Contracts/Offer: Difference between revisions

Offer and acceptance analysis is a traditional approach in contract law. The offer and acceptance formula, developed in the 19th century, identifies a moment of formation when the parties are of one mind. This classical approach to contract formation has been modified by developments in the law of estoppel, misleading conduct, misrepresentation, unjust enrichment, and power of acceptance.

Treitel defines an offer as "an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed", the "offeree".^[1] An offer is a statement of the terms on which the offeror is willing to be bound. It is the present contractual intent to be bound by a contract with definite and certain terms communicated to the offeree.

The expression of an offer may take different forms and which form is acceptable varies by jurisdiction. Offers may be presented in a letter, newspaper advertisement, fax, email verbally or even conduct, as long as it communicates the basis on which the offeror is prepared to contract.

Whether the two parties have reached agreement on the terms or whether a valid offer has been made is an issue which is determined by the applicable law. In certain jurisdictions, courts use criteria known as 'the objective test' which was explained in the leading English case of Smith v. Hughes.^[2][3] In Smith v. Hughes, the court emphasised that the important thing in determining whether there has been a valid offer is not the party's own (subjective) intentions, but how a reasonable person would view the situation. The objective test is largely superseded in the UK since the introduction of the Brussels Regime in combination with the Rome I Regulation.

An offer can only be the basis of a binding contract if it contains the key terms of the contract. For example, as a minimum requirement for sale of goods contracts, a valid offer must include at least the following 4 terms: Delivery date, price, terms of payment that includes the date of payment and detail description of the item on offer including a fair description of the condition or type of service. Unless the minimum requirements are met, an offer of sale is not classified by the courts as a legal offer but is instead seen as an advertisement. Under Dutch law an advertisement is in most cases an invitation to make an offer, rather than an offer. ^[4]

Communication of Offer

Whether the offer be by (a) acts or by (b) words it is essential that the offer be communicated.^[5]

(a) If A does work for B without B's request or knowledge, B can not be held liable to pay for it, because here it is clear that A has not communicated his offer to do the work to B and a man ought not to be forced to pay for what he has no opportunity to reject.^[6] In Bartholomew v. Jackson,^[7] a farmer, seeing his neighbor's stack of wheat in danger of fire, took upon h imself to remove it to a safe place, and then sued for his services. But it was ruled that as the offer to remove the stack was never communicated to the defendant there was no contract on which he could be held. In Taylor v. Laird,^[8] plaintiff, who had been engaged to command defendant's ship, threw up his command in the course of the expedition but helped to work the vessel home, and then claimed reward for services thus rendered. It was held that he could not recover. Evidence of a recognition or acceptance of services may be sufficient to show an implied contract to pay for them, if at the time defendant had power to accept or refuse the services. But in this case defendant never had the option of accepting or refusing the services while they were being rendered, and did in fact repudiate them when he became aware of them. Plaintiff 's offer, being uncommunicated, did not admit of acceptance, and could give him no rights against the party to whom it was addressed.

(b) If A promises to do something if B will do something and B does the act in ignorance of the offer, he can not claim performance of the promise, for the offer was not communicated to him when he accepted it by doing the act.^[9] In Fitch v. Snedeker,^[10] defendant had published a notice offering a reward of $200 to any person who would give information leading to the apprehension and conviction of the person or persons guilty of the murder of a certain female. Through the efforts of plaintiff one F was arrested and convicted, but it appeared that he had done so not knowing of the reward or before it was offered. The court held that there was no agreement.

To the existence of a contract there must be mutual assent or in another form offer and consent to the offer. The motive inducing consent may be immaterial, but the consent is vital. How can there be consent or assent to that of which the party has never heard?"^[11]

Offer May Prescribe Time, Place, and Condition of Acceptance

The offerer has the right to prescribe the time,^[12] place,^[13] form or other condition of acceptance,^[14] in which case the offer can be accepted only in the way prescribed by the offer.

Offer Made by Post

Main Article: Mailbox rule

As a rule of convenience, if the offer is made by post, the contract comes into existence at the moment that the acceptance was posted.^[15] This rule only applies when, impliedly or explicitly, the parties have post in contemplation as a means of acceptance.^[16] It excludes contracts involving land, letters incorrectly addressed and instantaneous modes of communication. The relevance of this early 19th century rule to modern conditions, when many quicker means of communication are available has been questioned, but the rule remains good law for the time being.

Unilateral contract

A unilateral contract is created when someone offers to do something "in return for" the performance of the act stipulated in the offer.^[17] In this regard, acceptance does not have to be communicated and can be accepted through conduct by performing the act.^[18] Nonetheless, the person performing the act must do it in reliance on the offer.^[19]

A unilateral contract can be contrasted with a bilateral contract, where there is an exchange of promises between two parties. For example, when (A) promises to sell her car and (B) promises to buy the car.

The formation of a unilateral contract can be demonstrated in the English case Carlill v Carbolic Smoke Ball Co.^[18] In order to guarantee the effectiveness of the Smoke Ball remedy, the company offered a reward of 100 pounds to anyone who used the remedy and contracted the flu. Once aware of the offer, Carlill accepted the offer when she purchased the Smoke Ball remedy and completed the prescribed course. Upon contracting the flu, she became eligible for the reward. Therefore, the company's offer to pay 100 pounds "in return for" the use of the Smoke Ball remedy and guarantee not to contract the flu was performed by Carlill.

Revocation of offer

An offeror may revoke an offer before it has been accepted, but the revocation must be communicated to the offeree (although not necessarily by the offeror,^[20]). If the offer was made to the entire world, such as in Carlill's case,^[18] the revocation must take a form that is similar to the offer. However, an offer may not be revoked if it has been encapsulated in an option (see also option contract), or if it is a "firm offer" in which case it is irrevocable for the period specified by the offeror.

If the offer is one that leads to a unilateral contract, the offer generally cannot be revoked once the offeree has begun performance.

Rejection of an offer or lapse of time

Revocation

Rejection or Conditional Acceptance

Lapse of Time

upon making an offer, an offeror may include the period in which the offer will be available. If the offeree fails to accept the offer within this specific period, then the offer will be deemed as terminated.

An offer can be terminated on the grounds of rejection by the offeree, that is if the offeree does not accept the terms of the offer or makes a counter-offer as referred to above.

Death of offeror

Generally death (or incapacity) of the offeror terminates the offer. This does not apply to option contracts.

The offer cannot be accepted if the offeree knows of the death of the offeror.^[21] In cases where the offeree accepts in ignorance of the death, the contract may still be valid, although this proposition depends on the nature of the offer. If the contract involves some characteristic personal to the offeror, the offer is destroyed by the death.

Death of offeree

An offer is rendered invalid upon the death of the offeree.^[22]

Change of Circumstances

See also

• 1911 Encyclopædia Britannica definition of Acceptance
• Bataille des conditions générales (The Battle of the Forms in France)
• Harris v Nickerson
• Implied in fact contract
• Last shot rule
• Proposal (business)
• Wolf v Forfar Potato Co

References