Contract Offer and Acceptance

Subject: Law
Pages: 7
Words: 1807
Reading time:
7 min
Study level: Master

Introduction

Usually, any enforceable contract comprises three essential elements: offer, acceptance, and consideration. They constitute mutual consent which is the baseline of a contract. According to Grose (2016), mutual consent requires an intent to be bound and definiteness of essential terms. Offers to express the willingness to contract on identified terms, which are made to be binding once recognized by the person addressed (Treitel 2003). In other words, an offer requires some action that gives another person the authority to create a contractual relationship between the parties involved. A consideration is any benefit, such as payment in the form of money, which the two parties must bargain, and is the main reason for each party to engage in the contract. (Adriaanse 2016). On the other hand, acceptance is a final and definite expression of assent to an offer’s terms. It serves to make the contract binding to the parties involved.

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When responding to an offer, an offeree (person who accepts or rejects the offer) may issue a positive reply, or opt to adjust the original offer. This action may portray the offeree as either making a counter-offer which in essence would mean rejecting the offer or merely asking for more information from the offeror (the party which makes the offer) (Smits 2017). This paper is objectively written to discuss the degree to which the reply to and modifications on an offer would mean non-acceptance and pertain to requesting additional information from the offeror.

Offer and Acceptance

The issuance and acceptance of an offer resulting in a contract so long as there is certainty on the subsequent obligations’ impact. Under the English and United Arab Emirates (UAE) law jurisdictions, offer and acceptance do not need to be accompanied by consideration regarding payment or other forms. An acceptable promise is sufficient for two parties to enter into a binding contract so long as this is their mutual intention (Beatson et al. 2010). However, in Bahrain, a contract is deemed annulled if it was taken without consideration, or if it contradicts public order (Beatson et al. 2010).

Issuance of an offer and its subsequent acceptance can result in a binding agreement even if done in separate documents. It is not mandatory for a contract to be validated in one document or provided in writing, considering that there is evidence of mutual consent (Bailey 2011). However, a non-written contract may give rise to uncertainty if the dialogues have created a written record of some considered terms. The Dubai Court of Cassation highlighted the difference in the following manner as reported by Glose (2016):

The invitation to contract and the negotiations preceding the contract are steps towards the offer and are not binding. The offer is a step towards the conclusion of the contract; if the offer is accepted then a contract is concluded. In such an event the offeror may not resile from his offer. This is because by his offer he is expressing his wish to conclude the contract. He may not withdraw from the transaction upon the conjunction of the offer and the acceptance along with his knowledge of the same, by unilateral termination of the contract. If the offer is open and the acceptance is known to the offeror, the contract is considered concluded. (27)

The offeree’s intention to accept an offer must be unambiguously communicated without chance of creating doubts with regards to the acceptance or coincidence of the acceptance and offer terms. These conditions are usually summarized by the image rule, requiring that the offeree accept all the original offer’s terms (Beatson et al. 2010). Therefore, an acceptance must be distinguished from a counter-offer and rejection, an acceptance with some modification or additional terms, an ambiguous acceptance, or qualified by reference to the successive organization of terms.

Counter-offer and Rejection

Kenton (2020) defines a counter-offer as a response given to an original offer. Baily (2011) adds that a counter-offer is an indirect rejection of the offer, contributing to the contract termination. For example, where an individual offers to trade on their terms, another party purports to accept the deal, but on a variation of the original terms, that would qualify as a counter-offer. Inquiring whether an offeror may change their initial terms does not necessarily amount to a counter-offer (Smits 2017). Therefore, in the Stevenson, Jacques & Co v McLean case (as cited in Beatson et al. 2010):

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The offeree could still accept an offer of a certain quantity of iron ‘at 40s. net cash per ton’, even though he had telegraphed to the offeror requesting information as to possible terms of credit. It was held that this was not a counter-offer, but was a mere inquiry, which should have been answered and not treated as a rejection of the offer.’ (41)

Change of Terms

An alleged acceptance of an offer may include terms that differ from or are not constituted in the initial offer. While in some cases, the response may be treated as an acceptance to venture into another contract, usually no contract is made, and the reply is considered as a counter-offer. In the case of Jones v Daniel (as cited in Beatson et al. 2010):

A offered £1,450 for a property belonging to B. In accepting the offer B enclosed with the letter of acceptance is a contract for the signature of A. This document contained various terms as to payment of deposit, date of completion, and requirement of title which had never been suggested in the offer. (42)

The court ruled that no contract was signed between the two parties since B had not accepted A’s offer and instead produced his counter-offer, which A did not acknowledge.

Ambiguous Acceptance

The acceptance must be assent unambiguously and without the restriction of the offer’s terms. For example, “We shall get back to you” is unspecified and cannot amount to an acceptance. The acceptance may imply that a more formal contract or better terms will be negotiated (Treitel 2003). In this situation, the contract is not binding since the agreement is not complete. Therefore, an offeree is likely to reject or withdraw from the contract.

Certainty

According to Glose (2016), an offer and acceptance must establish the contract’s effect. With the absence of clarity on a negotiation’s critical elements, an offer and acceptance process is not enough for selecting an operating agreement. Hence, any contract must ascertain its subject matter which consists of the critical elements of the bargain. In this regard, Glose (2016) reports that the Federal Supreme Court acknowledged and outlined the principle as follows:

Articles 125, 129, and 141 of the UAE Civil Code indicate that, for a contract to be concluded, the agreement has to be reached on all the essential elements of the contract and on all the other elements that the parties regard as essential. (29)

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Therefore, if any of the parties involved realize some requirements have not been accomplished according to their agreement, they have the legal authority to reject the offer.

Communication of Acceptance

An acceptance must be communicated to the offeror in a form other than ordinary mental consent. Unspoken formulation of intention is not enough to amount to an acceptance. In the following case of Brogden v Metropolitan Railway Co. (as cited in Beatson et al., 2010) judged by Lord Blackburn, it was ruled that there was a contract between the parties:

B (a supplier of coal) altered a draft coal supply agreement sent to him by M and returned it signed and marked ‘approved’. M’s agent put it in a drawer. The parties appear to have ordered and supplied coal upon the terms stated but, a dispute has arisen, B contended that he was not bound by the agreement. (43)

However, the agreement ceased to exist when M’s agent sneaked the supply agreement letter into his drawer, or it occurred when M ordered coal, and B supplied it. In this case, the buyer had the legal authority not to adhere to the contract terms since the supplier lied and contravened them.

According to Beaston et al. (2010), the English language must be used in the act or speech intended to convey the intention to accept the offer. Moreover, the acceptance is only complete when it is successfully communicated. The contract does not bind an offeror if the offeree does not notify them. No contract can be made if the acceptance is relayed by telephone, the connection drops, and the offeror does not hear the acceptance. Similarly, if the words of acceptance are disrupted by noise in their background, the contract is deemed void unless the offeree repeats them.

Whether an offeror indicates that acceptance by silence is enough to enter a contract, it is factually challenging to realize how an offeree’s silence or inaction would be interpreted as an acceptance. Therefore, the offeror is unable to proceed with the alternative of either rejecting the offer or entering a contract. Usually, a form or duration of indicating an acceptance may be suggested (Adriaanse 2016). However, they cannot recommend the type or time of refusal to effect a contract on the offeree if the latter does not refuse in a specific manner or within a certain timescale. For instance, in the case of Felthouse v Bindley (as cited in Beatson et al. 2010):

F offered by letter to buy his nephew’s horse for £30 15s, adding, ‘If I hear no more about him I shall consider the horse mine at £30 15s’. No answer was returned to this letter, but the nephew told B, an auctioneer, to keep the horse out of a sale of his farm stock, as he intended to reserve it for his uncle F. B sold the horse by mistake, and F sued him for conversion of his property. (49)

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As the nephew had not notified F that he accepted the offer before the auction sale, the court decided that there was no agreement to transfer the horse to F, which means that he had no right to oppose the sale.

Conclusion

This essay explored the dynamics of contract offer and acceptance based on the response of the offeree. A review of relevant literature to achieve this objective was conducted. The paper established that for a contract to be effective, both parties must be assured of the essential contract elements’ fulfillment. Upon receipt of the offer, an offeree may decide to accept or reject it. Alternatively, he may make a counter-offer which is a request to the offeror to modify the original terms’ content. In the latter case, an offeror has the legal power to reject the offeree’s proposal regarding the main contract terms. Some of the factors which determined whether an offeree would decide to accept or reject the offer, or make a counter-offer bordered on communication channels, an offeror’s reaction to their proposals, and certainty of the contract’s effectiveness.

References

Adriaanse, John. 2016. Construction Contract Law. 4th ed. London: Palgrave.

Bailey, Julian. 2011. Construction law. Oxfordshire: Routledge & CRC Press.

Beatson, Jack, Andrew Burrows, and John Cartwright. 2010. Anson’s law of contract. 29th ed. New York: Oxford University Press.

Grose, Michael. 2016. Construction Law in United Arab Emirates and the Gulf. New York: John Willey & Sons Limited.

Kenton, Will. 2020. “Counteroffer.” Investopedia. 2021. Web.

Smits, Jan, ed. 2017. Contract law: A Comparative Introduction. Cheltenham. Edward Elgar Publishing.

Treitel, Guenter H. 2003. On the Law of Contract, section 2-019. 11th ed. London: Sweet & Maxwell.