Texas Real Estate Contracts
4th Edition
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Chapter 2 Mutual Assent—the Offer and
Acceptance
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The Offer, in General
• An offer is a proposal to act or perform
communicated by one party to another with
the intent that the proposal be accepted to
form a contract.
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Offeree versus Offeror
• The person proposing the offer is referred to
as the offeror.
• The person to whom the offer is
communicated is the offeree.
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Communication of the Offer
• Communication is the act of transmitting
information.
• A communication can be either direct or
indirect.
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Direct Communication
• A direct communication is made directly to
the intended party.
• For instance, the offeror in a real estate
sales transaction might communicate his or
her offer directly to the offeree by telephone.
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Indirect Communication
• An indirect communication is a
communication made indirectly to the
intended party by way of a third party or third
party device.
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Imputed Communication
• Imputed communication is a concept
whereby communication to an agent is
considered communication to his or her
principal.
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Requirements and Manner of an Offer
• The offer must not be subject to any
conditions.
• It must sufficiently identify the real estate
with a proper legal description.
• The offeror must also state the price and any
other essential terms.
• These requirements are met when the
offeror uses a standard residential real
estate sales contract form.
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Presentation of an Offer
• Once the offer has been communicated to
the seller's representative, the seller’s
representative should review the offer and
indicate the overall situation to the seller.
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Sample Calculation of Net Proceeds
Net
=
Proceeds
Total
_
Proceeds
Loan
_ Closing _
Balance
Costs
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Broker
Commission
Offers Distinguished from Non-Offers
• There are several types of communications
which may appear to be, but are not, offers.
– expressions of intention
– invitations to offer
– inquiries
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Expressions of Intention
• An expression of intent refers to a statement
made by a person in which the person seeks
to accomplish a specific goal.
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Invitations to Offer versus Inquiries
• An invitation to offer simply invites parties to
make offers on a particular piece of
property.
• An inquiry is a question proposed concerning
a piece of property with the intent that an
answer be forthcoming.
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Multiple Offers
• Multiple offers may be implicated in a
situation where the seller receives several
offers simultaneously concerning a parcel of
real estate.
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Subsequent negotiations during
pending negotiations
• If the seller and prospective purchaser are in
the midst of negotiations, the seller's agent
still owes the seller the duty to present all
offers, unless otherwise instructed, until the
seller and prospective buyer have agreed in
writing on all aspects of the negotiations.
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Backup Offers and Contracts
• A backup offer is a second offer presented
during the pendency of a contract.
• Typically backup offers arise when the
property owner has a pending contract for
the sale and purchase of the real estate.
• Addendum for “Backup” Contract form must
be used.
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Termination of the Offer
•
•
•
•
•
•
Revocation by the Offeror
Rejection by the Offeree
Lapse of Time
Destruction of the Subject Matter
Death or Insanity of the Offeror
Illegality of the Subject Matter
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Revocation by the Offeror
• Revocation refers to the act by the offeror of
withdrawing the offer.
• A revocation of an offer by the offeror is not
effective until it is received by the offeree.
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Rejection by the Offeree
• Rejection refers to the refusal by the offeree
to accept the terms of the offer.
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--Lapse of a specified time
• In proposing an offer for the purchase or
sale of real estate, it is a good idea to put
some limitation on the time for acceptance.
• This forces the offeree to make a decision as
to whether or not to accept.
• It prevents the offeree from sitting on the
offer too long in the hope of receiving a
higher or better offer.
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--Lapse of reasonable time
• Where no time is specified in the offer, the
offer will terminate within a reasonable time.
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Destruction of the Subject Matter
• Destruction of the subject matter refers to
the partial or complete loss of the property
due to some Act of God or a governmental
taking.
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Death or Insanity of the Offeror
• An offer also can be terminated before
acceptance by the subsequent death or
insanity of the offeror.
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Illegality of the Subject Matter
• Illegality refers to that which is contrary to
the principles of law, morals, or public policy.
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The Acceptance, in General
• Acceptance is an action taken by the offeree
upon receipt of the offer that manifests his
or her agreement to the terms of the offer by
the means indicated in the offer.
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Who May Accept the Offer
• The only person who may accept an offer is
the party to whom the offer is
communicated.
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Validity of Acceptance
• In order for the acceptance of an offer to be
valid, it must be identical to the offer.
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Manner of Acceptance
• The preferred manner of acceptance by an
offeree is an acceptance in writing.
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Silence
• The general rule is that silence does not
constitute acceptance.
• However, where an offeree takes benefits
indicated in the offer without verbal or
written acceptance, the silence may be
sufficient to constitute an acceptance.
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Pre-Contractual Liability
• Pre-contractual liability is liability that arises
due to failed negotiations between the
parties before a contract is formed.
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Restitution
• Restitution is an equitable remedy under
which an injured party is restored to his or
her original position before the injury
occurred and placed in the position that he
or she would have been in had the breach
not occurred.
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Promissory Estoppel
• Promissory estoppel is a doctrine that arises
when a party to a contract relies on a
promise of another party to the contract, and
injustice would result if the injured party was
not able to recover.
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Good Faith
• Good faith refers to an honest intention to
contract and the absence of the intent to
defraud.
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