Business Law Chapter 11

3 requirements of an offer

1. The offeror must have a serious intention to become bound by the offer. 2. The terms of the offer must be reasonably certain, or definite, so that the parties and the court can ascertain the terms of the contract. 3. The offer must be communicated to the offeree.

Termination of the offer by Action of the Parties

An offer can be terminated by the action of the parties in any of three ways: by revocation, by rejection, or by counteroffer.

Mode and Timeliness of Acceptance

In bilateral contracts, acceptance must be timely. The general rule is that acceptance in a bilateral contract is timely if it is made before the offer is terminated. Problems may arise, though, when the parties involved are not dealing face to face. In such situations, the offeree should use an authorized mode of communication.

Silence as Acceptance

Ordinarily, silence cannot constitute acceptance, even if the offeror states, "By your silence and inaction, you will be deemed to have accepted this offer." This general rule applies because an offeree should not be obligated to act affirmatively to reject an offer when no consideration has passed to the offeree to impose such a duty. In some instances, however, the offeree does have a duty to speak. In these situations, her or his silence or inaction will operate as an acceptance.

Termination of Offer by Operation of Law

The power of the offeree to transform the offer into a binding, legal obligation can be terminated by operation of law through the occurrence of any of the following events: 1. Lapse of time. 2. Destruction of the specific subject matter of the offer. 3. Death or incompetence of the offeror or the offeree. 4. Supervening illegality of the proposed contract.

Unequivocal Acceptance and the Mirror Image Rule

To exercise the power of acceptance effectively, the offeree must accept unequivocally. This is the mirror image rule previously discussed. If the acceptance is subject to new conditions or if the terms of the acceptance change the original offer, the acceptance may be deemed a counteroffer that implicitly rejects the original offer.

Mailbox Rule

Under this rule, if the authorized mode of communication is the mail, then an acceptance becomes valid when it is dispatched (placed in the control of the U.S. Postal Service)—not when it is received by the offeror.

Counteroffer

a rejection of the original offer and the simultaneous making of a new offer.