Offer and Acceptance in Contract Law
You can ask our online solicitors for advice on offer and acceptance in contracts using the question box on the front of our website or the following free legal advice guide may answer your questions.
All contracts require an offer and acceptance of that offer to be valid under contract law. There may be situations where on the surface it may appear that there has been an offer and acceptance but when it is explored in detail, the court may conclude that there has been some uncertainty about what has actually been agreed.
If a contract is vague for example and it refers to something that is too vague, effectively a contract won’t exist. However, it doesn’t mean that every detail of the contract must be agreed in advance.
In service based contracts the specific amount to be paid is not included and will be added at the time the agreement is made. This is covered under Section 15 of the Supply of Goods and Services Act 1982. This Act will state that a reasonable charge can be requested, and it will be treated as a question of fact.
Contract Offers Explained
When a contract is created, there will need to be some form of offer made by an ‘offeror’. This will be an individual or business who has ownership of a product or service that is being offered. The other party entering into the contract will be the ‘offeree’ and they will be the individual or company accepting the offer and who will provide something in return for the product or service, usually of monetary value. The result of this would be a legally binding agreement which would be signed by all parties.
There are two main elements to an offer, an expression and an intention.
- Expression – The parties demonstrate in some way that they intend to enter into a contract, and this will be legally binding upon acceptance. An expression can take a variety of forms such as a letter, correspondence between parties or even an order form.
- Intention – Intention relates to a presumption held by both parties that the agreement will be legally binding and that both parties agree to be bound by the rights and obligations within the contract.
Offers can be simple such as an informal agreement between friends through to a complex legal agreement for the transfer of property or a business.
Acceptance is a term used to describe the process through which all parties involved agree to the terms of the contract but also their obligations too. Once an offer has been agreed and the contract signed by all parties it becomes legally binding and you will be under a legal obligation to fulfil your duties under the contract.
In some contracts, there may be a party who will incorporate a meaningless phrase which would enable them to exit from the contract if they wanted to do so and base their reason on uncertainty. However, this phrase must form a significant part of the contract. If the phrase can be removed from the contract and it would still function perfectly well without it, the court may consider the phrase as meaningless and therefore they will ignore it.
An Incomplete Agreement
When a contract is created and it leaves something that is undeterminable or undecided, the courts will not take steps to enforce it. Perhaps this could happen when something is clearly stated in the contract, but they don’t settle a significant aspect of contractual terms. If, for example you had a contract and you said that the date of payment and the price were to be agreed from time to time, the court would deem this contract not to exist.
This is because the parties hadn’t left the price open, they had simply stated that the price would be agreed at some point in the future. The courts currently rule out contracts which are based on an ongoing relational nature. They much prefer terms to be clearly stated from the outset, so all parties know exactly what the terms of the contract are and the obligations.
In terms of incomplete contracts, i.e lacking offer and acceptance it will not be regarded as such if it provides ‘machinery’ for resolving any issues that have been left uncertain. When the issue of price presents a problem, the court will assume that a reasonable price was always an intention. In these situations, the contract will form a mechanism through which any ambiguity can be resolved.