Formation of Contracts: Offer and Acceptance

Subject: Law
Pages: 6
Words: 1381
Reading time:
6 min
Study level: College

An offer is largely a promise that is conditional in nature. However, it is vital to mention that an offer is not mandatory because the participating party on the other side may either accept or reject it. In addition, an offer reveals or shows that the concerned party is willing to give out a certain entity based on some given conditions. This implies that a bargain is allowed whenever an offer is placed for the first time. The element of a bargain also creates an opportunity for another party to enter into a loose contract, and thereafter be able to bargain the offer and arrive at a valid conclusion (Fehr, Hart & Zehnder, 2011).

A present intent statement is a major requirement for any placed offer. The latter refers to a solid proposal or standing point upon which the contract is supposed to be built. The identified offeree must also receive adequate communication regarding the offer at hand. In other words, establishing the basis or framework of a contract demands a prospective offeree, and of course a valid statement of intent.

At this point, it is also vital to distinguish offers from aspects such as initial bargaining phase, welcoming bidders, and marketing the available offer. These elements do not possess any intention to form binding agreements. A contract can never be formed when such aspects are responded to by the likely buyers. When there is a desire to invite offers from customers, a prospective list of available products, cost estimates, and marketing may be used. Inadequate stock can be a major setback when making offers, and that is why the courts usually prefer the same interpretation. This implies that sufficient stock must be in place before any offer can be made (Bayern, 2015).

Invitation for offers may include activities such as construction of new structures, request for bids, or advertisements. Nonetheless, when a bid is submitted, it is tantamount to an offer. In the event that the bid is accepted by the offering party, it eventually develops into a binding agreement.

Errors might also arise when submitting offers. For example, when an offer is mistakenly submitted by a telegraph company, the law will hold the individual who opted for that channel of communication liable for the mistake. Even in the case of acceptances, the same law is still applicable (Anson, Beatson, Burrows & Cartwright, 2010). The company that sends a dispatch note for the offer is merely presumed as an agent.

Terminating an offer

After the specified period of an offer has expired, it may be terminated. In offers that do not have set expiry periods, a convenient expiry time may be chosen for termination. When it comes to a reasonable time, it delves into common sense in such a way that the offer can be terminated after a particular period lapse upon which it is considered to be adequate to accept an offer.

An offer can also be outdated owing to lack of formal communication after the demise or psychological problems of the concerned persons. However, a binding contract is considered to be in place if an offer was agreed upon on an earlier date before either party became insane or died (Anson et al., 2010). Other aspects that can also lead to the termination of an offer include supervening illegality of the suggested agreements, cumbersome conditions that impede the execution of a contract, and spoilage of the subject under discussion.

Irrevocable offers

Both parties can enter into an agreement and concur that an agreed offer should remain irrevocable for a given period under the stated terms and conditions. Hence, within the agreed period, the allowed option becomes a right. Therefore, the general rule is not included for offers that fall under this category. Considerations forwarded by the offeree are binding and hence, the offer cannot be withdrawn by the offeror.

Rejection of an offer

The first instance whereby an offer can be rejected is when the other party demonstrates unwillingness to accept the given offer. For instance, a counter offer may instigate rejection of an earlier offer. In this case, a counter offer acts as a formal way of refusal towards the offer. Consequently, the offer may be subjected to further advertisement in order to invite or welcome more bidders. Nevertheless, if an offeree feels that a counter offer should not hinder the earlier progress of the offer, then the latter can continue with the process (Becker, Connolly & Slaughter, 2010).

No liability is attached to the party who initially made the offer after the later has been rejected. The same offer cannot be transformed into an agreement by the person rejecting it.


In the case whereby an offer goes through, it is a requirement for the offeree to append his or her signature. In other words, the acceptance style should be agreed upon by both parties. An offeree must understand the terms of the offer for the offer and acceptance to be valid. Nonetheless, a valid acceptance can still be terminated. This type of termination must have been initially bargained against, or stems from an offeree’s action. A promise is not a valid way to accept an offer. It demands an offeree to act so that the other party can fully understand the intention. Hence, the intended performance notice is necessary.

After the reception of an offer by an offeree, the offer becomes effective as it is the case with bilateral contracts. After this instance, an offer can be revoked (Becker et al., 2010). The way acceptance can appear effective is only upon dispatch. This is referred to as the mailbox rule. The rule remains to be valid regardless of what happens to the acceptance during dispatch and delivery. The only way the majority rule may be introduced is using correct address and clearing postage fees before the dispatch.

If the offeror implicitly authorizes the acceptance mode to be used, the acceptance is considered valid after it has been dispatched. However, it is vital to mention that the effectiveness of this acceptance can only remain valid if postage is paid and a correct mailing address is used (Jalil, 2011).

After receipt, an acceptance that was once revoked or rejected becomes effective. However, an acceptance that is defective or delays is considered to be a counteroffer. Unless it is accepted by an offeror, it cannot form any binding agreement.

Requirements laid out in the offer must be compatible with the acceptance in cases whereby agreements do not entail selling goods. Besides, no single element should be ignored from the requested performance or promise. In addition, silence, conduct or acts of the offeree can be used as key indicators to infer or deduce that the offer has either been accepted or rejected.

Acceptance is compliance with the terms of a given proposal. It is an essential declaration of intent that completes a contract because when an agreement is accepted, the offer becomes a contract. Acceptance is therefore, the formulation of a consistent will in form of an agreement which shows that a conclusion has been reached (Becker et al., 2010).

Counter Offer

To produce the effect of improving a contract, the acceptance must be pure and simple. As the proposal loses the binding force after expiry of a deadline given by the applicant, the subsequent manifestation of the requested offer does not compel the latter because it has not been accepted. The same is true when the offer is not accepted in full and consequently leading to restrictions or modifications. An acceptance can be:

  • Express: Results from accepting the statement expressing the given consent.
  • Tacit: Stems from the conduct and reveals the consent between two or more parties.

For example, a vendor usually sends products to a particular merchant and without confirming the order, makes the payments. This is an established commercial practice (Anson et al., 2010). If the latter, at some point, wants to stop it, he/she must give prior notice to the supplier. Otherwise, the vendor may be required to pay new shipment on the same basis. It is also customary to mention the case of a tourist who sends a fax to a particular hotel to reserve accommodation and clearly stating that his arrival will be on a certain date if no further notice is received.


Anson, W. R., Beatson, J., Burrows, A. S., & Cartwright, J. (2010). Anson’s law of contract. New York: Oxford University Press. Web.

Bayern, S. J. (2015). Offer and Acceptance in Modern Contract Law: A Needles Concept. Cal. L. Rev., 103, 67. Web.

Becker, W. J., Connolly, T., & Slaughter, J. E. (2010). The Effect of Job offer Timing on offer Acceptance, Performance, and Turnover. Personnel Psychology, 63(1), 223-241. Web.

Fehr, E., Hart, O., & Zehnder, C. (2011). Contracts as reference points—-experimental evidence. The American Economic Review, 101(2), 493-525. Web.

Jalil, M. A. (2011). Clarification of rules of acceptance in making business contracts. Journal of Politics and Law, 4(1), 109-122. Web.