Chapter 5 - Formation of contracts
The importance of contracts
3 aspects of a contract:
- An expression by one party to another that he/she is willing to enter into a legal and binding
agreement if the other party will accept.
- “Offeror” – person making the offer.
- “Offeree” –person to whom the offer is made.
(a) Offers vs. Invitations to treat the more general the offer is the more it looks like an
invitation to treat. An offer is made to a specific person or a specific small group of people
with same interest, while an invitation to treat is made to a larger group of people. An
invitation to treat is not capable of being accepted, only an offer is. E.g. a flyer or an
(b) Basic Rules that apply to offers
i) Knowledge: offer cannot be accepted unless this offeree gains knowledge of it. If
offeree doesn’t have knowledge of it, they can’t possibly accept it.
ii) Lapse: Lapse of time, lapse of an offer in this case. Lapse of time that an offer stays
open. (1) Offeror puts a time limit on offer. (2) If the offeror does not put a time
limit, then a reasonable amount of time passes. (3) If offeror dies or lacks mental
capacity, then offer lapses.
iii) Revocation: comes from “revoke”- to pull back/ to take away. The offeror revokes or
withdraws the offer. Once an offer is revoked, it’s off the table (no longer capable of
being accepted.) An offeror can revoke an offer anytime they want even if they
promised to keep it open longer. Revoke in the same form the offer was made to
keep it consistent.
iv) Counter-offer: where the offeree changes the terms of the offer. Once a counter-
offer has been made, the original offer can no longer be accepted (off the table). A
mere inquiry is not an offer. “no but I’ll buy it for $900” counter-offer
4 ways an offer can come to an end:
- Offeree accepts the offer
- Offer lapses