What is an Offer?
An offer is a clear and unequivocal proposal by a seller to sell goods or services at a specified price, which becomes legally binding once accepted by the buyer. Offers are a fundamental concept in contract law, distinguishing themselves from mere invitations to negotiate or invitations to treat.
Key Characteristics of an Offer
- Definitive Intent: Indicates a willingness to be bound by the terms.
- Communication: Must be communicated to the offeree.
- Specific Terms: Clearly defined terms under which the offer is made.
Examples of Offers:
- Retail Sales: A store advertises a television at a sale price of $499. Buyer accepts and purchases.
- Property Sale: A real estate agent conveys a written offer from a buyer to purchase a house for $250,000 to the seller.
- Service Contracts: A plumber quotes $150 to fix a leak, and if accepted, the job becomes a legally obligated agreement.
Frequently Asked Questions
Q: Can an offer be revoked?
A: Yes, an offer can be revoked any time before acceptance, but the revocation must be communicated to the offeree.
Q: What is the difference between an offer and an invitation to treat?
A: An offer, when accepted, becomes a contract, whereas an invitation to treat is merely an invitation for others to make offers that the inviter is free to accept or reject.
Q: What makes an offer legally binding?
A: An offer becomes legally binding when it is accepted unconditionally, both parties intend to create legal relations, and consideration (something of value) is exchanged.
Q: Is displaying items in a shop window an offer?
A: No, it is considered an invitation to treat, encouraging customers to make an offer to buy.
Q: Can silence be considered acceptance of an offer?
A: Generally, silence does not constitute acceptance, unless agreed upon by both parties or under certain circumstances defined by law.
- Contract: An agreement between parties creating mutual obligations enforceable by law.
- Invitation to Treat: An invitation for others to make an offer, not an offer itself.
- Acceptance: The unqualified agreement to the terms of an offer, thereby creating a contract.
- Offer Price: The price at which an offer is made, distinct from the final purchase or market price.
Online References
Suggested Books for Further Studies
- “Chirelstein’s Concepts and Case Analysis in the Law of Contracts” by Marvin A. Chirelstein.
- “Principles of Contract Law” by Richard Stone and James Devenney.
- “Contract Law: Text, Cases, and Materials” by Ewan McKendrick.
Accounting Basics: “Offer” Fundamentals Quiz
### What happens when an offer is accepted?
- [x] A legally binding contract is formed.
- [ ] The terms of the offer become void.
- [ ] It turns into an invitation to treat.
- [ ] The price of the offer changes.
> **Explanation:** When an offer is accepted without any changes, it forms a legally binding contract between the parties.
### Can an offer be revoked after acceptance?
- [ ] Yes, at any time.
- [x] No, it cannot be revoked after acceptance.
- [ ] Only if the offeror provides a valid reason.
- [ ] Yes, within 24 hours.
> **Explanation:** Once an offer is accepted, it becomes a legally binding contract, and revocation is not possible.
### Is displaying goods in a shop window an offer?
- [ ] Yes, it is an offer.
- [x] No, it is an invitation to treat.
- [ ] Only if the price is also displayed.
- [ ] Only during a sale.
> **Explanation:** Displaying goods in a shop window is an invitation to treat, inviting customers to make offers.
### What is necessary for an offer to be legally binding?
- [x] Definitive intent and communication.
- [ ] Multiple offers from different parties.
- [ ] It should be vocalized publicly.
- [ ] It must always be in written form.
> **Explanation:** For an offer to be legally binding, it must show definitive intent and be communicated to the offeree.
### Which term describes the process that leads to a legally binding agreement?
- [ ] Negotiation.
- [ ] Bargaining.
- [x] Acceptance.
- [ ] Cancellation.
> **Explanation:** Acceptance of an offer leads to a legally binding agreement, provided all other elements of a contract are present.
### Who has the power to accept an offer and create a binding contract?
- [ ] Anyone hearing about the offer.
- [ ] Only a third-party observer.
- [x] The offeree.
- [ ] Both offeror and offeree must agree again.
> **Explanation:** Only the offeree has the power to accept an offer and create a binding contract.
### What does it mean if terms of an offer are specific?
- [ ] The offer cannot be revoked.
- [x] The terms are clearly defined and understood.
- [ ] The offer lasts indefinitely.
- [ ] There must be multiple offers.
> **Explanation:** Specific terms indicate that the conditions under which the offer is made are clearly defined and understood by both parties.
### What is an example of an invitation to treat?
- [x] Auction listings.
- [ ] A car sale advertisement with fixed terms.
- [ ] An agreement signed by both parties.
- [ ] An accepted job offer.
> **Explanation:** Auction listings are invitations to treat, inviting people to make offers.
### When can an offer be revoked?
- [x] Any time before acceptance.
- [ ] After it has been accepted.
- [ ] Only hours after it has been made.
- [ ] Once it is communicated, it can’t be revoked.
> **Explanation:** An offer can be revoked any time before it has been accepted.
### What does not constitute acceptance of an offer?
- [x] Silence.
- [ ] A signed contract.
- [ ] An email stating acceptance.
- [ ] A verbal agreement in the same terms as the offer.
> **Explanation:** Generally, silence does not constitute acceptance of an offer unless specifically agreed upon.
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