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Offers Counter Offers And Agreements In Contracts

Contract is an agreement of a two parties especially once it is written its enforced law. An agreement refers to a "meeting of the minds". There is no magic language necessary to inform an agreement. However, there is an offer must be made by a person to another and so acceptance. In other words, the sides (parties) of a contract must agree given basic terms in order to avoid any misunderstandings which come up after making contract.

There are few factors for the existence of a contract. One of the basics is an offer and an acceptance of that offer.

An offer can basically be illustrated as a clear statement of the terms on which a party (the offeror) is prepared to make a business with other party (the offeree). In other words making (by offeror) an offer is promising to do or not to do something which is depending on acceptance by other person (by offeree). An offer is perfomered by an offeror to an offeree. In contract, offer can be bilateral or unilateral; bilateral offer – means two sides’ promise to each other, therefore contract made by agreement with respect of two sides (offeror and offeree) in other words, type of contract which requires agreement and performance from both sides (parties) to the contract. One party promises to do A and the other party promises to do B. Unsimilarly, unilateral contract occurs when only one side (party) makes an offer to another party and the other party might accept by action instead of by offering something back. For example, (bilateral offer situation) if somebody offers £20 to a person who will bring him a hotdog, a unilateral contract is formed when a person performs the condition and supplies him with a hotdog.

To ensure that made offer is legal, it must include all 3 points shown below:

Stated terms must be shown clearly

Intention to make a business

Communication of that intention

Once an offer is made by the party, it might:



A counter-offer may be made, which automatically rejects the offer preceding it.

These events are important in the context of contract disputes as it is the order of events that determines the extent of any contractual relationship between the parties in the circumstances.

“Law for business students" Alix Adams; fourth edition; p46, 2006

An invitation to treat.

The essential feature of an offer is that the person making it must (actually or objectively) intend to be bound without further negotiation, by a simple acceptance of his terms. Thus there is no offer where the owner of a house, in response to an enquiry from a person who wishes to buy it, states the price at which he might be prepared to sell; nor even where the owner wishes to sell and invites offer at or about a specified price. In the latter case he is said to make an “invitation to treat", and he is not bound to accept the highest or nay other offer. In border – line cases it is obviously hard to determine with what intention the statement was made: but the difficulty is mitigated in two days. First, it is enough to show that the statement was reasonably understood by the person to whom it was addressed as indicating an intention to be bound; and secondly, the character of certain frequently-recurring types of statements is settled by rules of law, at any rate in the absence of clear evidence of contrary intention.

Thus it is generally accepted in England that a display of price-marked goods in a shop-window, or on the shelves of a self – service shop, is merely an invitation to treat. The offer in such a case comes from the customer. An indication of the price at which petrol is to be sold at a filling station is, similarly, only an invitation to treat. Likewise, advertisements in newspapers or in tradesmen’s circulars are commonly held not to amount to offers. These rules may apply even though the person making the statement calls it an offer: a shop’s “special offer" may well be nothing more than an invitation to treat. But it should not be supposed that all displays and advertisements are only invitations to treat. For example, it has been said that a notice displayed at the entrance to an automatic car-park was an offer, presumably because no further act of acceptance on the part of the proprietor was contemplated after the customer drove in. For the same reason, advertisements of rewards for the return of (for example) lost property are commonly held to be offers. Similarly, in Carlill v Carbolic Smoke Ball Co the manufacturers of carbolic smoke balls promised to pay £100 to any person who caught influenza after using the appliance as directed; and they added that they had deposited £1000 with a name bank “shewing our sincerity in the matter". It was held that the advertisement wan an offer.

An outline of the law of contract, fourth edition, honorary bencher, London, 1989

A counter-offer

If an offer is rejected is ceases to exist. If offerees then change their minds and try to accept, they will in contractual terms be making a new offer. The same result is achieved by a counter – offer. This is an attempt to vary the terms of the existing offer to get more favourable terms, like a price reduction. Hyde vs. Wrench (1840)

The defendant offered to sell his farm for £50000. The claimant at first said that he would pay only £45000, but after a few days said he would pay the full price. He heard nothing from the defendant. It was held that there was no contract between the parties: the defendant had not accepted the offer from the claimant, who had destroyed the defendant’s original offer by his counter – offer of a reduced price. The claimant’s subsequent statement that he would pay the asking price could not revive the original offer. It was a new offer which the defendant never accepted.

If the offeree, while not accepting an offer, asks for further information, or tests out the ground to see if further negotiation is possible, this is not treated as a counter – offer; it, thus, does not destroy the offer. “Law for business students" Alix Adams; fourth edition; p53, 2006

An offer made in response to a previous offer by the other party during negotiations for a final contract. Making a counter offer automatically rejects the prior offer, and requires an acceptance under the terms of the counter offer or there is no contract.


According to United Nations Convention on contracts for the International Sale of Goods there are factors about contracting between seller and buyer at Part 3 articles between 25 and 88 which are shown below:

Selling goods, obligations for sellers, obligations for buyers, passing of risk, common obligations for both sides (buyer and seller). The CISG (Convention on contracts for the International Sale of Goods) refers to the duty of the seller, showing and describing in obvious, as the goods must be delivered by the seller, handling any documents that belong to them and transfer the property in the goods, as they are mentioned in contract. Furthermore, the duty of the buyer is to take all steps ‘which could naturally be expected’ receiving the delivery of the goods and make a payment for them.

Basically, the quality, quantity and description of the goods must be exactly as required by the contract, must be neatly packaged and fit by some purposes. The seller is obliged to deliver goods that are not subject to claims from a third party for infringement of industrial or intellectual property rights. The duty of the buyer is to check the goods carefully and subject to some qualifications, must let the seller know if there is any lack of conformity during ‘specific time’ and within two years of receipt.

The CISG explains the risk when it passes from the seller to the buyer but it has been discovered that by working out most of the contracts describe the “seller's" delivery obligations quite precisely by adopting an established shipment term. Buyers’ and sellers’ remedies depend on the character of a breach of the contract. The other party is substantially deprived of what it expected to receive under the contract if the breach is fundamental. Only if results of an objective test say that the breach could not have been realized, then the contract might be and the party which felt treated wrongly might claim damages. Where performing part of a contract has happened then the performing side may recover any payment that been made or good that been supported. It illustrates with the common law that there is actually no rights to backup a good supplied unless title has been retained or damages are insufficient, only a right to claim the value of the good.

If the breach is not basic then the contract will not be avoided and remedies may be sought including claiming damages, specific performance and adjustment of price. Damages that may be awarded conform to the common law rules in Hadley v Blaxendale but it has been argued the test of foresee ability is substantially broader and consequently more generous to the aggrieved party.

The CISG excuses a party from liability to a claim of damages where a failure to perform is attributable to an impediment beyond the party’s, or a third party sub-contractor’s, control that could not have been reasonably expected. Such an extraneous event might elsewhere be referred to as force majeure, and frustration of the contract.

Where a seller has to refund the price paid then the seller must also pay interest to the buyer from the date of payment. It has been said the interest rate is based on rates current in the seller’s State since the obligation to pay interest partakes of the seller's obligation to make restitution and not of the buyer's right to claim damages’, although this has been debated. In a mirror of the seller’s obligations, where a buyer has to return goods the buyer is accountable for any benefits received.

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