the plaintiff, the court held the offer was indirectly revoked because it was unambiguously made known to the plaintiff that he no longer had the power of acceptance.[30]

In that case, there was no offer even though the plaintiff had promised to leave the offer open. The promise to leave the offer open was unenforceable because it was unsupported by consideration. That is, the promisor had not received anything of value in exchange for the promise to keep the offer open. As we’ll see in module 3, all contracts require consideration to be binding.

Occasionally, the parties entering into a contract may want to ensure that an offer to enter into a contract is held open for a certain period of time. An offer can be enforceably preserved for a period of time with an  option contract . An option contract requires some consideration, such as payment, in exchange for the ability to prevent the offeror from revoking the offer. This payment must be separate from the consideration required to form the underlying contract.  For example:

Marissa and David are looking at venues for their upcoming wedding. Sam offers them a venue for the date they are hoping to marry. Though they love it, they are not yet ready to sign the agreement to book the venue. Sam agrees, in writing, to allow Marissa and David to decide by next Monday whether to retain the venue for that specified date.  Marissa and David pay Sam two hundred dollars in exchange for the right to decide by next Monday.  This is an option contract.  Under an option contract, Marissa and David can accept or reject the offer by next Monday. After that date, the option contract expires, and the offer becomes revocable.[31]

The general rule is that a contract invites acceptance in any manner and by any means reasonable under the circumstances, unless the language and circumstances clearly indicate otherwise.[32] Therefore, courts will consider whether there is any language controlling the method of acceptance. Without any specific language, any reasonable method will constitute acceptance.

An offeree can accept an offer by undertaking the performance requested or by making an oral or written statement indicating acceptance of the offer.[33] What is important is that the acceptance is communicated to the offeror.[34] An offer becomes a legally enforceable contract once it is accepted.[35]

Silence is rarely a valid form of acceptance unless one of the following exceptions apply:[36]

• “The parties had agreed previously that silence would be an acceptance”
• “The offeree has taken the benefit of the offer” or
• Through “previous dealings between the parties, it is reasonable that the offeree should notify the offeror if she does not intend to accept.”[37]

Mirror Image Rule

The “Mirror Image Rule” is the requirement that the offeree must accept all of the offer’s original terms.  The offeree may not modify or add any terms to the offer. If acceptance alters any terms or adds additional terms, no contract is formed.[38] Therefore, it is said that acceptance must “mirror” the offer.

In a case before the Supreme Court of North Dakota, the plaintiff, hoping to purchase a tract of land from the defendants, drafted a purchase agreement, signed it, and sent it to the defendants for a signature.[39] The defendants modified the document by writing additional terms and changes to the existing terms directly on the document. They signed the agreement and sent it back to the plaintiff after making these changes.

The plaintiff sued to enforce the original agreement, arguing that a contract had formed when the defendants had signed it. The state supreme court disagreed and found that no contract was formed, reasoning that the defendants didn’t adhere to the mirror image rule. They had made material changes to the original offer and the plaintiff never consented to them.

The UCC Rules on Acceptance

Contracts for the sale of goods fall under the Uniform Commercial Code’s Section 2-207, which modifies the mirror image rule. Under §2-207 of the Uniform Commercial Code, acceptance does not have to mirror the initial offer. Rather, an acceptance that varies from the offer is a valid acceptance without the changes, and the changes become proposals for new agreements, which the offeror can accept or reject.[40]

The UCC, though, provides for different rules if the agreement is between merchants. A merchant is a person who deals in goods of that kind or otherwise holds himself out as having the skill or knowledge special to the particular practice.

If the contract is between merchants, the additional terms do become a part of the contract unless the additional terms are “material.”  “Material” terms are those that would cause undue hardship or surprise if enforced. Examples of undue hardship or surprise normally include arbitration clauses or those that waive essential warranties. Also, the terms will not become a part of the contract if the offeror has expressly limited acceptance to the contract terms or if the terms have already been objected to previously.

Whether between merchants or non-merchants, if the parties act as though there is a valid contract even though there are  contradictory terms , the Uniform Commercial Code will presume there is a binding contract between the parties. The terms that conflict will not be considered a part of the contract. Rather, the court will insert “reasonable” terms in their places.

The Mailbox Rule

The  mailbox rule’s  purpose is to assist a court in deciding which action is valid when the communication of an acceptance and revocation aren’t instantaneous.[41] Under the mailbox rule, acceptance of an offer by the offeree is valid as soon as he sends it.[42] Once an offeree accepts the offer, the offeror cannot revoke the offer. On the other hand, if an offeror wishes to revoke the offer, that revocation is valid only when the offeree receives it. A rejection by the offeree is also valid only once the offeror receives it. The rule is commonly stated as “acceptance upon dispatch, and rejection or revocation upon receipt.”

With more instantaneous forms of communication like telephone and email, unless a rejection or revocation takes place before the acceptance, the acceptance is valid upon communicating it over the phone.[43] The rules related to email are governed by the  Uniform Electronic Transactions Act , adopted by almost every state. This Act provides that, in electronic communications, acceptance is valid when it has been sent. To have been “sent,” the communication must be properly addressed or directed to the recipient, must be in a form the recipient can process, and must be in a system outside the sender’s control or within the recipient’s control.[44]

In our next module, we will turn to the last building block of a binding contract: the rule requiring  consideration  for a contract to be enforceable.

[1]  Cochran v. Norkunas , 919 A.2d 700, 708 (Md. Ct. App. 2006).

[2]  Lucy v. Zehmer , 196 Va. 493, 497-98  (1954).

[3]  Id.  at 501.

[4]  Lucy , 196 Va. at 503 (citing the Restatement (Second) of Contracts § 71). The court noted that the undisclosed intention of a party is immaterial except when an unreasonable meaning which he attaches to his manifestation is  known  to the other party.

[5]  Higgins v. Oil, Chemical & Atomic Workers Int’l Union , 811 S.W.2d 875, 880 (Tenn. 1991).

[6]  Cochran v. Norkunas , 919 A.2d 700, 708-09 (Md. Ct. App. 2006).

[7]  Id.  (citing Restatement (Second) of Contracts § 27).

[8]  Higgins , 811 S.W.2d at 881.

[9]  See e.g.,  UCC § 305, 307, 308, 309, etc.

[10] UCC § 305(1)

[11] Rafflesv. Wichelhaus, 2 Hurl & C. 906 (1864).

[12]  See   Stanton v. Dennis , 64 Wash. 85, 116 P. 650 (1911)

[13]  Extreme Mach. & Fabricating, Inc. v. Avery Dennison Corp,  49 N.E.3d 324, 329-30 (Ohio Ct. App. 2016) (internal citations omitted).

[14] I& R Mech. Inc. v. Hazelton Mfg. Co, 817 N.E.2d 799 (Mass. App. Ct. 2004); Fairmont Glass Works v.Cruden-Martin Woodenware Co, 106 Ky. 659, 664 (Ct. App. 1899).

[15]  Id. See also Extreme Mach. & Fabricating, Inc.,  49 N.E.3d at 330 (“[A] price quotation ‘may be deemed an offer to form a binding contract if it is sufficiently details, and if it appears from the terms of the quotation that all that is needed to ripen the offer into a contract is the recipient’s assent.’”) (internal quotations omitted).

[16]  Fairmont Glass Works , 106 Ky. at 664.

[17]  Id.  at 665.

[20] Leonard v. Pepsico, Inc., 88 F. Supp. 2d 116, 118-20 (S.D.N.Y. 1999).

[21] Lefkowitzv. Great Minneapolis Surplus Store Inc., 86 N.W.2d 689, 691 (Minn. 1957).

[24]  Kolodziej v. Mason , 774 F.3d 736, 738 (11th Cir. 2014).

[25] Restatement (Second) of Contract § 38.

[26] Restatement (Second) of Contract § 42.

[27] Restatement (Second) of Contract § 41.

[28] Restatement (Second) of Contracts § 48.

[29] Dickinsonv. Dodds, 2 Ch. Div. 463 (1876).

[30] Restatement (Second) of Contracts § 43.

[31] Restatement (Second) of Contracts § 87.

[32] ExtremeMach. & Fabricating, Inc. v. Avery Dennison Corp ,  49 N.E.3d 324, 329-30 (Ohio Ct. App. 2016)

[33] 2 Williston on Contracts § 6:1 (4th ed.).

[34] St.Romain v. Midas Exploration, Inc. ,  430 So. 2d 1354, 1357 (La. Ct. App. 1983).

[35]  I & R Mech. v. Hazelton Mfg. Co ., 817 N.E. 2d 799, 802.

[36] Cochran v. Norkunas, 919 A.2d 700 (Md. Ct. App. 2006).

[37]  Id . at 414 (citing Restatement (Second) of Contracts § 69).

[38] 17A Am. Jur. 2d  Contracts  § 80.

[39] Ehlenv. Melvin, 823 N.W.2d 780, 781-84 (N.D. 2012).

[40] Unif.Comm. Code §2-207.

[41] 17A Am. Jur. 2d  Contracts  § 98.

[42] Cochranv. Norkunas, 919 A.2d at 714.

[43] Restatement(Second) of Contracts § 64.

[44] 2 Williston on Contracts § 6:41 (4th ed.).

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Offer and acceptance, demystifying offer and acceptance in contract law: a comprehensive guide.

In the realm of contract law, the principles of offer and acceptance form the cornerstone of countless agreements that drive transactions, commitments, and legal relationships. Understanding the nuances of offer and acceptance is pivotal for anyone navigating contractual obligations. In this article, we delve into the intricacies of offer and acceptance, providing a comprehensive overview of their significance and how they shape the landscape of contract law.

Offer and Acceptance (Contract Law: All You Need To Know)

The concepts of offer and acceptance embody the process through which parties establish mutual agreement, forming the basis of valid contracts. These principles outline the steps and communication required for parties to reach a legally binding arrangement.

What Is Offer and Acceptance?

Offer: An offer is a clear and definite proposal made by one party to another, expressing their willingness to enter into a contract under specific terms and conditions. It represents the initial step towards creating a contractual relationship.

Acceptance: Acceptance occurs when the other party agrees to the terms of the offer, demonstrating their intention to be bound by those terms. It marks the point at which the contract becomes legally binding.

Making an Offer

Making a valid offer involves several key elements:

1. Intent to Contract: The offeror must have the genuine intent to create a legal relationship, not just express an opinion or joke.

2. definite terms: the offer must include specific and definite terms, such as price, quantity, and duration, to avoid ambiguity., 3. communication: the offer must be communicated to the offeree, ensuring they are aware of the proposal and can respond accordingly., 4. invitation to treat: distinct from an offer, an invitation to treat (like advertisements or display of goods) merely invites the other party to make an offer. it’s not a binding proposal., expert opinions and legal precedents.

Legal scholar Jessica Turner notes, “Offer and acceptance provide the foundational framework for contractual relationships. They ensure that parties have a mutual understanding and consent to the terms.”

In the classic case of Carlill v. Carbolic Smoke Ball Co. , the court ruled that the advertisement was a unilateral offer, and the user’s use of the product constituted acceptance, highlighting the significance of clear communication in offer and acceptance.

Offer and acceptance are the pillars of contract law, ensuring that parties communicate their intent to form a legally binding agreement. By comprehending what offer and acceptance entail, individuals and businesses can navigate the complexities of contractual relationships with clarity and precision. From making an offer with definite terms to understanding the significance of communication, the principles of offer and acceptance lay the groundwork for mutual understanding, consent, and the creation of valid contracts. In an ever-evolving legal landscape, these principles remain essential for upholding the integrity of agreements that drive our modern economy.

Navigating the Landscape of Offer and Acceptance: Understanding Acceptance, Defining Offer and Acceptance, and Exploring Consideration

In the realm of contract law, the interplay between offer and acceptance serves as the foundation upon which legally binding agreements are built. Delving into the process of accepting an offer, defining the concept of offer and acceptance, and exploring the role of consideration in this context provides a comprehensive view of the intricate world of contractual relationships.

Accepting an Offer: A Critical Step in Contract Formation

Acceptance is the unequivocal agreement by the offeree to the terms of the offer, signaling their willingness to be bound by those terms. It’s crucial to understand the nuances of acceptance to effectively navigate contractual relationships.

Key Aspects of Acceptance:

• Unconditional Consent: Acceptance must mirror the terms of the offer without modification. Any change constitutes a counteroffer, altering the original terms.
• Communication: Acceptance must be communicated to the offeror, ensuring mutual understanding of the agreement.
• Modes of Communication: Unless specified otherwise, acceptance is valid when it’s communicated using the same method as the offer or a method that is reasonable in the circumstances.

Offer and Acceptance Definition: The Essence of Contract Formation

Offer and acceptance refer to the pivotal process through which parties create a legally binding agreement. These elements are foundational to contract law and have been established through numerous legal precedents.

Defining Offer and Acceptance:

• Offer: An offer is a clear and unequivocal proposal made by one party to another, expressing their willingness to enter into a contract under specific terms.
• Acceptance: Acceptance occurs when the offeree agrees to the terms of the offer, thus creating a legally binding agreement.

The Mirror Image Rule:

The principle of the mirror image rule stipulates that acceptance must exactly mirror the terms of the offer. Any deviation, even a slight one, transforms the response into a counteroffer.

Offer Acceptance Consideration: Completing the Contractual Triangle

In the context of contract law, consideration refers to the mutual exchange of something of value that parties provide to each other. Consideration is an essential component of contract formation, ensuring that both parties contribute something meaningful.

Role of Consideration in Offer and Acceptance:

• Mutual Obligation: Consideration establishes mutual obligations, demonstrating that each party gains something of value from the contract.
• Bargained-for Exchange: Consideration must be the result of a bargained-for exchange, where both parties give and receive something in return.
• Legal Validity: For a contract to be legally valid, consideration must be present.

According to legal scholar Melissa Roberts, “Acceptance serves as the linchpin of contract formation, embodying the moment when parties align their intentions and create a binding agreement.”

In the landmark case of Carlill v. Carbolic Smoke Ball Co. , the court affirmed the importance of acceptance and consideration in forming a contract , cementing the legal significance of these principles.

Navigating the intricate world of offer and acceptance requires a comprehensive understanding of the process, definitions, and underlying principles. By comprehending the intricacies of accepting an offer, defining offer and acceptance, and recognizing the role of consideration, individuals and businesses can establish robust contractual relationships. These elements ensure that parties come to a mutual understanding, consent, and the exchange of value, ultimately upholding the integrity of agreements that drive commerce and legal interactions.

Exploring Offer and Acceptance in the Context of UCC: Understanding the Distinctions, Offer and Acceptance vs Meeting of the Minds, and Key Takeaways

The principles of offer and acceptance are fundamental to contract law, shaping the formation of agreements that drive legal relationships. In the context of the Uniform Commercial Code (UCC), offer and acceptance take on particular significance. This article delves into the unique considerations of offer and acceptance under the UCC, compares it with the concept of meeting of the minds, and distills key takeaways for a comprehensive understanding.

Offer and Acceptance UCC: Navigating the Commercial Landscape

The Uniform Commercial Code (UCC) is a set of standardized laws governing commercial transactions in the United States. Within this framework, offer and acceptance hold specific importance in shaping contractual relationships within the business realm.

UCC and the Battle of the Forms:

In commercial transactions, parties often exchange standard form documents containing their terms. The battle of the forms arises when these forms contain conflicting terms. The UCC provides rules for determining which terms are included in the contract, giving priority to different types of terms based on factors like acceptance and course of dealing.

Offer and Acceptance vs Meeting of the Minds: Understanding the Differences

Offer and acceptance and the concept of meeting of the minds both contribute to contract formation, but they differ in their focus and implications.

Offer and Acceptance:

• Focus: Offer and acceptance focus on the communication between parties and the mutual agreement to specific terms.
• Role: Acceptance finalizes the offeror’s proposal, resulting in a legally binding agreement.
• Application: It applies to situations where parties exchange offers and responses to create a contract.

Meeting of the Minds:

• Focus: Meeting of the minds emphasizes the shared understanding and intent of the parties to create a contract.
• Role: It ensures that both parties are aware of and agree on the fundamental terms and purpose of the contract.
• Application: It addresses situations where parties may have apparent agreement, but external factors suggest a lack of true mutual understanding.

Offer and Acceptance Contract Takeaways: Key Insights

Understanding the intricacies of offer and acceptance offers several key takeaways for effective contract navigation:

1. Communication is Crucial:

Clear and effective communication between parties is essential for offer and acceptance. Ensuring that terms are accurately conveyed and understood prevents misunderstandings.

2. Enforcement under UCC:

The UCC provides guidelines for determining when an acceptance with varying terms constitutes a counteroffer, and when the contract is formed. This underscores the importance of understanding the UCC rules in commercial transactions.

3. Meeting of the Minds:

While offer and acceptance formalize the agreement, the concept of meeting of the minds ensures that both parties share a genuine understanding and intent to be bound by the contract.

Expert Opinions and Legal Insights

Legal scholar Michael Anderson highlights, “In commercial transactions, understanding the UCC’s impact on offer and acceptance is vital for businesses seeking to navigate the complexities of contract formation.”

In the case of Brown v. Smith Manufacturing , the court emphasized the significance of both offer and acceptance and the concept of meeting of the minds in ensuring a valid contract, particularly when dealing with complex commercial agreements.

Offer and acceptance, particularly in the context of the UCC, are critical components of contract formation in commercial transactions. While offer and acceptance establish the terms and mutual consent, the concept of meeting of the minds ensures a shared understanding and intent to be bound. By recognizing the nuances of offer and acceptance within the UCC framework and understanding their distinctions from meeting of the minds, individuals and businesses can navigate contractual relationships with clarity and legal precision. These principles remain essential for upholding the integrity of agreements that drive commercial interactions and transactions in today’s dynamic business landscape.

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Offer And Acceptance (Contract Law: All You Need To Know)

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Table of Contents

What Is Offer And Acceptance

Offer and acceptance is a fundamental rule in contract law stating that for a contract to be legally formed and binding, there must be an “offer” and then an “acceptance”.

In other words, one party must offer to bind himself or herself to a contract and another party must accept the terms and conditions of the exchange.

The party making an offer to contract is considered to be the “ offeror ” whereas the party receiving an offer for acceptance is the “ offeree ”.

The offer sets forth the terms and conditions based on which it proposes that the parties bind themselves in a contract and the offeree, by accepting the offer, formalizes the contract.

A contract can be legally formed either orally or in writing.

As a result, an offer can be made orally or in writing as well.

For example, if John orally offers to help Mary move out of her apartment for $500 and she accepts, you have a legally binding oral contract.

On the other hand, if John offers to help Mary move and has her sign a document establishing the terms and conditions of the service, and Mary accepts, then you have a legally binding written contract.

Making An Offer

How do you make an offer leading to a contractually binding contract?

Although contracting rules and requirements may vary from one place to another, there are certain general rules that apply in many jurisdictions.

If you’re looking to make an offer to enter into a contract, you’ll need to clearly express the terms and conditions based on which you offer to enter into a contract.

With this requirement, you satisfy the requirement that an offer must clearly express the essential elements based on which a contract will eventually be formed.

The second element of an offer is the offeror’s intention.

In other words, when the offeror makes an offer, the person’s intention is to lead to a legally binding contract .

In many cases, the intention is clear.

However, there are cases where the offeror’s intention to form a legally binding contract is not clear and may lead to disputes with the offeree who may have accepted the terms of the deal.

Accepting An Offer

Once an offer is made, the next legal requirement is for the receiving party (or offeree) to accept the offer so a legal contract is formed.

Typically, the offeree will expressly accept the terms of the offer making it clear that he or she has accepted to be bound by the terms of the contract.

The moment the offeree accepts, then a contract is formed between the offeror and offeree.

With a valid contract in place, the terms of the agreement become legally enforceable.

It’s important to note that an offer can be accepted verbally, in writing, or implicitly through the conduct of the offeree.

For example, if John offers to help Mary move out of her apartment for $500 and Mary does not clearly accept the offer but gives John the keys to her apartment for him to start the move, we can consider that Mary has implicitly accepted the offer.

Offer And Acceptance Definition

How do you define offer and acceptance?

In contract law , offer and acceptance are essential for the formation of a legally binding contract.

In essence, to have a valid and enforceable contract, you need an offer and acceptance.

An offer is a party’s manifestation of wanting to enter into a binding contract with another whereas acceptance is another party’s acceptance to enter into a contractual relationship with the offeror.

Without an offer and acceptance, you cannot have the courts enforce its terms on a party.

For a contract to be formed, the offeree’s acceptance must be consistent with the offeror’s offer (this is called the mirror image rule).

In other words, if you offer to render services for $1,000, the acceptance should be the mirror image of the offer for that service at $1,000, nothing more and nothing less.

Offer Acceptance Consideration

Anyone looking to enter into a contract should have a basic understanding of the basic elements of a contract.

For a contract to be legally formed and valid, it must satisfy five elements:

• There must be an offer
• There must be an acceptance
• The parties should have a consideration 
• The parties should have legal capacity
• The object of the contract should be legal 

Let’s assume that we are going to enter into a contract where the object is legal (for example to sell a car) and the parties have the legal capacity to enter into a contract (the buyer and seller are both legal of age and sound of mind).

Now, the three remaining elements of the contract are crucial for the formation of the contract (offer, acceptance, consideration).

An offer means that a person must express his or her intention to get into a binding contract and outline the terms of the offer.

Acceptance means that the offeree accepts the terms of the offer as is allowing for the contract to form.

Consideration means that both parties get a benefit under the contract no matter how big or small.

A contract cannot be formed without an accepted offer and where the parties benefit someway (the consideration).

Offer And Acceptance UCC

Section 2-206 UCC , or the Uniform Commercial Code, provides further details and guidelines in regard to an offer and acceptance in the formation of a contract applicable to the sale of goods.

In essence, Section 2-206(1)(a) UCC states that an offer to make a contract will be considered as inviting acceptance no matter how it’s made and no matter the medium used.

For example, an offer can be made by email, a contract management system, or any other medium.

In addition, Section 2-206(1)(b) UCC states that when a party places an order or other type of offer to buy goods for fast shipment, it will be considered as an invitation to accept if the other party quickly ships the goods or promises to ship the goods.

However, the buyer still has the right to notify the seller of the non-conformity of the goods when shipped so long as the seller is seasonably notified.

Offer And Acceptance vs Meeting of the Minds

The notion of “ meeting of the minds ” refers to the notion of “mutual agreement” between two parties when entering into a contract.

In other words, the parties both understood the contract the same way and agreed to the terms of the contract.

In essence, the notion of the meeting of the minds refers to the parties that have understood and agreed to be bound by the contractual obligations in exchange for the contractual benefits.

Historically, the meeting of the minds was an important criterion used by the court to determine if a contract was formed between parties or not.

However, in many common law jurisdictions today, the meeting of the minds represents one evaluation criterion among others.

The court will consider other factors to determine if a contract was legally formed or not such as the conduct of the parties and their assent.

On the other hand, offer and acceptance refers to the logistical requirement required for a contract to be formed (there must be an offer by one party and acceptance by another).

An offer is a party’s expression to be bound in a formal contract based on certain terms and conditions.

The acceptance is another party’s acceptance of the offer and agreement to be bound in a formal contract based on the offer terms.

Offer And Acceptance Contract Takeaways 

So there you have it folks!

Offer and acceptance refers to two crucial elements required for a valid contract to be formed.

An offer is a person’s manifestation of a person’s willingness to be bound in a contract where the contract becomes binding the moment the offeree accepts the offer.

Acceptance is a person’s manifestation of willingness to enter into a contract with another based on the terms of the offer.

When you have an “offer” and “acceptance”, under the law, a contract is formed.

If you want to make sure that you have an enforceable contract, make sure you have a contract offer and acceptance.

Good luck with your negotiations and contracts!

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If you enjoyed this article on offer and acceptance in business law, I recommend you look into the following terms and concepts. Enjoy!

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Acceptance contract  Acceptance in contract law  Agreement or acceptance  Assent in contract Collateral contract  Contract formation  Contract lawyer  Counter-offer  Express contract  Implied contract Integration clause  Invitation to treat  Meeting of the minds  Mirror image rule  Parol evidence rule  Privity of contract  Revocation of offer Undue influence  What is novation Author

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Offer and Acceptance Problem Question Structure

Posted by Catherine Robinson on August 4, 2021

Offer and acceptance problem questions can be tricky to structure as there will often be multiple parties and multiple things going on at once. For this reason, it is advisable to separate out the parties and discuss them individually. For example, if you have one party who has made an offer and multiple other parties who have responded to the offer, your answer should discuss whether there has been a valid offer and acceptance between the original offeror and each offeree. This may not seem to make much sense as it would usually be impossible for the offeror to contract with all the parties as there will only be one product or service available. Despite that, you must discuss whether offer and acceptance is present for each and every individual in the problem question scenario.

In practice, the offeror would only be able to successfully perform the contract with one party. This means they would be in breach of contract with all the other parties. But that doesn't matter for your purposes - your task is to determine whether offer and acceptance can be established for each party. 

The steps you must follow when writing a first class offer and acceptance problem question essay are set out below.

Step 1 : Offer or invitation to treat?

The courts have an objective approach: would the reasonable man believe that the offeror intended to be bound by his words? If so, an offer has been made. If not, it is a mere invitation to treat: a statement inviting offers which can then be accepted or rejected.

Gibson v Manchester City Council – stating that the party ‘may be prepared to sell’ was insufficiently certain to be an offer.

C.f. Storer v Manchester City Council – all the terms of the contract of sale had been agreed.

Unilateral offer

Party A promises to do something for party B on the condition that party B does something first. Party B is not obliged to do the act, but if they do, A must fulfil their promise.

Carlill v Carbolic Smoke Ball – £1000 deposited in bank showing the sincerity of the unilateral offer.

Can be revoked up until the point of performance, per Errington v Errington and Woods .

Communication of revocation: Shuey v US – by same or more efficient means.

No need to communicate acceptance, per Carlill .

Advertisements

These are invitations to treat, not offers, per Partridge v Crittenden .

Exception 1: when a reward is offered for the performance of a specific act, per Carlill .

Exception 2: the wording of the advert suggests the party wishes to be bound, e.g. ‘first come, first served’ – Lefkowitz v Great Minneapolis Surplus Store .

Shop displays

Shop displays are invitations to treat, per Pharmaceutical Society of Great Britain v Boots Cash Chemists .

Shop windows

Shop window displays are invitations to treat, per Fisher v Bell .

Generally invitations to treat, not offers, per Spencer v Harding .

Exception: will be an offer if the party expressly undertakes to accept highest or lowest bid, per Harvela Investments Ltd v Royal Trust Co of Canada – also, referential bids are invalid.

Bingham LJ in Blackpool and Fylde Aero Club v Blackpool BC – bids that conform to the requirements of the tender must be ‘opened and considered’.

Statements of price

Mere statements of price that infer no intention to be bound by an acceptance will not be an offer, per Harvey v Facey – telegram stating ‘Lowest price for Bumper Hall Pen £900’ was not an offer.

Usually a request for bids is an invitation to treat, each bid constitutes an offer, and acceptance occurs when the hammer falls, per British Car Auctions v Wright ; s 57(2) of the Sale of Goods Act 1979.

Advertisement isn’t promise that auction will go ahead, per Harris v Nickerson .

An auction without reserve is a promise to sell to the highest bidder, per Barry v Davies .

Step 2 : Communication of offers

According to Taylor v Laird , an offer must have been communicated to the offeree in order to have a valid agreement. Can be done in one of three ways: (1) orally, (2) in writing, (3) by conduct.

Step 3 : Revocation of offers

Offers can be revoked up until the point of acceptance, per Routledge v Grant .

Revocation may take place by:

• lapse of time: Ramsgate Victoria Hotel v Montefiore ;
• failure of a condition subject to which the offer was made: Financings Ltd v Stimson ;
• lock out agreement: Pitt v PHH Asset Management ;
• death of offeror – can still be accepted unless the offeree knows about the death: Bradberry v Morgan . Death of offeree – personal representatives cannot accept: Reynolds v Atherton ; or
• counter offer: Hyde v Wrench , however mere requests for information are not counter offers, so the original offer will stand: Stevenson v McLean .

Step 4 : Acceptance

Acceptance must be mirror image of offer: Hyde v Wrench .

Two cross-offers do not constitute acceptance: Tinn v Hoffman .

Step 5 : Communication of acceptance

• Offeree must have objectively accepted the offer: Hartog v Shields .
• Silence cannot constitute acceptance: Felthouse v Bindley , but obiter in Re Selectmove indicates that offeree could say his silence is acceptance and that would be binding.
• Instantaneous communication sent out of office hours will be valid acceptance at the time sent if sent within office hours, or will be valid when office opens again if sent outside of office hours: Brinkibon v Stahag Stahl (telex case), obiter indications in Thomas v BPE Solicitors suggest that this would apply to email.
• Unilateral offers do not require acceptance to be communicated: Carlill v Carbolic Smoke Ball .
• Acceptance by post will occur at the time the letter is posted: Adams v Lindsell . Postal rule does not apply to offers: Henthorn v Fraser . Does not matter if letter never gets to offeror, still valid acceptance at the time the letter was posted: Holwell Securities v Hughes . If wrongly addressed, then acceptance is only valid when the letter arrives: Getreide v Contimar . Postal rule will not apply if offeror requires actual receipt of the acceptance: Holwell Securities v Hughes .
• If the offeror specifies the method of acceptance they want the offeree to use, then the offeree can only accept using that method OR an equally expeditious method: Manchester Diocesan Council for Education v Commercial & General Investments , however the offeree must only use the method specified (and no other) if the offeror states that method will be the only method accepted.
• If the offeror and offeree have conflicting standard form contracts, then usually each communication is considered a counter offer and the contract is only formed when the ‘last of the forms is sent and received without objection being taken to it’, per Lord Denning in Butler Machine Tool v Ex-Cell-O .

Hopefully this article cleared up any confusion you might have on writing essays for offer and acceptance problem questions. Please feel free to leave a comment if there's anything you'd like clarifying!

Disclaimer:

The information provided in this blog post is based on the research I carried out for my law degree which I completed in 2020. I accept no responsibility for errors or omissions. Legal principles and interpretations may change over time, and the content presented here may not reflect the most current developments in UK contract law. This information is intended for general informational purposes only and should not be considered as legal advice or relied upon as a substitute for professional legal counsel. For the most up-to-date and accurate legal information or advice, it is advisable to consult with a qualified legal professional who is knowledgeable about the latest legal developments and can provide guidance specific to your situation.

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At the heart of most professional relationships is a contract. If you’re striking a bargain, coming to an agreement, or closing a deal, a contract is what cements the obligations, rights, and duties of all parties involved. And even though contracts are infinitely varied in length, terms, and complexity, all contracts must contain these six essential elements.

• Consideration

When these six elements are present, a contract evolves from a simple agreement to a binding legal document. But if you lack just one of them, a contract may not be enforceable at all. It’s helpful to have a contract lifecycle management tool or a contract drafting tool that manages all the elements for you.

Let’s take a look at each element.

Contractual offer

All contracts start with desire and responsibility . Someone wants (desires) something, and someone can fulfill (take responsibility for) that want. Known as “the offer,” this first essential element encompasses the duties and responsibilities of each party, but must also demonstrate an exchange of value. That value can be money, or it can relate to a desired action or outcome.

Technically, an offer does not exist until it is received by the requesting party (the offeree). After the offer has been received, it can still be revoked, altered, or terminated at any time before acceptance.

The offeree is also free to extend a counteroffer. When a counter-offer is made, the original offer is terminated, and the parties are now in the process of bargaining for a new desired outcome.

Acceptance of the contract

Once the offer is presented, the offeree can decide whether to accept or reject the proposal . The offeree can communicate acceptance either verbally or in writing (including mail or email)*.

Acceptance can take many forms, including:

• Conditional Acceptance
• Acceptance by Action
• Option Agreement

In general, a counteroffer is considered a termination of the original offer, but some circumstances allow for conditional acceptance. For example, the Universal Commercial Code (UCC) acknowledges the validity of new conditions to an offer, as long as those conditions are made known to both parties and do not cause surprise or hardship.

Inaction is not considered acceptance for the purposes of a contract. This goes back to a legal tenant established in 19th Century Britain. In that contract case, a man offering to buy a horse declared that he would consider the horse purchased unless he heard otherwise from the seller. The court determined that assumption cannot create a contract. Acceptance must be explicit; merely taking action on one side (for example, shipping unsolicited materials) is not enough. Both sides must act, but if the actions are explicit and declarative, they will rise to the level of acceptance for the purposes of the contract.

* In most states, an offer is considered accepted once it has been placed in a mailbox. The “mailbox rule” applies even if the acceptance is never received by the offeror. The main rule of validity for an acceptance is that it must be a clear and direct statement that all terms and responsibilities in the contract are accepted.

Signaling awareness

For a contract to be binding, both parties must first be aware that they are entering into an agreement . Often called “a meeting of the minds,” both parties to a contract must be active participants. They must recognize the contract exists and are freely agreeing to be bound by that document’s obligations.

In fact, contracts can be voided if awareness is not adequately established. For example, if one of the parties signs an agreement under duress or can prove undue influence, fraud, or misrepresentation, the contract will be invalidated. As a result, it is crucial for all parties entering into a contract to clearly and decisively establish that the agreement is genuine and mutual, and that all parties consent to its contents.

In short, it’s crucial that both parties know what they’re getting into.

Considering the contract

Ultimately the purpose of the contract relates to what it provides: the consideration. For contractual purposes, consideration includes the value that has been agreed upon, whether that be an action or an item . Property, services, and even protection from harm, are all examples of contractual consideration.

It’s important to note that there does not need to be a financial component for consideration to be valid. An agreement of an exchange of services, for example, is enough to meet the legal burden of consideration. The key is that the consideration has an agreed-upon value between the signatories to the contract.

Contractual capacity

In simplest terms, an individual cannot sign away their rights. Of course, the reality is a bit more complicated, which is why contract law requires that all signatories demonstrate that they clearly understand the obligations, terms, and consequences of the contract before they sign .

The court defines that understanding as “legal capacity,” and each party signing a contract must demonstrate this legal capacity for the contract to be valid.

Generally speaking, people who fall into one or more of these categories may not have the legal capacity to validate a contract:

• Someone with a brain disorder (e.g., dementia)
• Someone under the influence of drugs or alcohol
• Someone without sufficient understanding of the language used in the contract

There are, of course, ways to overcome these capacity hurdles. A minor may have a court-appointed representative, for example. In the case of a foreign language, a translated copy of the contract could suffice. The final determination on capacity ultimately rests on understanding: does each party fully comprehend the contract’s words and meaning?

Legality of the contract

Finally, all contracts are subject to the laws of the jurisdiction in which they operate, including any applicable federal, state, and local laws and ordinances . Obviously, a contract for an illegal action or product cannot be enforced. Even if the parties initially had no knowledge, if their agreement runs afoul of local laws, that lack of awareness is insufficient to overcome the legality burden. It also goes without saying that a contract that involves criminal activity is not valid.

As always, there are nuances. In general, the contract must adhere to the law in the jurisdiction where it’s signed. Sometimes state and federal laws are not in alignment, and in those cases, the Contract Clause ( Article I, Section 10, Clause 1  of the United States Constitution) will be the guiding authority.

In addition, there are certain instances where a contract is no longer legal, including:

• Undue Influence, Duress, Misrepresentation : When any party to the contract signs as a result of coercion, threats, false statements, or improper persuasion
• Unconscionability : When the result of a contract triggers oppressive obligations or produces results that “shock the conscience of the court.”
• Public Policy and Illegality : When a contract violates public policy or jeopardizes public welfare
• Mistake : When an error in the contract has a “material effect” upon the obligations and responsibilities initially agreed to
• Force Majeure : When circumstances beyond the control of the parties make it impossible to satisfy the obligations of the contract
• Corporate Legal

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