Contract Law – Offers, Revocation, Rejection, Counter Offer

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Contract Law -The Offer

Offer and Counter Offer

Termination Of Offer

Revoking an offer

Normally, an offer can be revoked (withdrawn) at any time before it has been accepted. Once the withdrawal of the offer has been communicated to the offeree, the offer is no longer valid.

Revoking an offer is a term used in contract law that refers to the act of canceling or withdrawing an offer that has been made to another party. When two parties enter into a contract, there is an initial offer made by one party and an acceptance of that offer by the other party. However, there are situations where the party who made the offer may need to revoke or cancel it.

Revoking an offer can occur for various reasons. For instance, if the offering party discovers that there was a mistake in the terms of the offer, such as an incorrect price or quantity, they may choose to revoke the offer to correct the error. Another reason for revoking an offer could be if the offering party finds a better deal elsewhere or if circumstances change, making it no longer feasible or desirable to proceed with the agreement.

It’s important to note that revoking an offer is not always straightforward and may have legal consequences. Once an offer is accepted by the other party, a legally binding contract is typically formed, and revoking the offer may be seen as a breach of contract. In such cases, the offering party may be required to compensate the accepting party for any losses or damages incurred due to the revocation.

To avoid potential issues related to revoking an offer, it’s crucial to exercise caution and careful consideration before making an offer or accepting one. It’s advisable to ensure that the terms of the offer are accurate, feasible, and align with your intentions before extending it to another party. This helps minimize the need for revocation and promotes a more reliable and trustworthy business or contractual relationship.

Note: While revocation is sometimes necessary, it’s essential to be aware of the legal implications involved and strive to make well-considered offers to avoid complications down the line.

Firm Offers

Firm offers are for a set period of time and cannot be withdrawn within the time stated in the offer. To be valid a firm offer must be:

  • Made by a trader
  • In writing
  • State the amount of time the offer will be held open.

A firm offer is a binding and irrevocable offer made by one party to another.

See ‘Firm Offers – Contract Law’ for more.

Lapse of time

In contract law, the term “lapse of time” refers to the expiration or passing of a specific period mentioned in a contract. It signifies that the allotted time duration mentioned in the contract has elapsed, and it can have important consequences for the rights and obligations of the parties involved. When the terms of an offer do not state the amount of time the offer is open, it will be valid for a ‘reasonable’ amount of time. What is ‘reasonable’ will depend on:

  • The subject of the offer. E.g Offers regarding flowers or perishable goods cannot be expected to be valid for days.
  • Common standards of time that are normal for the type of merchandise.
  • Whether the parties have dealt with each other before and have a set norm for similar offers.
  • The method of communicating the offer and acceptance. E.g. By telephone would be much quicker than a postal offer/acceptance process.

Key points:

  1. Time-bound obligations: Contracts often include provisions that require certain actions to be performed within a specified timeframe. For example, a contract may state that a payment must be made within 30 days of receiving an invoice. If the party fails to make the payment within the stipulated time, it may be considered a breach of contract.
  2. Expiry of rights: Time limits can also affect the exercise of rights. For instance, a contract may grant one party the right to purchase a property within a specific period. If the party does not exercise this right within the designated timeframe, they may lose the opportunity to do so.
  3. Termination of offers: In contract negotiations, an offer made by one party may have an expiration date. If the receiving party does not accept the offer within the given timeframe, the offer may be considered revoked or no longer valid.
  4. Statute of limitations: In some cases, there are statutory time limits within which legal actions can be pursued. These time limits vary depending on the jurisdiction and the nature of the claim. If a party fails to initiate legal proceedings within the specified timeframe, they may be barred from bringing a lawsuit related to the contract.

Understanding the concept of lapse of time is crucial in contract law as it determines the enforceability and validity of contractual obligations and rights. It is important for parties to carefully review the terms and conditions of a contract, adhere to the specified timeframes, and seek legal advice if there are concerns about the impact of a lapse of time on the contract.

A problem arises when the offeror is trying to revoke an offer and the offeree is in the process of accepting the offer. Generally, the revocation of an offer does not apply until it has been ‘received’ by the offeree. This means that a letter notifying that an offer has been revoked may have been sent but before it arrives the offeree has accepted the offer. As the notice of revocation of the offer had not yet been received by the offeree then the offer is still valid.

Express Rejection

In contract law, the term “express rejection” refers to the explicit refusal or denial of an offer made by one party to another. It is a clear and unambiguous statement that communicates the rejecting party’s refusal to accept the terms or conditions of the offer.

See Express Rejection – Contract Law 

Implied Rejection

Implied rejection refers to a situation where the offeree (the party receiving an offer) rejects the offer through their actions or conduct, rather than explicitly expressing it. It occurs when the offeree’s response or behavior indicates a clear intention not to accept the terms of the offer.

See Implied Rejection – Contract Law

Counter Offer 

A counter-offer is made when the offeree makes a change to the ‘material subject’ of the offer. When a counter-offer is made by the offeree the original offer is automatically ended.

In contract law, a counter offer refers to a response made by the offeree (the party receiving an offer) that introduces new or different terms as a proposed modification to the original offer. It essentially rejects the original offer and presents a new offer with modified terms or conditions.

Key points:

  1. Introducing new terms: A counter offer occurs when the offeree responds to an offer by proposing changes to the terms, conditions, or obligations outlined in the original offer. This can include altering the price, quantity, delivery terms, or any other significant aspect of the agreement.
  2. Rejection of the original offer: By presenting a counter offer, the offeree implicitly rejects the original offer made by the offeror (the party making the initial offer). The counter offer acts as a form of negotiation or bargaining, indicating that the offeree is interested in reaching an agreement but with modified terms.
  3. Termination of the original offer: Once a counter offer is made, the original offer is no longer valid. It is terminated and cannot be accepted by the offeror unless they choose to accept the counter offer proposed by the offeree.
  4. Shifting party roles: With a counter offer, the offeree essentially becomes the new offeror, while the original offeror becomes the offeree. The roles of the parties are reversed as they engage in a negotiation process to reach a mutually acceptable agreement.
  5. Acceptance or rejection of the counter offer: The offeror has the option to accept, reject, or make a counter offer in response to the counter offer made by the offeree. Acceptance of the counter offer creates a new agreement with the modified terms, while rejection or counter-offering again restarts the negotiation process.
  6. Communication and clarity: It is important for both parties to communicate their intentions clearly during the counter offer process. Each counter offer should be unambiguous and specify the exact modifications proposed to the original offer to avoid misunderstandings or disputes.

Counter offers serve as a means of negotiation in contract law, allowing parties to express their desired terms and reach a mutually agreeable arrangement. They provide flexibility in shaping contractual terms and enable parties to find common ground through a back-and-forth exchange of offers and counter offers.

Other reasons for terminating a contract

  • Death: The death of one of the parties will end the agreement if it was made between two individuals.
  • Insanity: If either party is found to be insane at the time of entering into a contract they lack the ‘capacity’ to contract (See ‘Capacity to contract’ in a later article) the contract is terminated without notice.
  • Loss or destruction of the material subject: If the main subject of the contract (the material subject) is destroyed before the offer is accepted then the offer is automatically terminated.
  • Illegality: If the material subject of the offer becomes illegal (due to new or revised laws) before it is accepted the offer is automatically terminated.

Clever Video – Offer and Counter Offer.

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What is consideration in contract law?

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Posted in Business Law, Contract Law.