No Conditions
Suppose, in our example, you had not placed any conditions in an offer and simply said to your friend, “I’ll sell you my car for $10,000.” Now suppose that he doesn’t respond but, several years later, after receiving a large bonus at work, contacts you to say that he accepts the offer. Suppose further that you no longer want to sell your car, which is now worth twice what you originally offered to sell it for. Are you, as the offeror, now legally bound to sell your car to your friend for $10,000 just because you didn’t impose, as a condition, a deadline on when acceptance must be communicated (e.g., before Sunday at noon)?
The short answer is no. Fortunately for the offeror, the law steps in to impose a reasonableness standard on acceptance of offers. Is it reasonable for the offeree to assume that the offer made by the offeror should remain open indefinitely? In most cases, no. Each case would have to be judged on its own merits but, generally speaking, common sense determines whether an offer is still open for acceptance. Of course, that is not something you should leave to chance and is yet another reason why it is worth learning to write your own business contracts.
2.2c Conditional acceptance and counteroffer
It may have occurred to you that an offeree can impose conditions of his or her own as part of the acceptance of an offer. This creates a conditional acceptance scenario, which is, at law, no acceptance at all. At law, conditional acceptance (as opposed to conditions of acceptance) is considered a new or counteroffer.
To return to our example, your friend, as offeree, may, on the Saturday before the Sunday noon deadline, write the following note to you regarding the sale of your car: “I accept your offer.” In so doing, he will have met your condition and, thereby, accepted your offer in a way that the law will recognize as valid.
What if, on that same Saturday, your friend had instead written, “I accept your offer on the condition that the car is safety certified”? In that case, the offeree has still met the condition imposed on him, but imposed a condition of his own, namely, that the car must be safety certified.
How about, if instead of imposing a condition of his own, your friend (again, on the Saturday before the deadline) had written, “I accept your offer but I am only willing to pay $9,000 for your car.”
In both of these cases (i.e., where the offeree imposes a condition of his or her own on the offeror or changes a term of the offer) the original offer is deemed, at law, not to have been accepted and the offeree to have made a new offer of his own to the original offeror. In other words, the offeree has made a counteroffer and, in the process, has become the offeror. Correspondingly, the original offeror now has become the new offeree.
Most importantly, this now means that the original offer is no longer open for acceptance by the original offeree. He cannot make a counteroffer and keep the original offer open (unless the original offeror agrees to keep it open). As soon as the original offeree makes a counteroffer, he has reversed roles with the original offeror. It is now up to the original offeror whether he, in his new role as offeree, wants to accept or reject the counteroffer.
To bring it full circle, if the original offeror (who is now the new offeree) rejects the counteroffer, then the original offeree (who is now the new offeror) cannot go back and accept the original offer. As noted, it ended with the counteroffer.
Now if the original offeror/new offeree accepts the new offer but with new conditions or changes of his own (e.g., you tell your friend that you will take $9,500 for the car), then he again becomes the offeror and so on until the persons involved either agree on terms or part ways without further negotiation.
2.2d Revocation
To revoke an offer means taking it back. Practically speaking, that entails communicating to the offeree that the offer is no longer open for acceptance by the offeree. To be able to revoke an offer, the offer must not have already been accepted. An offeror cannot legally revoke an offer after it has been accepted. By that point, it is too late. It has become irrevocable. An offer that has been revoked cannot be accepted.
The situation becomes more complicated when there are conditions involved. For example, suppose an offeree has met all the conditions imposed by the offeror, can the offeror still revoke the offer? The answer is no.
What happens, though, if some of the conditions have been met by the offeree but not all of them? In that case, the offer also cannot be revoked. The offeror will simply have to wait to see if the remaining conditions are met by the offeree.
If one of the offeror’s conditions has come and gone without being met by the offeree, there is no need to revoke the offer. At that point the offer is incapable of being accepted.
Finally, it is worth mentioning that an offeree cannot revoke acceptance. Once accepted, the offeree is bound unless he or she can convince the offeror to agree otherwise.
2.3 Consideration
Consideration is the third and final component of a contract and, for our purposes, requires the least explanation. Let’s begin with an example.
I might offer the opinion that “April is the cruellest month.” You might accept that as true. We have an offer and we have acceptance; do we have a contract? Leaving aside the law’s position for a moment, does it even make sense in our everyday affairs to say that our exchange of views amounted to a contract?
Suppose that you offer to kiss your sweetheart and your sweetheart accepts. Did you enter into a contract for a kiss? Again, there is offer and acceptance. Still, I think you’d agree that it is absurd to speak of a contract in that context.
Now suppose that you, as offeror in our previous example, offer to sell your friend your car for $10,000 and he accepts. Is there a contract to buy your car? This sounds more like a contract, doesn’t it? After all, aren’t thousands of cars sold every day under exactly those or similar circumstances? This time, talk of a contract does not seem so absurd. Yet, even in this case, there is no contract, at least as far as the law is concerned.
What is missing is what the law calls consideration, which is what finally draws us together in the eyes of the law.
In the simplest terms, consideration means, “to get something you have to give something.” Agreement to do something is not enough. There has to be value exchanged between the offeror and the offeree before a contract will be found to exist, at law. That is the meaning of consideration.
There is no value exchanged in agreeing that the month of April is the cruellest. Nor is there value exchanged in a kiss (poetics aside). However, if I give my friend a car and my friend gives me money, value has been exchanged. In fact, very tangible value has been exchanged because he now has something to use for his work and I have the means to afford a nice vacation. Each of us has given consideration.
Why would such a seemingly abstract notion as consideration be so important in determining whether a contract exists? The best answer to this question is that the law, again in its wisdom, seeks to enforce bargains. The law does not want to, and shouldn’t, step in to give its opinion on such matters as whether you and I share a common opinion regarding the month of April or whether your sweetheart is obliged to share a kiss. These aren’t legal matters. The law’s purpose, especially insofar as it can force us to comply with our commitments, is directed toward enforcing exchanges of value.
In that regard,
