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CHAPTER 6
OFFER AND ACCEPTANCE
Answers to Learning Objectives
1. A valid contract is created by agreement of the parties. This agreement exists when one party
makes an offer and the other party accepts that offer.
2. An offer is a proposal to make a contract and, if accepted, binds the offeror. An acceptance of
an invitation to make an offer does not bind the person making the invitation.
Lesson Outline
1. An agreement is reached when one party makes an offer and the other party accepts the offer.
The intention of one party to make or to accept an offer may be inferred from acts if a party’s
conduct leads the other party reasonably to believe an offer is made or an acceptance is
intended.
3. Advertisements, window displays, price lists, etc., are not offers, but are invitations for
customers to make offers.
4. Duration of an offer is affected by the following factors:
a. An offer may be revoked by the offeror at any time prior to acceptance.
b. An option cannot be revoked at will.
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6. If the offeree varies or qualifies the terms of the offer, even if intending to accept the offer,
this becomes a counteroffer, which in turn must be accepted by the original offeror to create a
contract.
Comments on Cases
(p. 58) In this case it was clear that one of the parties to the alleged contract, Smelser, did not
agree since the main item he wanted in any settlement agreement was a “lifetime
warranty.” Since Price never told him about the letter with the alleged settlement terms
he could not possibly have agreed to it. DaimlerChrysler Corp. v. Smelser, 375 Ark. 216
(Ark.)
(p. 60) The court pointed out that price quotes “are a daily part of commerce by which products
are shopped and commercial transactions initiated.” They are generally not offers that
could be accepted to form binding contracts. The court noted that it would not be
possible to shop for products if every price quotation exposed the “quoter” to an
enforceable contract on whatever terms the other party chose regardless of product
availability. Audio Visual Associates, Inc. v Sharp Electronics Corp., 210 F.3d 254 (4th
Cir.)
(p. 62) Conference America’s performance of the deactivation services requested by Conexant
constituted a series of unilateral contracts, one for each leader account. If Conexant had
informed Conference America that it did “not agree to any new terms governing our
relationship” before Conference America performed the service, the notice by Conexant
could have been considered a revocation of its offer, and Conference America would
have acted at its peril in performing the service. Because Conexant did not communicate
its withdrawal until August 1, after the service had been performed, there was a series of
contracts between the parties. Conference America, Inc. v. Conexant Systems, Inc., 508
F. Supp.2d 1005 (M.D. Ala.)
(p. 64) In this case there were actually two contracts that had to be made: the contract for sale of
the house and then the agreement on the repairs. When the agreement on the repairs
could not be reached because of Albright’s counteroffer, the contract for sale of the house
was terminated. Albright v. McDermond, 14 P.3d 318 (Colo.)
Answers to Questions
(Page 66)
1. Yes, a binding contract can be formed if one party’s conduct reasonably leads the other party
to believe that the first party intends to enter into a binding contract.
2. The two essential elements of a contract are an offer, either expressed or implied and an
acceptance, either expressed or implied.
7. An offer is open for acceptance until the time specified in the offer expires. If no time is
specified, the offer can be accepted within a reasonable length of time.
8. (Answers will vary) Silence constitutes acceptance of an offer when the offeree accepts the
benefit of offered services with reasonable opportunity to reject them, knowing compensation
is expected; when the offeree accepts the benefit of offered services with reasonable
opportunity to reject them, knowing compensation is expected; or when because of previous
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Answers to Case Problems
(Page 66)
1. No. An offer that can become the basis of a contract must be reasonably definite and
adequately cover the essential terms of a proposed transaction. The only potential
offer in this case was the phone call. But the circumstances of the call and the call
itself indicated the parties intended to be bound by a written agreement. Principal
Life Ins. Co. v. Revalen Development, LLC, 358 S.W.3d 451 (Tex. App.)
4. No. The fact that Silber sent a subsequent letter attempting to negotiate the terms of his
reinstatement and indicating that there was no point in “moving forward” unless one term
was resolved proved that no oral agreement had been reached. Silber v. New York Life Ins.
Co., 938 N.Y.S.2d 46 (N.Y. A.D.)
5. No. The request for a title insurance commitment was clearly not a change in terms because
it was only a request. With regard to the title, the obligation of a seller in a contract to sell
land, in the absence of any other stipulation or condition, is to convey a good and marketable
title. Muilenburg, Inc. v. Cherokee Rose Design and Build, L.L.C., 250 S.W.3d 848 (Mo.
App.)