Comprehensive Volume, 18th Edition

Chapter 13: The Agreement

Requirements for Contract

Because a contract arises when an offer
is accepted, it is necessary to find that
there was an offer and that it was
accepted.
If either element is missing, there is no
contract.
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Requirements of an Offer
The offer must have contractual intent.
This intent is lacking if the statement is
merely an invitation to negotiate, a
statement of intention, or an agreement to
agree at a later date.
Newspaper ads, price quotations, and catalog
prices are ordinarily invitations to negotiate.

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An offer must be definite, with terms

that are clear and spelled out.
The offer must be communicated to the
offeree.

Is A Contract Formed?
Offer

Yes

Acceptance

Offer

No

Counteroffer

Acceptance
Offer, No Contractual Intent

Yes
No

Acceptance

Offer Not Definite

No

Acceptance

Offer

No

No Acceptance

Invitation to Negotiate

No

Acceptance

Terminated Offer

No

Post-termination Acceptance

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Acceptance of an Offer

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When the offer is accepted, a contract

arises.
Only the offeree can accept an offer,
and the acceptance must be of the offer
exactly as made without any
qualification or change.
The acceptance is any manifestation of
intent to agree to the terms of the offer.
Ordinarily, silence or failure to act does
not constitute acceptance.

Acceptance of Offer
Offeror makes
an offer

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Offeree accepts offer

unconditionally

Offeree changes or
adds terms

Contract
Arises

Counteroffer

Original offeror
accepts counteroffer
unconditionally

Original offeror changes

or adds terms
Counteroffer

Offeree rejects
offer
No contract
exists

Original offeror
rejects counteroffer

Acceptance of an Offer

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An acceptance does not exist until the

words or conduct demonstrating assent
to the offer is communicated to the
offeror.
Acceptance by mail takes effect at the
time and place when and where the
letter is mailed or the fax is transmitted.
A telephoned acceptance is effective
when and where spoken into the phone.

The Mailbox Rule

September 1, 1997
September 2, 1997
September 3, 1997
September 4, 1997

Seller mails an offer to Buyer

Buyer receives offer
Buyer mails acceptance
Seller calls to revoke offer
Buyer says he has already accepted
The acceptance arrives

Is there a contract?
Assume the same scenario as above, but the buyers acceptance never
arrives. Assuming the buyer has adequate proof of mailing the
acceptance, is there a contract?
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Yes, in both cases. Proper acceptance is effective when sent, even if

never received.

The Mailbox Rule

September 1, 1997
September 2, 1997
September 3, 1997
September 4, 1997
September 5, 1997

Seller mails an offer to Buyer

Buyer receives offer
Buyer mails acceptance
Buyer mails rejection
Seller receives rejection
Seller receives acceptance

Is there a contract? Why or why

not?

Again, Yes, because the acceptance is effective upon dispatch

or as soon as it was mailed.

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Termination of Offer

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The ordinary offer may be revoked at

any time by the offeror. All that is
required is the showing of intent to
revoke and the communication of that
intent to the offeree.
By definition, an attempted acceptance
made after the offer has been
terminated has no effect.

Termination of Offer
An offer is also terminated by:

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the express rejection of the offer or by the

making of a counteroffer
the lapse of the time stated in the offer or of
a reasonable time when none is stated
the death or disability of either party
a change of law that makes illegal a
contract based on the particular offer

Termination of an Offer
Revocation Prior to Acceptance*
By Offeror

Death or Incapacity
Time Limitations Placed in the Offer
Rejection

By Offeree

Counteroffer
Death or Incapacity

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*Options and firm offers excepted

Auctions

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In an auction sale, asking for bids is an

invitation to negotiate.
A person making a bid is making an
offer, and the acceptance of the highest
bid by the auctioneer is an acceptance
of that offer and gives rise to a contract.
When the auction sale is without
reserve, the auctioneer must accept the
highest bid.