Offers under Contracts
Offers under Contract Law
1. Definition of an Offer
An offer is a definite proposal made by one party (the offeror) to another (the offeree) indicating a willingness to enter into a contract on certain terms, with the intention that it becomes binding as soon as it is accepted.
2. Essential Elements of an Offer
For a communication to be considered a valid offer, it must:
Manifest an intention to be bound by the terms upon acceptance.
Be definite and certain in its terms (e.g., price, quantity, subject matter).
Be communicated to the offeree.
3. Distinguishing Offer from Invitation to Treat
An offer creates the power of acceptance in the offeree.
An invitation to treat (or negotiate) is merely an invitation to make offers (e.g., advertisements, price lists, catalogues).
Example:
A store displaying goods is an invitation to treat, not an offer.
A person placing a product for sale with specified terms can be an offer if it shows intention to be bound.
4. Types of Offers
a. Express Offer
Clearly stated orally or in writing.
b. Implied Offer
Inferred from conduct or circumstances.
5. Termination of an Offer
An offer can be terminated by:
a. Revocation
The offeror can revoke the offer anytime before acceptance.
Revocation must be communicated to the offeree.
b. Rejection
Offeree rejects the offer; the offer terminates.
c. Counteroffer
A counteroffer acts as rejection and creates a new offer.
d. Lapse of Time
Offer expires after the time specified or, if no time is specified, after a reasonable time.
e. Death or Insanity
The offeror or offeree’s death or incapacity terminates the offer.
f. Failure of a Condition Precedent
If the offer depends on a condition that fails, it terminates.
6. Acceptance of an Offer
Acceptance must be a mirror image of the offer.
Must be communicated to the offeror unless waived.
Creates a binding contract upon acceptance.
7. Special Offers
a. Option Contracts
The offeror promises to keep the offer open for a certain period, often supported by consideration.
b. Firm Offers (under UCC)
In the sale of goods, a merchant's written and signed promise to keep an offer open is irrevocable for a certain time without consideration.
8. Legal Significance
The offer creates the power of acceptance in the offeree.
Without a valid offer, no contract can be formed.
Summary Table
| Element | Description |
|---|---|
| Intention | Clear intent to be bound on terms |
| Definiteness | Terms must be clear and certain |
| Communication | Offer must be communicated |
| Termination | Revocation, rejection, lapse, etc. |
| Effect of Acceptance | Creates binding contract |
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