Terminating an Offer (Contracts) - Explained
When Does an Offer to Contract Terminate?
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
When does an offer to contract terminate?
An offer to contract terminates at the following times or under the following conditions:
Specific Provision - An offer may include a specific provision detailing how long an offer will stay open and the conditions under which it terminates.
Lapse of Time - Unless the offer states otherwise, an offer terminates after a reasonable period of time. A reasonable period of time will vary depending upon the type of contract.
- Example: An offer to sell bananas will terminate more quickly than an offer to sell cement.
Offerees Rejection - An offer terminates if the offeree receives the offer and rejects it. Once the offeree rejects the offer, she cannot come back later and accept the offer. Any attempt to do so may constitute a new offer to the original offeror.
Counter Offer - If an offeree makes a counter offer or counter proposal in response to an offer, the original offer terminates. This is the case with negotiations. If a party attempts to negotiate new or additional material terms to the offer, the original offer terminates. Attempting to offer ancillary or non-material terms may not terminate the offer.
Revocation by Offeror - Generally, the offeror may revoke an offer at any time before the offeree accepts it. If the offeree has already accepted the offer, a valid contract exists and an attempt to revoke the offer may constitute breach of the contract.
- Note: There are certain offers, known as firm offers, that state that the offer cannot be revoked for a certain period. This type of offer is a form of contract in itself.
Destroy Subject Matter of Contract - An offer terminates if, before the offer is accepted, the property that is the subject of the offer is destroyed. If the offer has already been accepted, this could serve to void the contract.
Death or Mental Incapacity - If the offeror dies or loses mental capacity at any time before an offer is accepted, the offer is revoked.
- Note: The offer does not become effective again if the offeror regains mental capacity.
Illegality - An offer terminates if the subject of the offer (the activity or product) becomes illegal. If the offer has been accepted, the subject matter becoming illegal will void the contract.
Some of the methods of contract termination are voluntary, while others others are a result of circumstances beyond the control of the parties.
Next Article: Mirror Image Rule Back to: CONTRACT LAW
Do any of the common methods by which an offer terminates surprise you? What factors should a court consider when determining whether a reasonable time has passed? What factors should the court consider in determining whether an offeree has been rejected? Does the rule regarding counter-offers discourage negotiation? Why or why not?
Dudley is interested in purchasing an ownership interest in Sarah's business. Sarah sends over a term sheet that places a specific value on her business and offers a specific number of shares. Dudley reviews the sheet and sends back a sign subscription agreement that lists a lower valuation, but agrees to buy a larger number of shares. The total purchase price for all shares would equal the amount indicated in Sarah's term sheet. Sarah writes back and says that she will work with other investors. Dudley is angry and wants to sue for a breach of contract? What is the likely outcome?
- In this situation, there was never a contract. An offer once made can either be accepted by the other party or be terminated by either of the parties. Termination of an offer depends on several factors which might include revocation by the offeror before the offer is accepted or rejection by the offeree. However, the offer can also be terminated by a counter offer made by the offeree. A counter offer arises when the offeree, not being pleased by the terms presented by the offerors original offer, rejects the original deal and proposes amendments to the original deal or a new deal entirely. Once the offeree makes a counter offer, the offeror can either accept or reject it. If the counter offer is rejected then there is no legal agreement between the parties. In this situation, by changing the terms presented by Sarah, rejected the original offer and made a counter-offer. Sarah rejected the counter offer. Thus, there is no agreement.
- What is a Unilateral Contract vs a Bilateral Contract?
- What is an Express Contract vs an Implied Contract?
- What are the requirements to form a Contract (Offer, Acceptance, Consideration)?
- What is an Enforceable Contract vs. a Valid Contract?
- What is a Void Contract vs a Voidable Contract?
- Adhesion Contract
- What is Mental Capacity to contract?
- What is the requirement of a Lawful Purpose?
- What are common types of Voidable Contract?
- When does an offer to contact terminate?
- Counterparty Definition
- Mirror Image Rule?
- Rule for Sale of Goods
- Silence is Not Acceptance?
- Mailbox Rule
- Shrink-wrap Agreement Definition
- Click-Wrap Agreement Definition
- What is Consideration?
- What is Promissory Estoppel?
- When is a contract required to be in writing Statute of Frauds?
- What type of writing satisfies the statute of frauds?
- Exceptions to the Statute of Fraud
- Documents Under Seal
- Who Can Sign Contracts on Behalf of a Company?
- E-Sign Act
- Privity of Contract
- Who are third-party beneficiaries to a contract?
- What is assignment and delegation of a contract?
- What is Performance, Substantial Performance, and Breach of a contract?
- What is performance of a Divisible Contract?
- When is a party's duty of performance discharged?
- What is tender performance of a contract?
- What are Impossibility and Impracticability
- What is a Frustration of Purpose?
- Acceleration Clause (Contracts) Definition
- What is Efficient Breach?
- Organization of a Contract
- Contract Representations & Warranties
- Contract Covenants
- What rules does a court follow in interpreting a contract?
- What is the Parol Evidence Rule?
- What is a complete integration vs a partial integration?
- Exceptions to the Parol Evidence Rule
- Patent and Latent Ambiguity in a Contract
- Service Level Agreement Definition
- Offtake Agreement