Contract Law – Offers, Revocation, Rejection, Counter Offer

Clever Video Series 

Forming A Legally Binding Contract

Capacity To Contract

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Normally, an offer can be revoked (withdrawn) at any time before it has been accepted. Once the withdrawal of the offer has been communicated to the offeree, the offer is no longer valid.

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Firm offers are for a set period of time and cannot be withdrawn within the time stated in the offer.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.

Lapse of time

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.

If the offer clearly states the duration of the offer then it will end at the period stated. If the offeree wants to take up the offer after this period they will have to renegotiate the agreement.

Timing

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 This means that a letter notifying that an offer has been revoked may have been sent but before it arrives the offeree has accepted the offer.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.


Rejection and counter-offer

An offeree may reject an offer at any time. When they reject the offer, the offer is immediately ended. There are two types of rejection:

  • Express rejection: This is where the offeree clearly indicates their rejection of the offer by some form of firm action. This may be oral, in writing, etc.
  • Implied rejection: Rejection of an offer may be through inaction e.g. Not accepting the offer within a certain time.

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.

During the bargaining process, if any material terms of the offer are changed, it is considered a counteroffer.


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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Posted in Business Law, Contract Law.