In our daily lives, we may encounter many forms of contract such as an insurance policy, lease agreements, employment contract, non-disclosure agreement etc. Even a marriage license is a type of legally binding contract. Hence, one should have a comprehensive knowledge of all the essential aspects of a contract. It can be defined as a written or oral agreement between two or more parties that is enforceable under law.
Furthermore, all the parties involved should be mentally sound and agree to enter the contract voluntarily. An agreement has three main components – offer, acceptance, and consideration. Additionally, one should also know about the communication of offer and acceptance.
Consideration
Consideration is an act of value that one of the parties provides to another in exchange for successful fulfillment of the terms and conditions of the contract. Without it, an agreement is null and void. However, consideration needs to satisfy some parameters to be considered valid – it should not involve illegal or fraudulent activities, such as causing damage to a person or property. Moreover, it should be offered at the desire of the promisor. It can also come from a third party.
Offer
Before a contract is drawn up, an offer is placed by one party to another. An offer is a promise to perform or abstain from an act at the desire of the other party in exchange for consideration. It should also contain a statement that communicates intent to enter into a contract.
The party that makes an offer is known as the offeror, and the individual who accepts it is known as an offeree. For instance, if A offered to paint B’s house for a sum of money, then A is the offeror and B is the offeree. An offer can be categorized into two types – unilateral and bilateral.
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Unilateral – It is a type of offer that is made to the general public at large. This type of offer includes only the promisor who makes an open offer which anybody can enter into. For instance, advertisements can be considered unilateral offers. Display of goods by a vendor can also be a unilateral offer as any individual can choose to buy a product or service from a shopkeeper which results in a contract. In this case, the offeror does not wait for communication of acceptance.
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Bilateral – An offer that is made to a specific individual or a group of individuals is called bilateral. In this type of offer, acceptance must be communicated, and all parties involved promise to provide some consideration to others.
Communication of Offer Acceptance and Revocation
An offer can only be considered valid after it is communicated to the offeree. Communication of offer in contract law is only complete when it is conveyed to the other party and is accepted by them. The offer can be dispatched through any common means such as post, email, telephone or through word of mouth.
Additionally, communication of acceptance of an offer is also necessary since an offer only becomes a contract after the individual to whom it was sent gives his or her consent to it. Some conditions need to be met while accepting a proposal which has been given below –
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Acceptance must be communicated to the offeror through written or oral means as silence will not be considered a valid form of approval.
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The communication of acceptance of an offer should be absolute.
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The offer will be considered accepted, once the promisee dispatches their acceptance.
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In case of instantaneous communication in contract law cases, such as telephone, email, fax, a contract will form only when the offeror receives the offeree’s acceptance. It is not so in the case of postal communication.
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It is also vital that the communication of acceptance is carried out either by the offeree or an authorized agent hired by him or her. If any other individual dispatches the approval, it is not considered valid.
An example of communication of acceptance cases is the Powell vs Lee case; Powell applied for the post of headmaster which was accepted by members of the school board. Plaintiff heard through a person who was on the board that he had been appointed for the post.
However, he later came to know that he was not selected and he sued the school board for breach of contract. The court ruled that since the communication of acceptance was not relayed by an authorized agent, there was no breach of contract.
Communication and Revocation of Offer and Acceptance
Revocation of the offer refers to when an offer has been terminated or canceled. A proposal can be revoked by the offeror at any time before the communication of acceptance is dispatched by the offeree but not afterwards. On the other hand, the offeree may revoke his acceptance any time before the post conveying it reaches the offeror but not later than that.
A revocation of a proposal may take place in the following instances –
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When the offeror passes away or gets diagnosed as mentally incompetent, and the offeree comes to know the fact before the communication of acceptance of a proposal.
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When the offeror notifies the other party regarding the Revocation of the offer
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After the time specified by the offeror has passed. Additionally, in situations where no time has been stipulated, then the offer can be rejected after a reasonable amount of time has been mentioned.
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The offeror can reject the proposal if the other party fails to fulfill a necessary condition