What is an offer?
An offer is a proposal made by one party to another to enter into a contract. For a contract to be formed, there must be an offer, acceptance of the offer, consideration (something of value exchanged), capacity to contract, and legality. An offer creates the power of acceptance in the offeree, meaning they have the power to transform the offer into a binding agreement by accepting it. Some key characteristics of an offer are:
- It must be communicated to the offeree.
- It must manifest the offeror’s intent to be bound to a contract if the offer is accepted.
- It must contain sufficiently definite terms to form a contract.
Examples of offers include a store advertising a product for sale at a certain price, a listing for a home for sale, or a job posting inviting applications. Until the offeree accepts, the offeror is free to revoke the offer.
When is an offer revoked?
There are several ways an offer can be revoked before acceptance:
- Revocation: The offeror communicates to the offeree that they are revoking the offer. This could be done through direct communication, like a phone call or email, or indirectly like posting a notice of revocation where the offer was made.
- Lapse of time: The offer states that it’s only open for acceptance for a certain period of time. If the offeree doesn’t accept within that timeframe, the offer lapses. For example, a store sale that’s only valid for the weekend.
- Death or incapacity of a party: If either the offeror or offeree dies or becomes incapacitated before acceptance, the offer is terminated.
- Destruction of subject matter: If the item that’s the subject of the offer is destroyed, the offer is considered revoked. For example, if a house burns down before an offer on it is accepted.
- Counteroffer: If the offeree responds to the offer with different terms, it’s considered a counteroffer which rejects the original offer.
- Rejection: If the offeree expressly rejects the offer through communication or action.
The offer can also be revoked indirectly if the offeror takes actions inconsistent with the offer, like selling the item to someone else. Revocation terminates the offeree’s power of acceptance. For revocation to be effective, it must be properly communicated to the offeree before they accept the offer. If the offeree accepts before receiving notice of revocation, a valid contract is formed.
Does an offer expire if not accepted within a certain time?
An offer does not automatically expire if not accepted within a certain timeframe. For an offer to expire, it must expressly contain language that limits the time available for acceptance. Some common time limit language includes:
- “This offer is only valid for 30 days.”
- “Offer expires on [date].”
- “Respond by [time] on [date] or this offer is void.”
Without this type of language, an offer is considered open until it is expressly revoked or rejected. An exception is an offer for a unilateral contract, where one party must perform the contract terms for acceptance. Unilateral offers can expire after a reasonable amount of time if not accepted.
Additionally, the start of performance can operate as acceptance of an offer of a unilateral contract before the time for acceptance expires. For example, if a reward is offered for returning a lost dog, starting the search for the dog could constitute acceptance and prevent the offer from expiring.
Can an offer be revoked after acceptance?
Once an offer has been accepted, it generally cannot be revoked. Acceptance creates a binding contract between the offeror and offeree. There are a few scenarios where revocation may still be possible after acceptance:
- If the offeror communicated revocation to the offeree before the offeree’s acceptance was received, the revocation effectively cancels the offer before a contract is formed.
- If the offer states it does not become binding until certain conditions are met, like approval of credit or a home inspection, the offeror may revoke before these contingencies occur.
- If the offeror made a mistake significant enough that no reasonable person would have made the offer with knowledge of the facts, it may be rescinded on grounds of unilateral mistake. Requirements for this include prompt notification from the offeror and no substantial change in position from the offeree.
- If the offeree obtained the offer through fraudulent misrepresentation, duress, or undue influence, the offeror may be able to void the contract.
Barring these limited circumstances, once an offer is accepted it creates a valid contract and cannot simply be revoked. If the offeror refuses to perform after acceptance, the offeree can seek legal remedies to enforce the agreement.
Can an offer be revoked if there is consideration?
The existence of consideration does not impact whether an offer can be revoked. Consideration is something of legal value exchanged between parties to a contract. Even if an offer is supported by consideration, the offeror is still free to revoke the offer at any time before acceptance.
For example, an option contract involves consideration paid to hold an offer open for a stated period of time. The offeree provides consideration for the exclusive right to accept the offeror’s proposal within the option period. If the offeror revokes before the offeree accepts during that window, the offeree is entitled to refund of the consideration paid.
While consideration may support an offer, it does not make it irrevocable. The offeror still maintains the power to revoke before acceptance, even when consideration is present. Only once the offeree accepts within the open time period does a binding contract come into force.
What happens if you accept an offer but consideration is never paid?
If an offer is accepted but the agreed upon consideration is never paid, there are a few possible outcomes:
- The failure to pay consideration is treated as a breach of contract. The accepting party would be liable to the offeror for monetary damages equal to the amount of consideration that was to be paid.
- The lack of consideration results in the agreement being unenforceable and voided. Without the consideration, there is no valid contract formed.
- The agreement is still binding if the offeree provides consideration in some other form or relies to their detriment on the existence of a contract.
- The parties reach a new agreement that releases the offeree from the duty to pay the original consideration.
The specific outcome would depend on the language of the agreement, the governing state law, and the nature of any partial performance. In general, if a party accepts an offer but never provides the promised consideration, they are unlikely to be able to enforce the agreement against the offeror.
Does an offer remain open until rejected?
No, an offer does not necessarily remain open until it is expressly rejected by the offeree. There are several ways an offer can terminate without being rejected:
- Revocation – The offeror retracts the offer before acceptance.
- Lapse of time – The stated deadline for accepting the offer expires.
- Destruction of subject matter – The item involved in the offer is destroyed.
- Death or incapacity of a party – Either party dies or becomes incapacitated before acceptance.
- Counteroffer – The offeree proposes different terms, which acts as a rejection.
Rejection certainly terminates the offeree’s power of acceptance. But the absence of rejection does not keep the offer open indefinitely. Unless otherwise stated, offers remain open for a “reasonable” amount of time. This depends on the nature of the contract and industry standards and customs. But in general, the law does not view offers as remaining open perpetually until declined. The offeror is free to revoke at any point before acceptance.
Does communicating revocation terminate the offer?
Yes, effectively communicating revocation of an offer to the offeree will terminate the offer before acceptance can create a binding contract. The key issues are:
- Communication: The revocation must actually be transmitted to the offeree in a manner likely to give notice. Simply deciding to revoke without informing the other party is ineffective.
- Receipt: The offeree must receive the communication of revocation for it to terminate the offer. If the offeree accepts before receiving notice of the revocation, a valid contract is formed.
- Definiteness: The revocation must be clearly stated rather than implied to be valid. Saying “I’m having second thoughts” likely doesn’t revoke the offer.
Methods like a letter, email, or conversation directly informing the offeree of the revocation would effectively terminate the offer. Indirect forms of communication like posting an ad or notice may also revoke the offer but could lead to disputes if not clearly received. As long as the revocation is definite and received before acceptance, communicating revocation ends the offer.
In conclusion, an offer can be revoked at any time prior to acceptance unless it is supported by consideration or states a firm time period for acceptance. Effective revocation terminates the offeree’s power of acceptance. Without proper revocation, an offer typically remains open for a reasonable timeframe based on industry norms. Once accepted, an offer usually becomes a binding contract and cannot simply be revoked. Careful drafting of offers is important to clarify revocation rights and the timeframe for acceptance. Understanding the nuances around revoking and accepting offers is key to avoiding contractual disputes.