ELEMENTS OF A VALID OFFER

ELEMENTS OF A VALID OFFER AND MANAGING CONTRACTUAL RISKS

Contracts are important in business deals for they not only make reference to documents used in business agreements, they summarize the duties obligations and expectations of the parties contracting as well.

Usually for a contract to be valid one party makes an offer and the other party accepts the offer. Both parties provide consideration, that is, the price paid for the promise made in the agreement.  The assumption is that the parties intend for the legal consequence to follow otherwise it won’t be a contract. This was the case in Balfour v Balfour (1919). The other aspect that has to exist is the parties must have contractual capacity

In this post however our focus is on offers specifically elements of a valid offer so that they can aid you in avoiding some contractual pitfalls

WHAT IS AN OFFER?

An offer is an expression of willingness to contract on definite terms, once the terms are accepted. The party that makes the offer is called the offeror and the party that receives the offer is the offeree

Negotiations between the parties will not always lead to a contract, in fact, inquiries may be made or offers invited and yet no offer is made or, if one is made, it need not be accepted.

MATTERS PRELIMINARY TO AN OFFER

From the beginning an offer must be distinguished from  

1. An invitation to an offer
2. A declaration of intention

Invitation to make an offer

An invitation to make an offer is not an offer which is capable of being turned into a contract by acceptance.

The fact that the seller has the phrase “offer! New arrivals” or something, on their window is not an offer. It is simply an invitation to the public to get in the shop and make the seller an offer to buy the goods at the stated price

Declaration of intention

A declaration by a person that he intends to do something gives no right of action to another who suffers loss because the former does not carry out his intention

Example

A seller saying that there will be a “grand sale” at a given venue and later cancels the event doesn’t give a buyer who travelled to the venue a right to sue for time and expenses.

Such a declaration means only that an offer is to be made or invited in future and not that an offer is made now

HOW AN OFFER IS MADE

An offer may be express or implied from conduct

Example of express offer

• John offers to sell his laptop to Becky at the price of $200. Becky promises to pay $200 for the laptop
• Jane advertises in a newspaper offering $50 reward to anyone who returns her pet cat. Mike brings the cat to Jane

Example of an implied offer

Boarding a bus with a fixed destination means that you have accepted to go to the destination

An offer can be made to a particular person, to some particular class of persons or to the world at large. All offers must be communicated to the offeree before they can be accepted.

The offeree cannot accept an offer unless he knows of its existence, because he cannot accept it without intending to do so, and he cannot intend to accept an offer of which he is ignorant

In the example above

If Jane advertises in the newspaper offering $50 reward to anyone who returns her pet cat and Mike finds the cat and brings it to Jane having not heard of the offer of the reward, he is not entitled to the $50

EXAMPLES OF WHAT ISN’T AN OFFER

• Displaying of goods on a shelves or even windows for the public to see – this is seen as an invitation to the customer to present the goods to the cashier who will then look them up and take payment. This means that the retailer has the right to refuse payment, something that would not otherwise occur if display goods were to be treated as an offer
• Advertisement – this is considered as an invitation to treat due to the multi-acceptance principle. Here is how that works: if advertisements were to be treated as offers, then in theory an unlimited number of people would be able to accept it at any one time and that could result in to legal problems if the advertiser runs out of stock

Note that this changes if the advertisement asked for a specific action, for instance “payment to a person who finds a lost pet” In such a case the advert is an offer that creates a unilateral contract, that is, a contract in which only one person is bound. In the pet case that will be the owner of the pet since you don’t have to look for the pet

• Tenders – these are considered invitations to treat since they involve a party having requirements for a specific product or service and advertising that need. It is the response to meet those needs that is considered an offer.
• Auctions – Whether physical or Electronic the key difference is whether there is a reserve or not in short:

In auctions with a reserve the idea is to set a minimum or maximum price set and offers are only the bids that meet the said criteria

Auctions with no reserve the bids that are considered as offers are those of the highest bidder

CONCLUSION

Without a valid offer the other elements of the contract cannot function. To qualify as an offer, there needs to be the following:

• An expression of willingness to enter into a contract on specific terms
• Intention for the contract to be binding once it is accepted

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