Offer and Acceptance Examples

“Offer” and “Acceptance” are the process by which a buyer and seller create a binding legal contract. This process typically begins when a prospective buyer makes an offer. Then, the seller either accepts it, rejects it, or rejects it and makes a counter offer. The buyer then has the same options (accept, reject without making a counter offer, or reject with a counter offer). When one party accepts the other party’s offer or counter offer, and communicates that acceptance to the offering party or that party’s real estate agent, a purchase contract is created. Offer and acceptance are a means of analyzing the process of negotiation to decide whether and when a contract has been made and what therefore constitute its terms.

Offer and acceptance analysis is a traditional approach in contract law used to determine whether an agreement exists between two parties. As a contract is an agreement, an offer is an indication by one person (the “offeror”) to another (the “offeree”) of the offeror’s willingness to enter into a contract on certain terms without further negotiations. A contract is said to come into existence when acceptance of an offer (agreement to the terms in it) has been communicated to the offeror by the offeree.

Offer:

Must be distinguished from invitation to treat

Can be explicit or impelled

Can be made to the public or specific

Must be communicated

Acceptance:

Is different from: counter-offer, cross-offer and enquiry.

Must absolute, clear and unqualified

Mode according to the manner stated by offer

Must be communicated to the offeror

Nature of an Offer

A valid contract does not come into existence until one party, the offeror, has made an offer and the offer and the other party, the offeree, has accepted it. An offer is normally conditional – that is, the offeree must do something or give some promise in exchange. The initial offer is tentative. Once an offeree accepts and agrees to fulfill the condition contained in the offer, the contract is formed and the promise becomes binding. To be valid, an offer must contain all the terms of the contract all of the terms of the contract, either expressly or impliedly.

Acceptance of an Offer

Acceptance of an offer may be made verbally or in writing, or it may be inferred from the conduct of the parties. However, certain rules must be complied with before acceptance of an offer is valid.

First, acceptance must be communicated by the offeree to the offeror in the manner requested by or implied in the offer. Second, the acceptance must be clear, unequivocal, and unconditional.

A.

An offer defines 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”. An offer is a statement of the terms on which the offeror is willing to be bound. The offer has to be specific in order to actually constitute an offer.

An invitation to treat is not an offer, but an indication of a person’s willingness to negotiate a contract. An invitation to treat is an indication that someone is prepared to receive offers with the view to forming a binding contract. It is not an offer in itself. The distinction between an offer and invitation to treat is best understood through the categories that the courts create. Invitations to treat include the display of goods; the advertisement of a price or an auction; and an invitation for tenders (or competitive bids). Here may however be statutory or complementary obligations, so consumer protection laws prohibit misleading advertising and at auctions without reserve there is always a duty to sell to the highest bona fide bidder. But the general rule is that unlike an actual offer, an invitation to treat is not binding. The “inviter” can change his or her mind. At an auction the bid itself is an offer and then the auctioneer can either accept or reject the offer. A good example of this is the case of Payne and Cave 1789, the defendant made the highest bid for the plaintiff’s goods at an auction sale, but he withdrew his bid before the fall of the auctioneer’s hammer. It was held that the defendant was not bound to purchase the goods. His bid amounted to an offer which he was entitled to withdraw at any time before the auctioneer signified acceptance by knocking down the hammer.

An example of invitation to treat is if you see goods for sale in a shop window for far less than the usual retail price and go into the shop to make your purchase. The shopkeeper then tells you that she has made an error on the price; therefore there is no offer it’s merely an invitation to treat.

B.

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 weakened by developments in the law of estoppel, misleading conduct, misrepresentation and unjust enrichment.

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.The “expression” referred to in the definition may take different forms, such as a letter, newspaper, fax, email and even conduct, as long as it communicates the basis on which the offeror is prepared to contract.

Acceptance is a final and unqualified expression of assent to the terms of an offer. It is no defense to an action based on a contract for the defendant to claim that he had not intended to be bound by the agreement, if his conduct demonstrated that he had. 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 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 to be his intent. Hence, an actual meeting of the minds is not required.

An invitation to treat is not an offer, but an indication of a person’s willingness to negotiate a contract. In Harvey v. Facey, 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 Gibson v Manchester City Council 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, 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.

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. 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). 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.

C.

The requirement for an “intention to create legal relations” arises out of the common law position which states that even if the elements of offer, acceptance and consideration are satisfied, there will not be an enforceable agreement in the absence of such intention.

The first element of a valid contract requires the parties to intend to create a legal relationship. To determine whether there is an intention to create legal relations, the law looks at the nature of the agreement. There are two types of agreements that are Social and Domestic Agreements and Business and Commercial Agreements.

If the agreement is of a social or domestic nature, the law has created a presumption that such agreements do not have an intention to create legal relations. Social agreements are made between friends and are made without the intention of being enforceable. Domestic agreements made between members of a family, for example, parents and children, also do not create a legal relationship. Example: An agreement whereby the father agrees to load the dishwasher and the children to unload it constitutes a domestic agreement not a legal one.

Agreements of a business or commercial nature are treated differently from social or domestic agreements by the law. Courts assume that business agreements are intended to create a legal relationship. This presumption can be rebutted if evidence is produced to show that there was clearly no intention to create a legally binding agreement. If an agreement is made in the course of business dealings, then in the absence of express words to the contrary, the courts will say that legal relations were intended.

In this case of Roy, business agreements should take place so that both parties are bound to a contract in an intention to create legal obligations. Both parties must agree on the subject matter of the contract. A contractual agreement is formed when one party (the offeror) makes an offer to enter a contract and the other party (the offeree) accepts the terms of the proposal.

D.

At most times, materials can be bought cheaply at auction rather than from wholesalers. Facing this situation, there are a few considerations that we need to go through before any decision is made.

The considerations should include condition of the materials being auctioned. These materials are able to be cheaper than those sold by wholesalers probably because they have drop in value with the condition of the materials that might have deteriorated over time. Therefore, these materials are often sold at auction and bidding starting from a low price to the highest price being bid. Hence, we should always examine the products to be purchased before purchasing them. If the condition of the materials is still in good shape then it is wiser to buy them at auctions rather than from wholesalers.

Another consideration is the quality of the materials. Often there are cases where consumers are short-changed of their money due to the quality of the products they are promised. As we all know, the value of a product varies with the quality. A quality product will definitely fetch a higher price. In order to prevent such cases from happening, we should always inspect the quality of the materials and make sure upon delivery of the product, the quality still remain as promised during the auction.

One of the considerations that must be taken account into is the expiry date of the materials. It is an acknowledged fact that every material has an expiry date. Certain materials have a certain range of life span. If the expiry date of the materials is near, then of course the value of the materials will drop. When these materials are being auctioned off, we should enquire the expiry date of the materials. If it is decided to purchase the materials even though the expiry date is near then the materials must be used as soon as possible.