Offers to Contract

AuthorFranklin G. Snyder, Mark Edwin Burge
Unit 4
Part Two
Offers to Contract
Formation in Steps or All at Once? How are contracts formed? Historically,
most of them tended to be made in one of three ways: a face-to-face agreement
followed by a handshake, a meeting at which a contract document that had been
prepared in advance was signed by the parties, or an exchange of correspondence
through physical mail—“snail mail” as many of you might know itor (later)
In the handshake and contemporaneous-signature situations, the questions of
who first proposed the exchange and who said what during the discussion are largely
irrelevant. The important facts are the substance of the final terms agreed to by the
parties. Using modern terminology, we can think of these as “synchronous”
transactions, because the creation of the agreement takes place in real time with the
contracting parties having a largely simultaneous experience.
The Place of Offer and Acceptance. In the third situation, however, where
the parties are sending communications back and forth in an “asynchronous”
transaction, a potential problem arises. Suppose A sent a letter proposing to sell
Blackacre to B for $500,000, and B sent a letter in response. We have to put the two
together and see if there is an agreement. In this case we would ask whether A made
an offer in his letter, and whether B’s letter in return accepted the offer. To answer
that question we would have to define what an “offer” and an “acceptance” are for
purposes of contract law. If A’s letter is not an “offer” in the legal sense, then there is
no contract no matter what B wrote. If A’s letter is an offer, but B’s response is not
an “acceptance” in the legal sense, there is (again) no contract. In this kind of
asynchronous transaction we need, legally speaking, an offer and an acceptance. In
this analysis, A (the person making the offer) is called the offeror, and B (the recipient
of the offer) is the offeree.
In the modern world, the question of who made the offer and who made the
acceptance is often irrelevant because the existence of mutual assent is so clear.
When you carry the goods to the checkout counter, or click the “buy” button on a web
site, or buy a burger at a fast-food window, or haggle with your friend about buying
her car, the question of whether you are the offeror or offeree in such transactions
makes little difference. Yet while issues of offer-and-acceptance are relatively
unimportant in some transactions, they are critical in othersespecially in a world
in which parties deal with each other at great distances. You need think back only to
Augsberg v. Leslie, in the last unit, to recall the argument that Ryan Leslie’s internet
pleas were not offers.
Asynchronous Contracts. The issue of contracts entered into by exchanges of
communications at a distance is a comparatively new thing in the many centuries of
the common law. Until there were reliable means of exchanging communications (the
post and the telegraph) and recipients who could actually read, contracts were rarely
formed at a distance. In the rapidly industrializing 19th century, however, such
contracts began appearing with some frequency. One obvious question was how the
minds of two parties can meet if they are not acting at the same time. As commerce
in England was more advanced than that in the young United States, English courts
often dealt with these issues before their American counterparts, and their decisions
had a substantial impact.
Another important point addressed in Augsberg v. Leslie is the idea that a
public offer of a reward is (in the legal sense) an offeras Mr. Leslie discovered. This
rule was settled in important English cases like Williams v Carwardine, 10 E.R. 590
(K.B. 1833). That the mere fact that the reward seems extravagant does not
necessarily let the offeror off the hook, as another English court held in Carlill v.
Carbolic Smoke Ball Co., 1 Q.B. 256 (C.A. 1892), which also held that a newspaper
advertisement could be an offer. “If a person chooses to make extravagant promises,”
wrote Lord Justice Bowen, “he probably does so because it pays him to make them,
and, if he has made them, the extravagance of the promises is no reason in law why
he should not be bound by them.” You will meet Carbolic Smoke Ball again in the
cases below.
Offer Inviting Acceptance. We now start with the idea of the “offer.” What
kinds of statements qualify as “offers” for purposes of contract law? As you will see,
there are no magic wordseverything depends on wording of the communication and
[The infamous advertisementwhich you can easily find online—stated that a £100 “reward
will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic
influenza, colds, or any disease caused by taking cold, after having used the ball three times daily f or
two weeks, according to the printed directions supplied with each ball.” 1 Q.B. at 257. Mrs. Louisa
Elizabeth Carlill used the vapor-emitting ball in her nose three times daily for about two months before
she contracted the flu. Upon Carlill’s demand for £100equivalent to about $30,000 as these materials
are writtenCarbolic refused to pay, claiming, among other things, that the advertisement was not
an offer. They lost. Eds.]

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