Meaning of Offer and Acceptance: Everything You Need to Know
The meaning of offer and acceptance is the basis of a contract. To form a contract, there must be an offer made by one party.3 min read
2. Elements to Acceptance
3. Assent Versus Meeting of the Minds
The meaning of offer and acceptance is the basis of a contract. To form a contract, there must be an offer made by one party which is, in turn, accepted by another party, and then, in most cases goods and/or services must be exchanged between the two.
Elements to an Offer
In contract law, the party making the offer is called the “offeror.” Put simply, this is the person or company that has ownership in some form of the goods and/or services being offered.
The other party to the agreement is called the “offeree.” This is the person or company willing to pay the other party some form of compensation in order to use or acquire ownership of the goods and/or services. The result of this agreement is a legally binding contract, which is usually, but not always, finalized through the signatures of both parties.
There are two parts to any offer:
- The Expression: This is where the parties articulate in some form an inclination to enter into a contract and to make that contract legally binding upon the acceptance by both parties. The expression may take a wide variety of forms, from a personal discussion to a letter that lays out the basics of the terms.
- The Intention: This is a slightly more vague concept, and it is often left up to the courts to determine whether or not intention was breached by a party. Essentially, intention involves a presumption by both parties that the agreement will be legally binding and comes down to the belief that neither party would begin discussions without the intent to live up to their side of the bargain.
Offers can really cover anything, from a verbal agreement to provide a service, such as housesitting, to a detailed contract with legal terminology that one may find in an agreement to transfer real estate. It’s more than a promise, because it must be made with the understanding that what is being agreed to will be legally binding. It can be for the sale of goods, a pledge to perform a service, or even a promise not to engage in an activity. The more complex the agreement, the greater the likelihood will be that each party would engage legal counsel to negotiate the contract.
Elements to Acceptance
Acceptance is the final agreement of both parties to consent to the terms of the offer. While it is common for the terms of the offer to be negotiated before acceptance, if it can be shown that through conduct and communications that the parties did in fact intend to agree to the final terms of the contract, then formal acceptance of an offer is not required for it to be legally binding.
It is also not always necessary that acceptance be in the form of a signature on a piece of paper, although this is the most commonly accepted agreement between parties. For instance, if a party performs an act that would not otherwise happen, such as a painting contractor painting a house or a professional moving company moving furniture from one location to another, it would be interpreted as acceptance and agreement to the terms of the offer of payment for these services.
Assent Versus Meeting of the Minds
A long held and essential element of whether or not a contract is valid is that a “meeting of the minds” existed between the parties when they entered into contract. Thus it was a common defense against breach of contract for a party to argue that they never were of a mind to intend to be bound by the contract.
However, establishing that a “meeting of the minds” did indeed exist is difficult and is no longer the sole criteria used by a court to determine a contract’s validity. Factors such as conduct and assent indicate the intention to enter into the agreement and outweigh the “meeting of the minds” criteria.
Contracts are the very essence of the way individuals and companies agree to exchange practically everything that anyone can imagine. If one party owns something and another party wished to use it, and is willing to pay for that right, a contract is the safest way to make sure both parties are protected in the case of something going wrong. No matter how minor or major the exchange, it all starts with an offer being made and that offer being accepted.
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