3.1 Offer and Acceptance
- Tell a binding offer from an invitation to treat.
- State the requirements of a valid acceptance.
- Apply the postal (mailbox) rule and its limits.
- Explain consideration and the intent to be bound.
- See when an offer lapses, is revoked, or is rejected.
Dear reader,
A contract is a promise the law will enforce. It is built when a valid offer is met by an unqualified acceptance, supported by consideration and an intention to create legal relations. This letter concerns the first two elements — the meeting of the minds — and the exact instant at which two wills become one: how a bare proposal hardens into a binding promise, and the moment it does not. We read for the way there, not only the destination: what turns a proposal into an offer, what turns a reply into acceptance, and when a deal quietly falls away before it is ever struck.
A binding contract needs all four elements present together. Two of them make the agreement: an offer and an acceptance. The other two make that agreement enforceable: consideration — the price each side pays — and an intention to create legal relations. In short, offer and acceptance and consideration and intention together, and only together, make a binding contract; miss any one and no agreement arises. This letter follows the first two — how agreement itself is reached — and returns to consideration and intention, in outline, once the meeting of the minds is settled.
I. What an Offer Is
An offer is an expression of willingness to contract on definite terms, made so that it becomes binding the instant it is accepted. The test is objective: not what the maker privately meant, but how a reasonable person would read the words and conduct.
An offer is a clear expression of willingness to contract on specified terms, made with the intention that it becomes binding as soon as it is accepted by the person to whom it is addressed. It must be distinguished from an invitation to treat — a mere invitation to make an offer, as with goods displayed on a shelf.
Most everyday overtures fail the objective test and so remain mere invitations. A shop display, a price tag, an advertised catalogue — each invites the other side to make the offer rather than making one itself, and the seller keeps the last word. An auctioneer's call for bids works the same way: it invites offers, and each bid is an offer accepted only at the fall of the hammer (Payne v Cave). The distinction matters because only a genuine offer can be closed by a matching acceptance; an invitation to treat can be withdrawn at any time, no explanation owed.
Figure — The intent-to-be-bound test sorts a statement of terms into a true offer or a mere invitation to treat.
A shopper carries a jacket tagged at a slashed price to the till, but the cashier refuses to sell at that figure. The shopper protests that the tag was a promise. Was a contract broken?
Analysis
No. The priced display is an invitation to treat, not an offer (Pharmaceutical Society v Boots). The shopper makes the offer at the till; the seller is free to accept or decline it. Because no acceptance ever met an offer, no agreement arose — so none could be broken.
Classify each. Is it a binding offer, or only an invitation to treat? (a) A jumper in a shop window, tagged £20. (b) An auctioneer calling for bids on a lot. (c) A newspaper notice: “Reward £50 to whoever returns my lost dog.”
Answer
Hint. Apply the objective test — would a reasonable person read it as a promise to be bound the instant it is taken up, or as a step inviting the other side to make the offer?
Answer. (a) Invitation to treat — a priced display invites the shopper to make the offer (Boots; Fisher v Bell). (b) Invitation to treat — the call for bids invites offers; each bid is an offer, accepted at the fall of the hammer (Payne v Cave). (c) Offer — a definite reward promised to the world, accepted by performing the act (a unilateral offer).
A motorist drives up to an automatic car-park barrier. A machine shows the price and issues a ticket the moment a coin drops in. At what instant is the offer made, and when is it accepted — and what of the terms printed on the ticket itself?
Analysis
The machine's standing readiness to deal is the offer — held out to all comers, it binds the proprietor the instant its condition is met (Thornton v Shoe Lane Parking). The motorist accepts by driving up and inserting the money; the contract is concluded then. Terms the customer could see only afterwards — on the ticket, or a sign inside — arrive too late to join the bargain.
II. A Valid Acceptance
An acceptance is a final, unqualified assent to every term of the offer. Under the mirror-image rule the reply must match the offer exactly; it must be made in response to the offer, by someone who knows of it. Change a term and you have not accepted at all: you have made a counter-offer, which rejects the original and puts a fresh proposal on the table (Hyde v Wrench). The power to accept the first offer is gone. (For the sale of goods, the strict rule is relaxed — a definite acceptance with additional terms can still form a contract under UCC §2-207.)
For acceptance to conclude the agreement, then, it must satisfy three requirements:
- It must be a mirror image of the offer — any new term is a counter-offer that rejects and destroys the original, leaving nothing left to accept.
- It must be communicated to the offeror, save where the offer waives this, as with a unilateral offer accepted by performing the act itself.
- It must be made in reliance on the offer, by a person who knows of it — a party cannot accept terms it never saw.
Seller offers a farm for £1,000. Before any acceptance, weigh Buyer's two possible replies. (a) “I will give you £950.” (b) “Would you accept payment spread over two months?” For each: is the original £1,000 offer still open to accept?
Answer
(a) No. £950 varies a term, so it is a counter-offer: it rejects and destroys the £1,000 offer, which Buyer can no longer accept (Hyde v Wrench). (b) Yes. A mere request for information neither varies nor rejects the offer — the £1,000 offer stays alive, and Buyer may still accept it (Stevenson, Jaques v McLean).
On Monday, Seller offers Blackacre for £1,000. On Tuesday, Buyer replies, “I'll pay £950.” Seller declines. On Wednesday, Buyer writes, “Very well — I accept your £1,000.” Is there a contract?
Analysis
No. Buyer's £950 reply was a counter-offer. It rejected the £1,000 offer and extinguished the power to accept it. Wednesday's message therefore accepts nothing that still exists; it is itself only a fresh offer, which Seller is free to refuse (Hyde v Wrench). A rejected offer cannot be resurrected by the offeree who spurned it.
The general rule is that acceptance takes effect only when it is communicated to the offeror. An unspoken decision to accept, kept in the mind, binds no one — the offeror is entitled to know the deal is on. From this follows a firm limit: an offeror cannot turn the other party's silence into acceptance, nor may inaction be dressed up as assent. The clearest exception is the unilateral contract, where the offer invites acceptance by performing the act itself — no separate word back is required.
(a) An aunt writes to her nephew: “If I hear nothing more, I shall consider the watch yours for £50.” The nephew says nothing. Is there a sale? (b) An owner posts: “£100 to anyone who walks my dog home.” A finder walks the dog home without a word to the owner. Is the owner bound?
Answer
(a) No. An offeror cannot impose acceptance by silence — inaction is not assent, and no contract forms (Felthouse v Bindley). (b) Yes. This is a unilateral offer: it invites acceptance by performing the act, and full performance is the acceptance — no separate communication is required (Carlill). Silence binds no one; performance can.
III. When Acceptance Bites
Where the parties contemplate the post, an exception to the communication rule applies. The postal rule (the American mailbox rule) fixes formation at the moment of posting — before the letter ever arrives. The rule allocates the risk of delay or loss in the post to the offeror, who invited that channel. A revocation, by contrast, is effective only on receipt — so a posted acceptance can beat a revocation already in the mail.
Figure — The postal rule — formation is fixed at posting, so the whole interval before delivery is the offeror's risk.
A buyer in London sends an acceptance by telex — an instantaneous line — to a seller in Amsterdam, where it prints out at once. Does the postal rule fix formation at the moment of sending?
Analysis
No. The postal rule is confined to non-instantaneous channels the parties reasonably contemplate. For instantaneous communication — telex, telephone, and by extension real-time email — acceptance is effective when and where it is received, not when sent (Entores v Miles Far East; Brinkibon). So the contract is made in Amsterdam, on receipt; the sender bears the risk of a garbled or lost message and must try again.
Post is the contemplated channel. Mon: Seller posts an offer. Wed 9am: Seller posts a revocation. Wed 2pm: Buyer, not yet having received the revocation, posts an acceptance. Thu: each letter arrives. Is there a contract — and which two timing rules decide it?
Answer
Hint. Acceptance and revocation run on different clocks — one bites on posting, the other only on receipt.
Answer. Yes — a contract forms. Buyer's acceptance took effect on posting, Wed 2pm. Seller's revocation was effective only on receipt, Thu — by which time the offer had already been accepted. The offer was still live at 2pm Wed, so agreement was struck; the later-arriving revocation is simply too late (Byrne v Van Tienhoven).
IV. Making It Enforceable
Consideration is the price for which a promise is bought — some benefit to the promisor or detriment to the promisee, given in exchange. It is what separates an enforceable bargain from a bare gift, which the law of contract leaves alone. Consideration must be sufficient but need not be adequate: a peppercorn can be good consideration, and the courts will not weigh the fairness of the bargain for you. And it must be present or future — a past act, already complete before the promise, is no consideration for it.
(a) A promises B £500 as a birthday gift, then changes his mind. Can B sue? (b) B rescues A's cat; grateful afterwards, A promises B £50, then does not pay. Can B enforce it? (c) A promises to sell a car worth £5,000 for £1. Good consideration?
Answer
(a) No — a bare gift promise has no consideration moving from B; the law of contract leaves it alone. (b) No — the rescue was already complete when the promise was made, so it is past consideration and cannot buy the later promise. (c) Yes — consideration must be sufficient but need not be adequate; £1 is something of value, and courts do not weigh the fairness of the bargain.
Read left to right, formation is a sequence. A valid offer opens the door; a mirror-image acceptance closes it; consideration gives the promise its price; and an intention to create legal relations makes the whole enforceable. Only when all four are present — offer, acceptance, consideration, and intention together — does a bare exchange of words become a promise the law will keep.
Figure — The four elements accumulate in order until the contract binds.
V. Before Acceptance — How the Power to Accept Ends
| Mode | What happens | Effective when |
|---|---|---|
| Revocation | The offeror withdraws the offer before it is accepted. Permitted even for an offer said to be “open,” unless an option was bought. | On receipt by the offeree |
| Rejection | The offeree turns the offer down — expressly, or by making a counter-offer that varies its terms. | On communication to the offeror |
| Lapse | Time runs out: the stated period passes, or a reasonable time elapses with no acceptance. | At the end of the period |
| Death / incapacity | A party dies or loses capacity before acceptance, defeating the meeting of the minds. | On the event |
The thread running through all four: until acceptance is effective, there is no contract — and anything that removes the offer first leaves nothing to accept.
Name the mode by which each offer ends, and say when it takes effect. (a) The offeror phones to withdraw before any acceptance. (b) The offeree replies with a lower price. (c) An offer “open for seven days” is still untouched on day eight.
Answer
(a) Revocation — effective on receipt by the offeree (allowed even for an offer said to be “open,” unless an option was bought). (b) Rejection by counter-offer — effective on communication to the offeror. (c) Lapse of time — the offer dies when the stated period expires. In each, the offer is gone before acceptance, so nothing is left to accept.
Applying the Rules
On Monday, Seller posts an offer to sell goods, the post being an expected channel. On Wednesday morning Seller posts a letter revoking the offer. That same Wednesday, before the revocation arrives, Buyer posts an acceptance. The two letters cross in the mail. Is Buyer bound to a contract?
Analysis
Yes — there is a contract. Acceptance under the postal rule was effective the instant Buyer posted on Wednesday. The revocation was effective only on receipt, which came later. The offer was still live when acceptance took effect, so agreement was struck and the crossing revocation arrived too late.
A company advertised that it would pay £100 to anyone who used its smoke ball as directed and still caught influenza, adding that it had deposited £1,000 with a bank “to show our sincerity.” Mrs Carlill used the ball, fell ill, and sued.
The court held the advert was a genuine unilateral offer to the world, not mere puff: the bank deposit showed an intention to be bound. Mrs Carlill accepted by performance — using the ball as directed — and no separate communication of acceptance was needed. A contract was formed, and she recovered.
An offer to the world. A definite promise, backed by a deposit that proved intent, is an offer even to the general public — accepted by doing the act, with communication of acceptance waived.
An owner promises “£500 to whoever walks from London to York.” A walker sets off and reaches Doncaster — nearly there. The owner then shouts, “the offer's off.” Revocation is normally effective on receipt. Can the owner revoke here?
Analysis
An offeror may generally revoke any time before acceptance, and in a unilateral offer acceptance completes only on full performance — so on its face the owner could withdraw before York. But the courts imply a second promise: once the offeree has begun the requested act, the offer cannot be revoked while performance remains possible (Errington v Errington; Daulia). The owner may not snatch the reward away once the walker has set out in reliance.
On 1 May Seller emails: “I offer you 100 units at £10 each; reply by 8 May.” On 3 May Buyer emails: “Agreed, but at £9.” On 5 May Seller stays silent. On 6 May Buyer emails: “Fine — £10 it is.” Is there a contract on 6 May? Work through offer, counter-offer, and acceptance.
Answer
No. The 1 May email was a valid offer. Buyer's 3 May reply changed the price, so it was a counter-offer that rejected and destroyed the £10 offer (Hyde v Wrench). By 6 May no £10 offer survived to accept; Buyer's message is only a fresh offer, which Seller has not accepted. And email being instantaneous, any acceptance would bite on receipt, not posting (Entores). No agreement has been reached.
The result to carry forward. A contract exists the instant a mirror-image acceptance is communicated — and where the post is contemplated, at the moment of posting, even before the letter arrives.
The postal rule allocates a risk; it does not reward carelessness. It yields where the offer requires actual receipt, where posting was not a reasonable medium, or where instantaneous channels — telephone, email — make the analogy a poor one.
What to Carry Away
- An offer is intent to be bound on acceptance; a display or advert is only an invitation to treat.
- A valid acceptance mirrors the offer; a variation is a counter-offer that kills it.
- Acceptance must be communicated; silence cannot be forced into assent.
- By post, acceptance bites at posting; revocation only at receipt.
- Consideration and intention make the agreement enforceable.
- Before acceptance, an offer can lapse, be revoked, or be rejected.
Adapted from OpenStax, Business Law I Essentials (Rice University), used under CC BY 4.0. Illustrative decisions — Carlill, Felthouse, Boots, Hyde v Wrench — are common-law classics named for teaching only.
Two wills, one moment, and a promise the law will keep — offer, acceptance, the meeting of the minds.
Yours in good faith,
— the Contract Law reader
Next: §3.2 Consideration in depth — the price of a promise, and why bare gifts fall outside the law of contract.