§ 1.11 Offer Defined

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An offer is an expression by one party of assent to certain definite terms, provided that the other party involved in the bargaining transaction will likewise express assent to the same terms.n1 An offer looks forward to an agreement-to mutual expressions of assent.

Can it properly be said that an offer-a mere expression of assent to certain terms by one party-before any acceptance or similar expression of assent by the other party, has any legal operation whatever? There are some cases in which it can properly be said that such an expression of assent has no legal operation. There are certain persons who may be quite capable of expressing assent to certain terms, and yet in whom the law recognizes no capacity to make a contract. Various limitations on such legal capacity are discussed elsewhere. Moreover, there are expressions of such assent looking toward non-contractual illegal bargains. Furthermore, there are expressions of assent looking forward to a similar expression of agreement by another party, and yet no effect will be given to these expressions by the law, because it has not been customary to do so. Two friends may mutually agree to meet at lunch or to play golf together, without in any way affecting their legal relations. The differences between such social engagements and a business agreement that constitutes a contract will be discussed in a subsequent Section.n2 It should be observed here, however, that, as the term ''offer'' has been defined above, the offer may or it may not be a legally operative fact.

The definition of offer that has been discussed above is an attempt at a factual description, without any reference whatever to the legal operation of the facts so described. There are two kinds of questions that are presented to the courts for their solution. First. What were the facts that occurred or existed? This question must be answered by making a historical investigation, by receiving oral testimony and other evidence, and drawing inferences therefrom. Secondly. What is the legal operation and effect of the facts that are found to have existed? When an offer is made as a part of a lawful business transaction that looks to an exchange, and is made by a person possessed of full contractual capacity, it has legal consequences. Generally, when lawyers and courts use the term ''offer,'' this kind of offer is meant and hereafter this treatise will use it in this sense. It is believed that the best short description of these legal consequences is that an offer creates a power of acceptance in the offeree.n3 With respect to the resulting legal relations, offer and acceptance may be defined thus: An offer is an act whereby one person gives to another the legal power of creating the relation called contract. An acceptance is the exercise of the power conferred by the offer, by the performance of some other act or acts. Both offer and acceptance must be acts expressing assent.n4 It will not be disputed by any one that, after an offer is made, a voluntary expression of assent by the offeree is all that is necessary to create what we call contract. This is what is meant, and it is all that is meant, by saying that an offer creates a power of acceptance in the offeree. The exercise of this power by the offeree will create a very important change in the legal relations of the parties. But the power to bring about this important change by the act of acceptance is itself an important juristic fact, and it is the legal result of the offer standing quite alone. For this reason, it seems to be reasonable and convenient to say that the offer may be an operative fact creating a new legal relation-the relation of power in the offeree to create new changes in legal relations, with the correlative liability in the offeror that such a change will take place without any further action or expression on the offeror's own part.

What kind of act creates a power of acceptance and is therefore an offer? It must be an expression of will or intention. It must be an act that leads the offeree reasonably to believe that a power to create a contract is conferred.n5 This applies to the content of the power as well as to the fact of its existence. It is on this ground that we must exclude invitations to deal or acts of mere preliminary negotiation, and acts evidently done in jest or without intent to create legal relations. All these are acts that do not lead others reasonably to believe that they are empowered ''to close the contract.'' So long as it is reasonably apparent that some further act of the purported offeror is necessary, the purported offeree has no power to create contractual relations, and there is as yet no operative offer.n6

An expression of willingness to make a contract is not an operative offer unless it is made in such a manner as justifies another person in thinking that it is directed to him or her for acceptance. An oral statement of such willingness made to a third person who has no authority to communicate it is not an operative offer; and a written statement to the same effect is not an offer, even though without any authorized delivery and without negligence it becomes known to a person who tries to accept. So also the mere passing of a resolution by a board of directors or by a town council, uncommunicated by them or by anyone with authority, creates no power of acceptance in one who learns of it in some fortuitous manner.n7 A legislative enactment promising exemption from taxation, addressed to no specifically named party, is almost certain to be held not to be an offer of a contract.n8 Similarly, a report of a community association to property owners conveying projections with respect to fees and costs after a proposed acquisition of a water company is no offer.n9

In order to be legally operative and to create a power of acceptance, it is necessary that the offer shall contain all the terms of the contract to be made. It is not enough for one party to promise to do something. This party must also say what the other party must do in exchange.n10 If A says to B: ''I will sell and convey Blackacre to you,'' and B replies: ''I will pay you $5,000,'' no contract has been made as yet. In order to make a bilateral contract, the offer must state the terms of both the promises to be made; one party offers to exchange a specified promise for a similarly specified promise by the other party. By acceptance, the other party not only makes the requested return promise, but also assents to the exchange of the two specified promises as offered.

As is the case with most working definitions of legal terms, the definition advanced here is not fully understandable without multiple illustrations based on concrete cases. These are given in later sections of this volume.n11

Legal Topics:

For related research and practice materials, see the following legal topics:

Contracts LawFormationOffersGeneral OverviewContracts LawFormationAcceptanceGeneral OverviewContracts LawTypes of ContractsBilateral Contracts

FOOTNOTES:

(n1)Footnote 1. This definition is used in Spenard Plumbing and Heating Co. v. Wright, 370 P.2d 519, 524 (Alaska 1962) . The Restatement (Second) of Contracts § 24 provides: ''An offer is a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to the bargain is invited and will conclude it.'' It differs from the original Restatement's definition primarily by omitting the idea that an offer is necessarily a promise. For a defense of the idea that an offer is a promise, see Samuel Williston on Contracts § 24A (3d ed.) Under the newer Restatement definition, a proposal looking to a sale or a barter may constitute an offer even though no promise is made. Nonetheless, it will be conceded by all that most offers are promissory. The United Nations Convention on Contracts for the International Sale of Goods (see § 1.21 below) defines ''offer'' inferentially in Article 14, providing that ''A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates an intent to be bound in case of acceptance... A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal.'' This language bristles with legal rather than merely factual terms: ''contract,'' ''sufficiently definite,'' and ''intent to be bound.''

(n2)Footnote 2. See § 2.13 below.

(n3)Footnote 3. This section is cited (also § 1.13) in Myers v. Buff, 45 N.J.Super. 318, 132 A.2d 543 (1957) . A broker wrote to his principal, ''In accordance with our conversation, we have quoted a price of $7400'' to a named prospective purchaser. This letter was held to satisfy the New Jersey brokerage statute. The word ''quoted,'' under the circumstances, meant ''offered''; and it is reasonably implied that the owner had ''promised'' to pay a commission.

(n4)Footnote 4. Calo, Inc. v. AMF Pinspotters, Inc., 31 Ill.App.2d 2, 176 N.E.2d 1 (1961) .

In United States v. Farina, 153 F.Supp. 819 (D.N.J.1957) , the court held that the defendant, by merely making a collusive bid to supply goods, was not guilty of a violation of the ''False Claims Act.'' By ''claim'' is meant ''a demand for money or property to which a right is asserted. ... Being essentially an offer, a bid creates no rights.'' The defendant had asserted no ''right'' or ''claim'' against the government; he had merely created a power of acceptance. See also § 626.

(n5)Footnote 5. In Frederics, Inc. v. Felton Beauty Supply Co., 58 Ga.App. 320, 198 S.E. 324 (1938) , overruled on different grounds, Willis v. Hill, 116 Ga.App. 848, 159 S.E.2d 145 (1967) , the sending of a complete documentary contract signed by the Vice President of a corporation justified the other party in believing it was an offer empowering it to consummate the contract by signing it and mailing it back.

In U.S. Rubber Co. v. Silverstein, 229 N.Y. 168, 128 N.E. 123 (1920) , a father and two sons were separately in business, and all had dealings with the plaintiff. The father wrote, without specifically naming his sons: ''send them separate statements, but I am good for what they buy.'' The jury found that this included both of the sons. Cardozo, J., said: ''The promise, if uncertain, was to be taken in the sense in which the promisor had reason to suppose it was understood by the promisee. The jury were to fix the meaning in the light of all the circumstances.'' The defendant's offer created such power in the offeree as its terms led him reasonably to believe that it did and as the defendant should have foreseen that it would.

(n6)Footnote 6. Bank of Benton v. Cogdill, 118 Ill.App.3d 280, 73 Ill.Dec. 871, 454 N.E.2d 1120, 1125-26 (1983) .

(n7)Footnote 7.

N.J. - Mayor of Jersey City v. Harrison, 72 N.J.L. 185, 62 A. 765 (dissenting opinion) (1905). We are not here dealing with the effect of such a resolution as an act of legislation.

(n8)Footnote 8.

U.S. - Wisconsin & M.R. Co. v. Powers, 191 U.S. 379, 24 S.Ct. 107, 48 L.Ed. 229 (1903) .

Ind. - Grand Lodge Hall Ass'n v. Moore, 224 Ind. 575, 70 N.E.2d 19, 173 A.L.R. 6 (1945) , aff'd, 330 U.S. 808, 67 S.Ct. 1088, 91 L.Ed. 1265 , cert. denied, 331 U.S. 864, 67 S.Ct. 1201, 91 L.Ed. 1869 .

N.Mex. -Tax abatement legislation was found to be an offer in Board of County Commissioners v. N. Mexico and So. Pac. Ry., 3 N.M. 126, 2 P. 376 (1884) .

Cf. State v. Baltimore & O.R. Co., 127 Md. 434, 96 A. 636 (1916) , where the legislative act was addressed directly to the railroad company as a compromise of previous tax disputes.

See also, Alliance of American Insurers v. Chu, 77 N.Y.2d 573, 569 N.Y.S.2d 364, 571 N.E.2d 672 (1991) (Hancock, Jr., dissenting).

(n9)Footnote 9. Chasan v. Village Dist. of Eastman, 128 N.H. 807, 523 A.2d 16 (1986) .

(n10)Footnote 10. See Klimek v. Perisich, 231 Or. 71, 371 P.2d 956 (1962) .

Like any other word in any language, the word ''offer'' may be used by any person with an idiosyncratic meaning. Thus, in Molero v. California, 145 So.2d 602 (La.App.1962) , a contract provided that the defendant must pay $37,500 as liquidated damages if he should within one year ''make an offer'' to the owner for a mineral lease on certain land. The court held on sufficient extrinsic evidence that the contractors did not mean by ''offer'' merely a proposal that would create in the owner a power of acceptance; they used the term to include ''concerted, bona fide, serious and persistent'' efforts to obtain a lease.

(n11)Footnote 11. Sections 2.2-2.34 below.