Offer and Acceptance
(part B)
by
Charles Lamson
Duration of the Offer
Several rules affect the duration of an offer:
- The offeror may revoke an offer at any time prior to its acceptance. If it has been revoked, the offeree can no longer accept it and create a contract. Normally the offer can be revoked even if the offeror has promised to keep it open.
- An option cannot be revoked at will. If the offeror receives something of value in return for a promise to hold the offer open, it is said to be an option and this type of offer cannot be revoked. If the offer relates to the sale or purchase of goods by a merchant, a signed written offer to purchase or sell that states that it will be held open cannot be revoked during the time stated. If no time is stated, it cannot be revoked for a reasonable time, not to exceed three months. This type of offer is called a firm offer. It is valid even though no payment is made to the offeror. In states in which the seal has its common law affect, an offer cannot be revoked when it is contained in a sealed writing that states that it will not be revoked.
- A revocation of an offer must be communicated to the offeree prior to the acceptance. Mere intention to revoke is not sufficient. This is true even though the intent is clearly shown to persons other than the offeree, as when the offeror dictates a letter of revocation. Notice to the offeree that the offeror has behaved in a way that indicates the offer is revoked, such as telling the subject matter of the offer to another party, revokes the offer.
- An offer is terminated by the lapse of the time specified in the offer. If no time is specified in the offer, it is terminated by a lapse of reasonable time after being communicated to the offeree. A reasonable length of time varies with each case depending on the circumstances. It may be 10 minutes in one case and 60 days and another. Important circumstances are whether the price of the goods or services involved are fluctuating rapidly, weather perishable goods are involved, and whether there is keen competition with respect to the subject matter of the contract.
- Death or Insanity of the offeror automatically terminates the offer. This applies even though the offeree is not aware of the death or the insanity of the offeror and communicates an acceptance of the offer. Both parties must be alive and competent to contract at the moment the acceptance is properly communicated to the offeree.
- Rejection of the offer by the offeree and communication of the rejection to the offeror terminates the offer.
- If, after an offer has been made, the performance of the contract becomes illegal, the offer is terminated.
 |
The Acceptance
When an offer has been properly communicated to the party for whom it is intended and that party or an authorized agent accepts, a binding contract is formed. Acceptance is the assent to an offer that results in a contract. The acceptance must be communicated to the offeror, but no particular procedure is required. The acceptance may be made by words, oral or written, or by some act that clearly shows an intention to accept. Silence does not, except in rare cases, constitute an acceptance nor is a mental intention to accept sufficient. If the offer stipulates a particular mode of acceptance, the offeree must meet those standards in order for a contract to be formed.
Counteroffers
An offer must be accepted without any deviation in its terms. If the intended acceptance varies or qualifies the offer, the counteroffer rejects the original offer. This rejection terminates the offer. This rule is changed to some extent where the offer relates to the sale or purchase of goods. In any case, a counteroffer may be accepted or rejected by the original offeror.
Inquiries Not Constituting Rejection
The offeree may make an inquiry without rejecting the offer. For example, if the offer is for 1,000 shares of stock for $20,000 cash, the offeree may ask, "Would you be willing to wait 30 days for $10,000 and hold the stock as collateral security?" This mere inquiry does not reject the offer. If the offeror says no, the original offer may still be accepted, if it has not been revoked in the meantime.
Manner of Acceptance
An offer that does not specify a particular manner of acceptance may be accepted in any manner reasonable under the circumstances. However, the offeror may stipulate that the acceptance must be written and received by the offeror in order to be effective. If there is no requirement of delivery, a properly mailed acceptance is effective when it is posted. This rule is called the "mailbox rule," and it applies even though the offer never received the acceptance.
Similarly, the delivery of an acceptance to the telegraph company is effective unless the offeror specifies otherwise or unless custom or prior dealings indicate that acceptance by telegraph is improper. In former years the courts held that an offer could be accepted only by the same means by which the offer was communicated, called the mirror image rule. But this view is being abandoned in favor of the provision of the Union Commercial Code, section 2-206(1)(a), relating to sales of goods unless otherwise unambiguously indicated by the language or circumstances, and offer to make a sales contract shall be construed as initiating acceptance in any manner and by any medium reasonable in the circumstances. Under this principle, an acceptance can be made by telephone or even by fax. The contract is made on the date and at the place the fax acceptance is sent.
Careful and prudent persons can avoid many difficulties by stipulating in the offer how it must be accepted and when the acceptance is to become affected. For example, the offer may state, "The acceptance must be sent by letter and be received by me in Chicago by 12 noon on June 15th before the contract is complete." The acceptance is not effective unless it is sent by letter and is actually received by the offeror in Chicago by the time specified.
*SOURCE: LAW FOR BUSINESS, 15TH ED., 2005, JANET E. ASHCROFT, PGS. 63-68*
end
|
No comments:
Post a Comment