What is offer and acceptance?

The four elements, briefly

Offer, acceptance, consideration and an intention to create legal relations. All four have to be present, and a fifth requirement, certainty of terms, sits alongside them: an agreement so vague that a court could not say what either party had to do is unenforceable however sincerely it was made. In commercial dealings the intention element is presumed, so businesses rarely argue about it. In family and social arrangements the presumption runs the other way. What that means practically is that most commercial disputes about formation turn on whether an offer was accepted, whether it was still open, and whether the terms were certain enough, rather than on whether anybody meant it.

Invitation to treat, and why it matters

An invitation to treat is a step before an offer: it invites others to make offers, without committing the person making it. A price list, a catalogue, a shop display and a request for tender are all invitations. The distinction protects a seller from being obliged to supply at an advertised price to more people than they can serve, and it decides who is offering and who is accepting, which in turn decides whose terms apply. That last point is the commercially important one. If a buyer's purchase order is the offer and the supplier's delivery is the acceptance, the buyer's terms govern, which is exactly what buyers intend when they print terms on the back.

Acceptance has to be unqualified

A reply that agrees but changes something is not an acceptance. It is a counter offer, and it kills the original, which can no longer be accepted unless it is renewed. Businesses do this constantly without noticing: a quotation is returned signed with a note asking for an earlier date, and both sides believe there is a contract at the quoted price. There may be no contract at all, or a contract on different terms, depending on what happened next. The safe habit is to treat any change as a new offer and to confirm the final position in one document that both sides accept, rather than relying on a chain of messages that each altered something.

When acceptance takes effect

Acceptance generally has to be communicated to the offeror, so silence is not acceptance and an unsent reply does nothing. For instantaneous communication, which now includes email in most practical settings, acceptance takes effect when it is received rather than when it is sent, though the detail varies with the circumstances and with electronic transactions legislation that addresses when a message is taken to be received. Where the parties are in different places and timing matters, the sensible response is to write the rule into the document: state that acceptance is effective when the signed copy is received at a named address, and the question stops being interesting.

The battle of the forms

A buyer sends an order on their terms. The supplier acknowledges on theirs. Goods are delivered and accepted. Whose terms govern is a question with no elegant answer, and the traditional analysis gives it to whoever fired last before performance, which is usually the supplier's acknowledgement. Neither side plans for this and both discover it during a dispute about liability. Two habits reduce the risk. Read what the other party actually sent rather than assuming it matched what you sent. And where the terms matter, agree them separately in a signed document before any order is placed, so the exchange of forms is administration rather than negotiation by ambush.

Withdrawing an offer

An offer can be withdrawn any time before it is accepted, provided the withdrawal is communicated. An offer held open until a stated date can still generally be withdrawn before then, unless the promise to keep it open was itself supported by consideration or made in a deed, which is what an option is. Offers also lapse: at the end of a stated validity period, after a reasonable time where none is stated, on the death of a party in some circumstances, and upon rejection or counter offer. Printing a validity period on a quotation is the practical version of all of this, and it costs one line.

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