Contracts/Offer

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.

Intention to Bind is Essential

Agreement consists in two or more persons being of the same mind and intention concerning the subject matter.^[1] As it is frequently put by the courts the minds of the parties must meet.^[2]

This common intention can not be present where there is doubt or difference on either side. Thus if A offers B to sell him his horse and B replies, "I might purchase it at the price you asked," there is no agreement.^[3] Neither is there where A says, "I will sell you my horse for one hundred dollars," and B replies, "I will give you seventy-five for it."^[4]

A person's state of mind or intention can be ascertained only by outward expressions, such as words or acts. Therefore the law excludes all questions of intention unexpressed, and imputes to a person a state of mind or intention corresponding to the rational and honest meaning of his words and acts. Whatever a man's real intention may be, if he so conducts himself that a reasonable man would believe that he was assenting to what he proposed, and the latter on the faith of this contracts with him, the man so conducting himself is as much bound as if he had actually intended to agree to the other party's terms.^[5]

"If a man intends to buy, and says so to the intended seller, and he intends to sell, and says so to the intended buyer, there is a contract of sale; and so there would be if neither had the intention."^[6]

If . a man writes a letter to another and its language shows an offer to contract, he will not be allowed to say, "I did not intend to make an offer in writing that letter.^[7] A person can not set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement.^[8]

And it does not matter how formal or informal the words used may be. A says to B, "I want you to send your wagon for my goods tomorrow to take them to the station." B replies, All right." This is an agreement.^[9]

Promissory Expressions

The intention to bind oneself must appear, for all promissory expressions do not by acceptance constitute an agreement.^[10] They may have the form of an offer and yet not be such as the law will enforce. The case of a mere jest is clear.^[11] If A, for example, is riding a broken down horse and B in a spirit of badinage calls out, "I say, will you take $1,000 for your horse?" B's reply, "I will," could by no possibility be considered as the conclusion of a contract to sell the horse for $1,000. But suppose a man, who believes his life in danger from a disease or an injury, says to his physician, "O doctor, I will give all I have if you will save my life," and the physician says, "I'll try," and does, by his surgical skill, save his patient's life. Is this a contract?

The reports do not give much light; the few adjudicated cases are hard to reconcile. In a Tennessee case,^[12] where defendant and his family were in deep affliction over the mur­der of his son; he himself was laboring under the effect of severe wounds received from the person who had killed the son and when his arrest was spoken of, he said he would give two hundred dollars to have him arrested. Plaintiff, who was present, made the arrest and claimed the reward. But the Court held that there was no offer.

"What is called an offered reward was nothing but a strong expression of his feelings of anxiety for the arrest of those who had so severely injured him, and this greatly increased by the distracted state of his own mind, and that of his family; as we frequently hear persons exclaim, 'Oh! I would give a thousand dollars if such an event were to happen,' or vice versa. No contract can be made out of such expressions; they are evidence of strong excitement, but not of a contracting intention."

So in an old case where A told B that he would give $100 to anyone who married his daughter with his consent and B did so and sued for the $100, it was ruled not to be reasonable that a man should be bound by general words spoken to excite suitors.^[13] On the other hand, in a Wisconsin case, where a man standing in front of a burning building shouted to the crowd, "I will give $5,000 to any person who will bring the body of my wife out of that building dead or alive," this was held to be a binding agreement with one of the firemen who entered the house and brought out the woman;^[14] and in Illinois, where at a public meeting, during the war, a man declared that he would give $400 to get his sons relieved from the draft, this was held a binding promise · to pay that amount to anyone who should accomplish that object.^[15]

"If I have valuable property in imminent danger and I make proclamation that I will give $50 to save it and a stranger undertakes the labor and does save it, on what principle of law or justice is it that I should not pay. So here the defendant declared he would give $400 to save his sons from the draft and put the declaration in writing. The plaintiff incurred the expense and trouble necessary to save his sons and did save them, why th en should he not be paid the amount promised."

In an English case the defendants, the proprietors of a medical preparation called The Carbolic Smoke Ball, issued an advertisement in which they promised to pay £100 to any person who contracted influenza after having used one of their smoke balls in a certain specified manner and for a certain specified period. The plaintiff sued for £100 alleging that on the faith of the advertisement she purchased one of the smoke balls, used it in the manner and for the time specified, but nevertheless contracted the influenza. It was contended by the defendants that this was not an offer at all or at least not one that any any sensible person would take to be a bona fide offer. But all the judges of the Court of Appeals pointed out that the advertisement contained this clause: "£1,000 is deposited in the Alliance Bank, Regent street, showing our sincerity in the matter," and that this must have been for the very purpose of leading those who read the advertisement to believe that the defendants were serious in their proposal and intended to fulfill their promise.

"It may be, that of the many readers of the advertisement very few sensible ones would have entertained expectations that in the event of the smoke balls failing to act as a preventive against the disease the defendants had any intention to fulfill their attractive and alluring promise; but it must be remembered that such advertisements do not appeal so much to the wise and thoughtful as to the credulous and weak portions of the community; and if the vendor of an article, whether it be medicine smoke or anything else, with a view to increase its sale or use, thinks fit publicly to promise to all who buy or use it, that to those who shall not find it as efficacious as it is represented by him to be, he will pay a substantial sum of money, he must not be surprised if occasionally he is held to his promise."^[16]

It is not easy to state any definite rule by which such cases should be governed, but it may be said broadly that the question is whether the terms of the offer and the circumstances under which it is made are such as to give a person a right to act upon it as a real and intentional offer.

Statements of Intention

Of a similar character are mere statements of intention, though they be accepted or acted upon by the party to whom they are made.^[17] Where a father writing to a man who was going to marry his daughter said, "She will have a share of what I leave after the death of her mother," this was held not a promise.^[18] So where another parent, in answer to a suitor for his daughter, wrote, "I shall allow her the interest on £2,000, whether she remains single or marries. If the latter, I may bind myself to do it, and pay the principal at my death to her and her heirs," this was held not to create a contract, because it did not import an intention to make a binding promise.^[19] So there was no contract where a person to whom a proposal was made replied, "I am prepared to make the arrangements with you on the terms you name."^[20]

Here, as before, it is a question of fact whether what was said was a mere statement of intention or was intended as a definite offer or acceptance.^[21] Where A, on opening a number of bids, said to B, one of the bidders, "I guess it is up to you, yours is the lowest bid," it was held that this was acceptance of B's bid.^[22]

An advertisement of a sale by auction is not an offer, so as to bind the advertiser, to persons attending the sale, to sell the property or to sell it on the terms advertised.^[23] An announcement that an examination for a scholarship will be held does not imply a condition that the scholarship will be given to the competitor obtaining most marks; and consequently there is no contract.^[24]

Invitations to Deal

See also: Contracts/Invitation to deal

A mere invitation to deal is not such an offer as may be turned into an agreement by acceptance. Thus in Moulton v. Kershaw,^[25] A wrote to B: "We are authorized to offer Michigan fine salt in full carload lots of 80 to 95 barrels delivered in your city at 85 cents per barrel." B telegraphed: "Your letter of yesterday received and noted. You may ship me 2,000 barrels of Michigan fine salt as offered in your letter." This was held not a binding contract, A's letter was only a notice to those dealing in salt that he was in a position to supply that article for the prices named, and requesting offers from the person or persons addressed.

Where defendants sent out a circular: "We are instructed to offer to the wholesale trade for sale by tender the stock in trade of A", amounting to so-and-so, "and which will be sold at a discount in one lot. Payment to he made in cash," it was held that this did not amount to a contract or promise to sell to the person who made the highest tender, but was, "a mere proclamation that the defendants are ready to chaffer for the sale of the goods and to recieive offers for the purchase of them."^[26]

Business circulars sent by mail or distributed by hand and advertisements in newspapers of goods for sale, fall under this head. They are merely invitations to trade; they go no further than what occurs when anyone asks another what he will give or take for certain goods. Such inquiries may lead to agreements, but do not make them.^[27]

"A bookseller's catalogue, with prices stated against the names of the books, would seem to contain a number of offers. But if the bookseller receives by the same post five or six letters asking for a particular book at the price named, to whom is he bound? To the man who first posted his letter of acceptance? How is this to be ascertained? The catalogue is clearly an invitation to do business, and not an offer."^[28]

So where a person or a corporation advertises for bidders for property to be sold or for work to be done, the advertisement is simply an invitation to make offers and the advertiser is not bound to accept the highest, the lowest or any of the bids.^[29]

The mere statement of the lowest price at which a vendor will sell is not an offer to sell at that price to the person making the inquiry. A telegraphed, "Will you sell us B. H. P.? Telegraph lowest cash price." B telegraphed in reply, "Lowest price for B. H. P. 900l." and then A telegraphed, "We agree to buy B. H. P. for 900l. asked by you. Please send us your title-deed in order that we may get early possession," but received no reply. Here there was no contract, as the final telegram was not the acceptance of an offer to sell, for none had been made, but was itself an offer to buy, the acceptance of which must be expressed.^[30]

Exposing goods in the window of a store, with a price attached is generally merely an invitation to trade, while the displaying them on a stand in the street where the passerby may pick one up--as for example a fruit stand--would seem to be an offer.

If the proposal can be construed as a definite offer, then a communicated acceptance makes the contract. If A had written, "We will sell you all the Michigan salt you may order at the price named," the contract would have been complete upon B notifying him of the quantity he desired, as in a California case,^[31] where defendant had a crop of growing grapes and he offered to pick from the vines and deliver to plaintiff, at his vineyard, so many grapes then growing in said vineyard, as plaintiff should wish to take during the present year at ten cents per pound. When plaintiff, while the offer was in force, named the quantity, the contract was held to be complete and both parties bound as to the quantity named.

An invitation to deal is not an offer, but an indication of a person's willingness to negotiate a contract. It's a pre-offer communication. In the UK case Harvey v. Facey,^[32] an indication by the owner of property that he or she might be interested in selling at a certain price, for example, has been regarded as an invitation to treat. Similarly in the English case Gibson v Manchester City Council^[33] the words "may be prepared to sell" were held to be a notification of price and therefore not a distinct offer, though in another case concerning the same change of policy (Manchester City Council underwent a change of political control and stopped the sale of council houses to their tenants) Storer v. Manchester City Council,^[34] the court held that an agreement was completed by the tenant's signing and returning the agreement to purchase, as the language of the agreement had been sufficiently explicit and the signature on behalf of the council a mere formality to be completed. Statements of invitation are only intended to solicit offers from people and are not intended to result in any immediate binding obligation. The courts have tended to take a consistent approach to the identification of invitations to treat, as compared with offer and acceptance, in common transactions. The display of goods for sale, whether in a shop window or on the shelves of a self-service store, is ordinarily treated as an invitation to treat and not an offer.^[35][36]

The holding of a public auction will also usually be regarded as an invitation to treat. Auctions are, however, a special case generally. The rule is that the bidder is making an offer to buy and the auctioneer accepts this in whatever manner is customary, usually the fall of the hammer.^[37][38] A bidder may withdraw his or her bid at any time before the fall of the hammer, but any bid in any event lapses as an offer on the making of a higher bid, so that if a higher bid is made, then withdrawn before the fall of the hammer, the auctioneer cannot then purport to accept the previous highest bid. If an auction is without reserve then, whilst there is no contract of sale between the owner of the goods and the highest bidder (because the placing of goods in the auction is an invitation to treat), there is a collateral contract between the auctioneer and the highest bidder that the auction will be held without reserve (i.e., that the highest bid, however low, will be accepted).^[39] The U.S. Uniform Commercial Code provides that in an auction without reserve the goods may not be withdrawn once they have been put up.^[40]

Intention Must Refer to Legal Relations

The intention of the parties must refer to legal relations; it must have reference to the assumption of legal rights and duties. One may accept a proposal to dine with another or to take a walk or go to a baseball match with him, and may even incur trouble and expense in keeping the engagement, yet no action will lie for the breach of the mere social engagement.^[41] The reason in all these cases is that the promise was neither intended nor understood to create between the parties rights and duties enforceable by law. "If, at a ball a young lady promises a gentleman to dance with him, say the sixth dance on the program, and afterwards dances it with someone else, no one would suppose that he could sue her for breach of contract. So if A agrees to join B tomorrow at a certain hour to take a bicycle ride together, this is not a promise creating a contract. So if in the playing of a charade a man and a woman go through the form of a betrothal there is no promise creating a contract so as to furnish the foundation for an action of breach of promise of marriage. . . . It is only those promises which as between the parties to them create or alter rights and duties, which the law treats as of binding obligation, that constitute contracts."^[42]

Intention Must Be Serious

An offer cannot be the foundation of an agreement where it is made or accepted, not with the intention to contract, but as a mere jest or joke.^[43] Where one gave a three-hundred dollar check for a fifteen-dollar watch by way of mere frolic and banter, not expecting to buy the watch and the other not expecting to sell it, it was held that there was no contract;^[44] and where two young people went through the marriage ceremony before a person authorized to celebrate marriages without really intending to marry, it was held that there was no marriage.^[45] But one is not permitted to say that he was jesting if his conduct and words would warrant a reasonable person in believing that he was serious.^[46] Thus in an Australian case:

"The question is raised whether there was any evidence upon which the judge might reasonably act that the defendant did at that time really, and not by way of banter only, request the plaintiff not to sell his shares or place them on the market. We are of opinion that there was such evidence. The defendant's answer to the plaintiff's claim was that having been asked by a friend of the plaintiff who was anxious and distressed by the falling state of the market to comfort him, he gave him an unreal and false promise without intending to perform it. The defendant admits that the plaintiff did not seem to take his words of comfort as a joke. Now the judge has found upon evidence amply sufficient that this defense is untrue."^[47]

Preliminary Negotiations

Where parties a re negotiating as to the terms of an agreement to be entered into between them, there is no meeting of minds while such agreement is incomplete. Where they intend that their verbal negotiations shall be reduced to writing and signed by them as the evidence of the terms of their agreement, there is nothing binding on them until the writing is executed.^[48] On the other hand if the parties intend that their oral agreement shall be put in writing simply as a memorial of it, the contract is binding, although it is never written out.^[49] An agreement is very often made by correspondence, but care must be taken not to construe as an agreement letters which the parties intended only as a preliminary negotiation. The question in such cases always is, did they mean to contract by their correspondence, or were they only settling the terms of an agreement into which they proposed to enter after all its particulars were adjusted, which was then to be formally drawn up and by which alone they designed to be bound.^[50]

The principle is well expressed in a .Maine case.^[51]

"From these expressions of courts and jurists it is quite clear that after all the question is one of intention. If the party sought to be charged intended to close a contract prior to the formal signing of a written draft or if he signifies such an intention to to other party he will be bound by the contract actually made, though the signing of the written draft be omitted. If on the other hand such party neither had nor signified such an intention to close the contract until it was fully expresed in a written instrument and attested by signatures then he will not be bound until the signatures are affixed. The expression of the idea may be attempted in other words: if the written draft is viewed by the parties merely as a convenient memorial or record of their previous contract its absence does not affect the binding force of the contract; if however it is viewed as the consummation of the negotiation there Is no contract until the written draft is finally signed."

Certainty Required

The promise must be certain in its terms, and not so indefinite and illusory as to make it impossible to say just what was promised.^[52] Therefore, where A bought a horse from B, promising that "if the horse was lucky to him, he would give $25 more for the buying of another horse," it was held that this was too loose and vague to be considered in a court of law.^[53]

"In another case A promised B to give up his business 'so far as the law allows'; it was held that parties must fix the limits of their agreement and not leave it to be fixed by the courts;^[54] in another B promised C that if satisfied with him as a customer, he 'would favorably consider' an application to renew the contract; this was ruled to create no legal obligation;^[55] in another where the parties attempting to make an agreement by a telegraphic code had, by using too few words, made it so ambiguous as to be unintelligible even to them,^[56] the Court said that it was for the plaintiff, in an action for breach of contract, to show that his construction was the true one, and to prove that his proposal was so clear and unambiguous that the defendant could not be heard to say that he misunderstood it."

So where A promised B that if she, a single woman, would live with him until her marriage, he would give her one hundred acres of land, without any reference to locality or value, it was held void for uncertainty.^[57] Where an employer engages a servant, promising to give him such remuneration as he, the employer, shall think right, there is no legal liability to pay anything.^[58] A promise by a school trustee to a teacher to pay "good wages" was held too indefinite to found an action upon,^[59] as was one to give a child a "good share" of property^[60] and a stipulation in a contract that it might be canceled by either party for "good cause"^[61] and one giving the "use" of land for a certain purpose.^[62]

Persons must make their own agreements and not leave it to the courts to make them for them from the language they have used.

If an agreement is uncertain, it is because the offer was so, because the acceptance must be identical with the offer or there is no meeting of minds. If the offeree sees the uncertainty and proposes a change that will make the agreement certain, this is a new offer which puts an end to the other.^[63]

An agreement, however, will not be considered uncertain if the court can see what the parties intended. Absolute certainty is not required, for that is certain which may be rendered certain, according to the maxim id certum est quod certum reddi potest.^[64] Thus a contract is not uncertain because it is silent as to the damages for its breach.^[65] An ambiguous contract is not necessarily uncertain.^[66]

Intention Must Be Communicated

The intention of the parties must be communicated, for one's intention can be ascertained by another only by means of outward expressions, as words and acts.^[67] "It is a trite law," said an old judge, "that the thought of man is not triable, for even the devil does not know what the thought of man is."^[68]

Telling an intention to a third person is of no more effect than noting it in one's memorandum book, which is no more than though it existed solely in one's mind.^[69] The communication is absolutely essential and is not sufficient that two minds coincide at the same moment.^[70]

But if the intention is communicated the mode is immaterial. It may be by mail, by telegraph, by special messenger or the like, as well as by words written or spoken or the acts or conduct of the one who makes it.5

Thus where two letters, each containing an offer identical in terms, cross each other, there can be no contract.6

§ 13. Rcpresc 11 t a t i􀀡 on Which A nother Act$.-Estoppel.

A representation concerning a matter of faet may be made to another, without any expressed or intended warranty of the truth , yet with the i ntention of inducing him to act upon it ; and if the latter acts upon it, and suffers loss by reason of it not being true, the party making the representation may be held responsible in law for the consequences ; or he may b<> estopped from denying the truth of the representation.1

' 'Where a person makes to another the representation, ' I take upon myself to say such and such things do exist, ' and the other man does really act upon that basis, it seems to me that it is of the very essence of justice that between these two p arties their rights should be regulated, not by the real stat e of facts, but by that conventional state of facts which the two parties agree to make the basis of their action. ' ' 2

Estopp􀇅l in contract law may be described as a rule of evidence which will not permit a person to deny an inference that a reasonable man would necessarily draw from his words and conduct.

§ 14. Agreement Results from Offer and Accepta nce .

Every agreement necessarily results from a n offer o n one side and an acceptance on the other! Sometimes they are by words, sometimes by acts, sometimes by both words and acts.2

To illustrate :

( a ) At a sale by auction each bid is an offer of a price for the article put up for sale, which bids are successively. made until one is accepted by the fall of 'the hammer, when the agreement is complete.5

( b ) The time-tables published by a railroad company are an offer made to all persons who apply for carriage that the trains will run as advertised!

( c ) The publication of an advertisement of a reward for information, respecting a loss or a crime, or an oral announcement to the same effect, is an offer to any person who is able to give the information asked, and on its acceptance by giving the information the agreement is complete.6

( d ) The sending of au order to a merchant or manufachtrer is an offer to purchase and the sending of the goods is nn acceptance of the offer and creates a contract of sale.6

( e ) An agreement by B to sell A his farm for $5,000, must be the result of an offer by B to sell it for that price and an acceptance by A or an offer by A to give that sum for it and an acCeptance by B.1 •

( f ) The purchase of a book or a basket of fruit or other article displayed for sale i'! the result of the displaying his wares by the seller, who impliedly says, ' ' Will you buy my goods at my price T " and the customer, taking up the article \\;th his cognizance, says, ' ' I will. ' ' 8

( g ) The presence of a running street car is a constant offer by the company to perform a service upon its usual tenns, and one who enters the car accepts the offer and agrees to pay the usual fare for the service.9

( h ) A person who takes a seat at the dining table of a hotel offers to take a meal for the usual price charged to guests, and the proprietor accepts the proposal by furnishing the meal.10

( i ) A man with the full knowledge of another does work for him, the latter knowing that he expects to be paid 'for it ; the doing the work is a proposal and the receiving the servie«> without dissent is the acceptance.11

( j ) A offers B to pay him a certain sum of money on a future day if B will promise to perfonn certain services for him before that day. When B makes the promise asked for he accepts the promise offered, and both parties are bound, the one to do the work, the other to allow him to do it and to make the payment.

(k) A sends goods· to B 's hou.'>e and B accepts or uses th<' goods ; B is liable on an implied contract to pay what the goods are worth. The offer is made by sending the goods, the acceptance by their use or consumption, which is in fact a promise to pay their price.

( 1 ) A requests B to work for him for hire. On B going to work as requested, the offer is accepted unless A had prescribed in his offer some particular form of acceptance. Or A writes to · B offering to reimburse him if he will pay the taxes on certa in la nd. B pays the taxes. This is a sufficient acceptance of the offer.1:

(m) Whether the manager of a theatre who advertises that at a certain time a particular piece will be performed, stating the price of admission, contracts with one who comes to the theatre door that he will be admitted on payment of the price, and that the piece advertised will be performed, is a question on which there is no judicial authority.18 •

From these examples it will be seen that a proposal may assume two forms, the offer of a promi.se and the offer o f a n act, and that accep tance may assume two forms also, t h e giving of a promise or the doing of an act. And that therefore an ngreemPnt ma,v a rise in three ways, viz. : ( 1 ) In the offer of an act for a promise, as in illustrations ( f) , ( g ) , ( i ) , ( k ) . ( 2 ) In th e offer of a promise for a n act, as in illustrations ( c ) , ( d ) , ( h ) , ( 1 ) . ( 3 ) In the offer of a promise for a promise, as in illustrations ( a ) , ( b ) , ( e) , ( j ) .

The unusual t"ase of an offer of an act for an act, may be seen in the cont inuing offer made by the proprietor of an automati(' machi ne distributing candy, chewing gum, postage stamps and other articles, to persons who put in a coin to obtain something contained in the machil!e.

Offer

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".^[71] 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.^[72][73] 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. ^[74]

Communication of Offer

Identical Acceptance and Offer

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.^[75] In this regard, acceptance does not have to be communicated and can be accepted through conduct by performing the act.^[76] Nonetheless, the person performing the act must do it in reliance on the offer.^[77]

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.^[76] 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,^[78]). If the offer was made to the entire world, such as in Carlill's case,^[76] 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.

Acceptance

A promise or act on the part of an offeree indicating a willingness to be bound by the terms and conditions contained in an offer. Also, the acknowledgment of the drawee that binds the drawee to the terms of a draft.

Test of acceptance

For the acceptance, the essential requirement is that the parties had each from a subjective perspective engaged in conduct manifesting their assent. Under this meeting of the minds theory of contract, a party could resist a claim of breach by proving that he had not be intended to be bound by the agreement, only if it appeared subjectively that he had so intended. This is unsatisfactory, as one party has no way to know another's undisclosed intentions. One party can only act upon what the other party reveals objectively (Lucy V Zehmer, 196 Va 493 84 S.E. 2d 516) to be his intent. Hence, an actual meeting of the minds is not required. Indeed, it has been argued that the "meeting of the minds" idea is entirely a modern error: 19th century judges spoke of "consensus ad idem" which modern teachers have wrongly translated as "meeting of minds" but actually means "agreement to the [same] thing".^[79]

The requirement of an objective perspective is important in cases where a party claims that an offer was not accepted and seeks to take advantage of the performance of the other party. Here, we can apply the test of whether a reasonable bystander (a "fly on the wall") would have perceived that the party has impliedly accepted the offer by conduct.

Rules of acceptance

1.It must be an absolute and unqualified acceptance of all the terms of the offer: Sec.7(1).If there is any variation, even on an unimportant point, between the terms of the acceptance, there is no contract.

Communication of acceptance

There are several rules dealing with the communication of acceptance:

• The acceptance must be communicated.^[80][81] Theisger LJ said in Household Fire and Carriage that "an acceptance which remains in the breast of the acceptor without being actually and by legal implication communicated to the offeror, is no binding acceptance".^[82] Prior to acceptance, an offer may be withdrawn.
• As acceptance must be communicated, the offeror cannot include an Acceptance by Silence clause. This was affirmed in Felthouse v Bindley,^[83] here an uncle made an offer to buy his nephew's horse, saying that if he didn't hear anything else he would "consider the horse mine". This did not stand up in court, and it was decided there could not be acceptance by silence.
• An exception exists in the case of unilateral contracts, in which the offeror makes an offer to the world which can be accepted by some act. A classic instance of this is the case of Carlill v Carbolic Smoke Ball Co. [1893] 2 Q.B. 484 in which an offer was made to pay £100 to anyone who having bought the offeror's product and used it in accordance with the instructions nonetheless contracted influenza. The plaintiff who was Mrs Carlill bought the smoke ball and used it according to the instructions but she contracted influenza. She sued the Carbolic Smoke Ball Co. for £100. The court held that the inconvenience she went through by performing the act amounted to acceptance and therefore ordered £100 to be given to Mrs. Carlill. Her actions accepted the offer - there was no need to communicate acceptance. Typical cases of unilateral offers are advertisements of rewards (e.g., for the return of a lost dog).
• An offer can only be accepted by the offeree, that is, the person to whom the offer is made.
• An offeree is not usually bound if another person accepts the offer on their behalf without his authorisation, the exceptions to which are found in the law of agency, where an agent may have apparent or ostensible authority, or the usual authority of an agent in the particular market, even if the principal did not realise what the extent of this authority was, and someone on whose behalf an offer has been purportedly accepted may also ratify the contract within a reasonable time, binding both parties: see agent (law).
• It may be implied from the construction of the contract that the offeror has dispensed with the requirement of communication of acceptance (called waiver of communication - which is generally implied in unilateral contracts).^[84]
• If the offer specifies a method of acceptance (such as by post or fax), acceptance must be by a method that is no less effective from the offeror's point of view than the method specified. The exact method prescribed may have to be used in some cases but probably only where the offeror has used very explicit words such as "by registered post, and by that method only".^[85]
• However, acceptance may be inferred from conduct.^[86][87]

Counter-offers and correspondence

The "mirror image rule" states that if you are to accept an offer, you must accept an offer exactly, without modifications; if you change the offer in any way, this is a counter-offer that kills the original offer and the original offer cannot be accepted at a future time.^[88]

However, a mere request for information about the terms of the offer is not a counter-offer and leaves the offer intact.^[89] It may be possible to draft an enquiry such that it adds to the terms of the contract while keeping the original offer alive.

Under the Uniform Commercial Code (UCC) Sec. 2-207(1), a definite expression of acceptance or a written confirmation of an informal agreement may constitute a valid acceptance even if it states terms additional to or different from the offer or informal agreement. The additional or different terms are treated as proposals for addition into the contract under UCC Sec. 2-207(2). Between merchants, such terms become part of the contract unless:

• a) the offer expressly limits acceptance to the terms of the offer,
• b) material alteration of the contract results,
• c) notification of objection to the additional/different terms are given in a reasonable time after notice of them is received.

Material is defined as anything that may cause undue hardship/surprise, or is a significant element of the contract.

If there is no contract under 2-207(1), then under UCC Sec. 2-207(3), conduct by the parties that recognize there is a contract may be sufficient to establish a contract. The terms for this contract include only those that the parties agree on and the rest via gap fillers.

Battle of the forms

Often when two companies deal with each other in the course of business, they will use standard form contracts. Often these standard forms contain terms which conflict (e.g. both parties include a liability waiver in their form). The 'battle of the forms' refers to the resulting legal dispute arising where both parties accept that a legally binding contract exists, but disagree about whose standard terms apply. Such disputes may be resolved by reference to the 'last document rule', i.e. whichever business sent the last document, or 'fired the last shot' (often the seller's delivery note) is held to have issued the final offer and the buyer's organisation is held to have accepted the offer by signing the delivery note or simply accepting and using the delivered goods.

In U.S. law, this principle is referred to as the last shot rule.

Under English law, the question was raised in Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd,^[90] as to which of the standard form contracts prevailed in the transaction. Lord Denning MR preferred the view that the documents were to be considered as a whole, and the important factor was finding the decisive document; on the other hand, Lawton and Bridge LJJ preferred traditional offer-acceptance analysis, and considered that the last counter-offer prior to the beginning of performance voided all preceding offers. The absence of any additional counter-offer or refusal by the other party is understood as an implied acceptance.

In Leicester Circuits Ltd. v. Coates Brothers plc (2002) and GHSP Incorporated v AB Electronic Ltd (2010) the English High Court has found that companies may have not agreed on any terms, and so the 'last document rule' may not apply. In the GHSP case, there was no situation where one company could have been said to have accepted the other's standard terms, as they remained in unresolved dispute. The court held that neither party's terms applied and therefore the contract was governed by the implied terms of the UK Sale of Goods Act 1979.

Postal Rule

Main Article: Mailbox rule

As a rule of convenience, if the offer is accepted by post, the contract comes into existence at the moment that the acceptance was posted.^[91] This rule only applies when, impliedly or explicitly, the parties have post in contemplation as a means of acceptance.^[92] 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.

Knowledge of the offer

In Australian law, there is a requirement that an acceptance is made in reliance or pursuance of an offer.^[77]

Rejection of an offer or lapse of time

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.

Also, 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.

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.^[93] 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.^[94]

Time of contract formation

A contract will be formed (assuming the other requirements for a legally binding contract are met) when the parties give objective manifestation of an intent to form the contract.

Because offer and acceptance are necessarily intertwined, in California (US), offer and acceptance are analyzed together as subelements of a single element, known either as consent of the parties or mutual assent.^[95]

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