Offer to Contract - Explained
When is an Offer an Actual Offer to Contract?
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What constitutes an offer to contract?
The following elements must be present to establish a valid offer to contract.
Offeror and Offeree - An offer to contract must contains a specific promise from the the person making the promise (offeror) and a specific demand of the individual receiving the offer (offeree).
- Example: I tell you that I will sell you a product for $5. I am the offeror and you are the offeree. My offer is to transfer ownership of a product and my demand is that you transfer ownership $5.
Intent to Make an Offer - The offeror must intend to make the offer. Whether there is intent to make an offer is judged from the position of the offeree. If a reasonable person in the position of the offeree would believe the offerors words or actions constitute an offer, it is an offer. This is an objective, rather than subjective, standard for determining whether the intent to make an offer exists.
- Example: I shout out loud in frustration that I would sell my piece-of-junk care for a $100. The words look like an offer to sell my car. In reality, I am simply espousing my frustration. I do not have the intent necessary for my statement to constitute an offer and no reasonable person would interpret my statement as truly demonstrating that intent.
Definite Terms - An offer to contract must be sufficiently definite. That is, the terms of the offer must be sufficiently specific to allow the offeree to understand and accept the offer. (See also: Sum Certain) The offeree must understand that she is the intended recipient of the offer and may accept it. Also, the terms of consideration must be stated.
- Example: Simply stating that I will sell you an item for a reasonable price is not sufficient to constitute a definite offer. Most advertisements, catalogs, and web page price quotes are considered too indefinite to form the basis for a contract. To be sufficiently definite, the advertisement must be specific about the quantity of goods being offered and who is the intended offeree.
- Note: There is an exception to this rule for the sale of goods pursuant to the terms of the UCC. Some contracts for the sale of goods can leave open non-quantity terms to be decided at a future time.
Remember, the above elements do not have to be in writing or formal. Further, the parties do not have to realize that their words or actions constitute a valid contract; rather, each element is judged by an objective standard. That is, how would a reasonable person perceive the actions potentially constituting an offer?
Next Article: Terminating an Offer Back to: CONTRACT LAW
How do you feel about the requirement that a contract meet this level of formality? Should it be more or less formal, and why? How do you feel about the fact that individuals can form a contract without fully realizing that their agreement is legally enforceable?
Ashton is reading looking at the merchandise for sale on Smart Clothes Corps website. He places an order for a new shirt and goes through the process of setting up an account and attempting to pay. At the end of the process, he gets notification that his purchase is discontinued and cannot be purchased. Ashton is furious and wants to sue Smart Clothes for breach of contract. If he does, what is the likely legal result in this situation?
- An offer must have two specific characteristics. It must have the intent to be an offer. Next, it must be sufficiently definite. This means that the offer must identify the goods or services offered, it must provide definite terms of the offer (such as price, quantity, etc.), and it must indicate who specifically can accept the offer. Generally, advertisements for the sale of goods is seen as a solicitation of offers to purchase. The seller does not make an offer simply by putting the goods out for sale, as it is not definite who can purchase the goods. As such, Ashton has made an offer to purchase goods. The seller rejects the offer by notifying him that the offer is reject. As such, there was no contract formed. Ashton would not be successful in bringing a legal action against Smart Clothes.
- What is a Contract?
- Contract Theory Definition
- Meeting of the Minds
- Doctrine of Utmost Good Faith
- Aleatory Contract Definition
- What are the sources of contract law?
- Restatement of Contracts
- Uniform Commercial Code
- Convention on Contracts for the International Sale of Goods (CISG)
- 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?
- When is a party's Duty of performance?
- Aleatory Contract
- What is an Executed contract vs an Executory contract?
- Inchoate Definition
- Evergreen 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 are conditions to Contract (Precedent & Subsequent)?
- Abandonment Option (Contract) Definition
- Cooling Off Rule Definition
- What is tender performance of a contract?
- What are Impossibility and Impracticability
- What is a Frustration of Purpose?
- Waiver or Release from Contract
- Accord and Satisfaction
- Force Majeure Clause
- What is a Breach of Contract?
- Repudiation (Contract) Definition
- Anticipatory Repudiation
- Acceleration Clause (Contracts) Definition
- What methods exist for resolving a breach?
- What remedies exist for a breach of contract?
- Rescission (Contract)
- Exculpatory Clause
- Hold Harmless Clause
- What is Efficient Breach?
- Organization of a Contract
- How to Read the Contract
- Contract Representations & Warranties
- Contract Covenants
- What rules does a court follow in interpreting a contract?
- Allonge Definition
- 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