LESSON 2.2
OFFER AND ACCEPTANCE
GOALS
 Know how to create a valid offer
 Describe how an offer can be terminated
before acceptance
 Understand the importance of acceptance
and consideration to contract formation
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The Offer
Generally, to create a valid offer the
following must occur.
1. The offeror must appear to intend to
create a legal obligation
2. The terms must be definite and complete
3. The offer must be communicated to the
offeree
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Test of the Reasonable Person
 If you are joking but a reasonable
person would interpret that you are
making a contract, then you have made
an offer
 On the other hand, if you are serious,
but the other person thinks you are
joking, then no offer is made.
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Invitation to Negotiate
 Newspapers, Magazines, Radios, TV, direct
offer mailings advertise items for sale.
 These are not offers
 Something is advertised and it is an invitation
to negotiate.
 This is not a contract – this is an offer to
negotiate a contract to buy and sell an item. If
an advertisement says clearly in writing that it
is an offer and a car will be sold to the first
person who accepts the terms of the offer,
then this is an offer and acceptance.
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Offer Must be Complete and
Definite

An offer must have the essential
information to be legally effective
1.
2.
3.
4.
5.
Identify the item to be sold
Price
Full terms of payment
Date of delivery of possession
Date for delivery of title or deed (if there
is one)
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Offer Must be Communicated to
the Offeree
 The offeror must tell the offeree about the offer
 Sarah lost her backpack, it had a calculator, wallet,
driver’s license and other valuables
 Sarah posted a $25.00 reward
 Carlos found the backpack, he returned it to Sarah
 Carlos never saw the reward poster
 Can Carlos get the reward?
 The courts claim that any one who claims the reward
must have known of the offer and acted in response
to the offer. So no, Carlos cannot get the reward.
 What do you think?
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Possible Termination of the
Offer before Acceptance
 Revocation
 Anytime before the offer is accepted , the offeror
may withdraw or revoke the offer. The revocation
must be communicated to the offeree.
 Expiration of a set period or a reasonable time
 Will the offer expire at the end of a specific time?
 If not, it will expire in a reasonable amount of time.
 Example: if you are selling food that will spoil, what is a
reasonable amount of time?
 If you are selling bathing suits and September is coming
soon, what is a reasonable amount of time?
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Possible Termination of the
Offer before Acceptance
 Rejection by the offeree
 If someone refuses the offer then the offer is terminated.
 Even if you say no and then change your mind the original no
terminates the offer
 Counteroffers
 Treated the same as a rejection.
 A counteroffer takes place when the offeree changes the terms of
the original offer.
 Example: John wants to sell Pam his car for $7,000. Pam says no,
but I’ll buy it for $6,000. That is a counter offer.
 Other circumstances
 Death, insanity, destruction of the item for sale.
 Example: The offeror’s house burns down before the offeree can
accept the offer.
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Acceptance and Consideration
 An acceptance is the agreement by
an offeree to the terms of the offer.
 Consideration is what the offeror
demands, and generally must
receive, in order to make her or his
offer legally enforceable.
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Hot Debate
 Trenton and Elisa were college students taking a class on movie
production. Knowing that the final movie in the Alien
Cheerleader trilogy was about to come out, Trenton camped out
overnight at the theater. He bought two tickets, and then asked
Elisa to go with him.
 Elisa agreed. To be able to go, however, she had to call in sick
to her evening job as a waitress. Not working that evening would
cost her more than $100 in wages and tips. Nonetheless, she
made the call.
 When Trenton did not show up to get her, she confronted him.
He admitted he had sold the tickets to someone else for $50
each.
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Where Do You Stand?
1. Should Elisa be allowed to sue
Trenton for not taking her to the
movie?
2. Would your answer change
depending upon whether or not
Trenton knew Elisa would lose
income by going?
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Answer
1.
2.
Almost every state would not allow Elisa to
sue
Social invitations do not produce legally
enforceable contracts
Courts do not have time to involve
themselves in these issues
 However in two states there have
been cases where the “injured” party
has resulted in the person being able
to recover their losses
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 Because of its limited resources, the court
system is very selective in what it will enforce.
 Criminal laws and laws allowing recovery for
certain private injuries (torts) are highest on
the list for enforcement as they are necessary
for keeping peace in society.
 However, when it comes to contracts,
generally defined as agreements between
two or more parties that create obligations,
the courts are far more selective.
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WHAT'S YOUR VERDICT?
 Diaz, 16, contracted to sell his full drum set to
his classmate Martin, also 16, for $450. They
concluded their contract with a handshake in
front of a couple of friends.
 If one of them later decides he does not want
to go through with the deal, can the contract
nonetheless be enforced in court against
him? Why or why not?
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Answer
 The contract would be unenforceable against
either party because the parties were under
age.
 If the parties had been old enough to
contract, even though it was not put in written
form, the contract would be enforceable
because it was for a small enough amount
and could be proven by oral testimony of the
witnesses.
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Where Do You Stand?
 Anchors Aweigh, a boat retailer, placed an ad in a
local newspaper announcing a sale of 25-ft. cabin
cruisers for $35,500 each.
 When seven would-be buyers were waiting for the
business to open in order to purchase a cruiser at
that price, the owner of Anchors Aweigh raised the
price to $40,000.
 Can the original price be enforced against the
dealership by a customer who showed up to buy a
cabin cruiser for $35,500?
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