Offer and acceptance

Offer and acceptance are elements required for the formation of a legally binding contract: the expression of an offer to contract on certain terms by one person (the "offeror") to another person (the "offeree"), and an indication by the offeree of its acceptance of those terms. The other elements traditionally required for a legally binding contract are (i) consideration and (ii) an intention to be legally bound.

Offer and acceptance analysis is a traditional approach in contract law. The offer and acceptance formula, developed in the 19th century, identifies a moment of formation when the parties are of one mind. This classical approach to contract formation has been weakened by developments in the law of estoppel, misleading conduct, misrepresentation and unjust enrichment.

Treitel defines an offer as "an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed", the "offeree". An offer is a statement of the terms on which the offeror is willing to be bound. It is the present contractual intent to be bound by a contract with definite and certain terms communicated to the offeree.

The expression of an offer may take different forms, such as a letter, newspaper advertisement, fax, email and even conduct, as long as it communicates the basis on which the offeror is prepared to contract.

Whether the two parties have reached agreement on the terms or whether a valid offer has been made is an issue which is determined by the courts using criteria known as 'the objective test' which was explained in the leading English case of Smith v. Hughes. In Smith v. Hughes, the court emphasised that the important thing in determining whether there has been a valid offer is not the party's own (subjective) intentions, but how a reasonable person would view the situation.

Unless the offer included the key terms of the contract, it cannot be the basis of a binding contract. For example, as a minimum requirement for sale of goods contracts, a valid offer must include at least the following 4 terms: Delivery date, price, terms of payment that includes the date of payment and detail description of the item on offer including a fair description of the condition or type of service. Unless the minimum requirements are met, an offer of sale is not classified by the courts as a legal offer but is instead seen as an advertisement.

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Wikipedia