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What is a Valid Offer?

7. What constitutes an “offer” to contract?

The following elements must be present to establish a valid offer to contract.

•    Offeror and Offeree – An offer to contract must contains a specific promise from the the person making the promise (offeror) and a specific demand of the individual receiving the offer (offeree).

⁃    Example: I tell you that I will sell you a product for $5. I am the offeror and you are the offeree. My offer is to transfer ownership of a product and my demand is that you transfer ownership $5.

•    Intent to Make an Offer – The offeror must intend to make the offer. Whether there is intent to make an offer is judged from the position of the offeree. If a reasonable person in the position of the offeree would believe the offeror’s words or actions constitute an offer, it is an offer. This is an objective, rather than subjective, standard for determining whether the intent to make an offer exists.

⁃    Example: I shout out loud in frustration that I would sell my piece-of-junk care for a $100. The words look like an offer to sell my car. In reality, I am simply espousing my frustration. I do not have the intent necessary for my statement to constitute an offer and no reasonable person would interpret my statement as truly demonstrating that intent.

•    Definite Terms – An offer to contract must be sufficiently definite. That is, the terms of the offer must be sufficiently specific to allow the offeree to understand and accept the offer. The offeree must understand that she is the intended recipient of the offer and may accept it. Also, the terms of consideration must be stated.

⁃    Example: Simply stating that I will sell you an item “for a reasonable price” is not sufficient to constitute a definite offer. Most advertisements, catalogs, and web page price quotes are considered too indefinite to form the basis for a contract. To be sufficiently definite, the advertisement must be specific about the quantity of goods being offered and who is the intended offeree.

⁃    Note: There is an exception to this rule for the sale of goods pursuant to the terms of the UCC. Some contracts for the sale of goods can leave open non-quantity terms to be decided at a future time.

Remember, the above elements do not have to be in writing or formal. Further, the parties do not have to realize that their words or actions constitute a valid contract; rather, each element is judged by an objective standard. That is, how would a reasonable person perceive the actions potentially constituting an offer?

•    Discussion: How do you feel about the requirement that a contract meet this level of formality? Should it be more or less formal, and why? How do you feel about the fact that individuals can form a contract without fully realizing that their agreement is legally enforceable?

•    Practice Question: Ashton is reading looking at the merchandise for sale on Smart Clothes Corp’s website. He places an order for a new shirt and goes through the process of setting up an account and attempting to pay. At the end of the process, he gets notification that his purchase is discontinued and cannot be purchased. Ashton is furious and wants to sue Smart Clothes for breach of contract. If he does, what is the likely legal result in this situation?

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