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The following examples are generic, in the sense that they are not summaries of the
chapters in your text. Rather the examples are drawn from my knowledge and experience;
my practice; variety of relevant articles and books read; and case law researched
PART 1: UNDERSTANDING FORMATION OF CONTRACTS - INVITATION TO
TREAT, OFFER, EVENTS BRINGING OFFER TO AN END, CONNSIDERATION AND
ACCEPTANCE, APPLICABLE TO
1. Offer vs. Invitation to Treat:
Example 1: A says to B, “would you like to but my car” or “I am interested in
selling my boat”, or B says to A, “are you interested in buying my car?”
All of these statements are invitations to treat, meant to open up
negotiations to get the next step which is an offer.
Example 2: A goes onto a department store, where the clothes are displayed on
the racks with the prices on them. A takes an article of clothing from the
rack priced at $ 6.00 and takes it to the cashier. A hands $ 6.00 to the
cashier. The cashier, who has the ability to accept or reject the money,
Here, the display of goods on the racks, is merely an invitation to treat.
The offer (which is an offer to purchase by A made to the cashier) is made
by A when A takes the goods off the rack to the cashier. Then the cashier
accepts the offer, when the cashier tells A the price.
Example 3: A and B are discussing the purchase of A's car which is 3 years old.
During the discussions, A says to B, "I am happy to sell you the car", or
"here are copies of my work orders for repairs and upkeep to the car."
In this case, both of A's statements are merely invitations to treat.
Example 4: A says to B, “I will sell you my car for $500.00. This is another
way of A saying to B, I promise to sell you may car for $ 500.00 or “I offer
to sell you my car for $ 500.00. Each form of statement is an offer,
because it is a promise made by A intended to have legally binding
consequences if B accepts. Note that both the subject matter (the car) and
the price must be contained in an offer.
2. Termination of Offer:
A: By Rejection:
Example 1:A offers to sell his car to B for $ 500.00. If B says no, or I am not
walks away, or remains silent, saying nothing, he has rejected A’s
Example 1: A offers to sell his car to B for $ 500.00, but before B has a chance to accept, A
says to B, I am revoking (withdrawing or taking back) my offer. This is a direct
revocation of A’s offer by A and the offer is over.
Example 2: On June 10, A delivers to B a written offer to sell his car for $ 6,000.00. The offer
states that it will be open for acceptance until 9 a.m. on June 12. On June 11, B
hears that A is agreeing to sell his car to C. On the evening of the 11th, B goes to
A’s house and delivers a written acceptance of A's offer. On the following
morning, B personally tells A he accepts. However, A, refuses the acceptance
saying, you are too late. I have sold the car. B now sues A alleging that there is a
contract between them under which A had to sell the car to B.
Here, at common law, although the offer stated that it would be open for
acceptance until 9 a.m. on the 12th, it was not binding on A, who did not have to
(or was not required to) keep the offer open to 9 a.m. on the 12th. For this
reason, A could revoke his offer at any time before acceptance. Also, at common
law the offer had been effectively revoked (withdrawn or taken back) by A,
because B had learned in advance that A was selling to someone else. In other
words, A’s revocation came through and was communicated to B by a third party
and was indirect.
Please note that if A had made his offer to B irrevocable to 9 a.m. on the 12th,
(meaning that it could not be revoked until that time) then A would have had to
keep his offer to B open for B’s acceptance until 9 a.m. on the 12th so that so long
as B communicated his acceptance to A before that time, the acceptance would
have been enough to create a contract between A and B.
Example 3: On August 1st, A sends an offer to B which says I will to sell you my car for $
6,500.00 and my offer will be open for acceptance until August 15th. A receives
no other offers between August 1st and 15th, and on August 17th B decides to
accept A's offer.
Here, because the offer specified a time for acceptance, once the time for
acceptance by B had expired (was not accepted within that time) there is no
contract. The offer had been revoked because of B's failure to accept within the
specified time period
There are fours kinds of Lapse:
1. Rejection (see above)
2. Death of the offeror after making the offer, but before acceptance. The offer has lapsed,
because there is no one for B to communicate his acceptance to.
3. Death of the offeree before he accepts the offer. The offer has lapsed because the offeror
B, being dead, cannot communicate acceptance to the offeror.
4. Failure to accept the offer within a reasonable time, based on the subject matter of the
goods being offered. See below:
Example 1: On June 1st, A offers to sell 40 bushels of grapes to B. B waits until June 22nd to
accept A's offer. However, by this time, A has sold the grapes to C. B now sues A
saying they have a contract. In this case we will assume that the storage period for
perishable grapes is 2 weeks after which they cannot be sold for their full value.
Here and leaving aside the ability of A to accept another offer, given the
assumption above about the storage period for grapes, a court would probably
hold that the offer had lapsed around June 14th if not sometime before that date,
so that A was free to sell to someone else after the offer had lapsed. Common law
says that A must have the right to sell his perishable goods to someone else if B
does not accept within a reasonable time before they go bad and can no longer be
Example 2: Instead of perishable goods, A offer to sell steel beams to at 1,000.00 per steel
Here given that the subject matter of the offer will last a long time, a
reasonable time for acceptance might be a month to a number of months,
depending on the marketability of the steel beams.
D: Counter Offer:
Example 1: A offers to sell his car to B for $ 6,000.00 and B says I will buy the car from you
for $ 4,000.00. B has made a counter offer which is actually two things, a
rejection of A's offer and a new offer by B.
In this situation A was the original offeror and B the offeree. However, the
moment that B made his counter-offer of $ 4,500.00, it brought A’s offer to an
end (it can never be accepted) and making B the offeror and A the offeree. If A
accepts B's offer of $ 4,500.00, there is a contract. However, assume that A's
response to B's counter offer is simply "I will not sell it for less than $ 5,000.00”.
Here, A's statement is a new counter-offer, ending B’s counteroffer and making A,
once again, the offeror and B the offeree. If B agrees to pay the $ 5,000.00
amount, there is a contract.
3: Communication of Acceptance:
Example 1: A offers to sell his car to B for $ 6,000.00.