Thought of the Week | Counter offers

Typically, contracts are concluded by way of offer and acceptance. This is more important than one might think, as this exchange functions as an indication of consensus – one of the most important requirements for a valid contract – and determines the time and place that the contract is officially concluded. This is significant, not only for legal technical reasons like jurisdiction and prescription, but also because the moment the contract is concluded marks the end of the negotiation phase and gives rise to contractual obligations. We generally, with the notable exception of electronic contracts, follow the approach that a contract is concluded at the moment and place where the person who made the offer learns that it has been accepted, known as the information theory.

Offers must inter alia be made with the intention to create binding obligations and clearly set out the material aspects of the agreement in certain terms. To be valid, the acceptance thereof must be made with the same intention and must correspond with the terms of the offer. If the acceptance does not for all intents and purposes mirror the offer, it becomes a counter offer and the original offer falls away. It is important to be aware of the fact that a counter offer has been made, because until it is accepted, no obligations arise and parties are free to withdraw from the agreement. As a general rule, the person who makes the offer or counter offer can dictate how acceptance must take place and whether notice is required. If the offeror expressly or impliedly does away with the requirement of notice to him- or herself, then performance will be sufficient acceptance.

Because it is so important to know whether one’s offer has been accepted, it is always better to err on the side of certainty and make specific provision in the agreement for the acceptance and notification procedures.

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