11. Offer and revocation of offer

Question 1

Offer and acceptance in formation of contract

Answer 1

are conceived as declarations of willingness, issued by each party and dispatched to the other

Question 2

Why is offer important?

Answer 2

artificially applied even when a declaration of willingness by either of the parties seems to be lacking or when they have never been communicating with each other

Question 3

Examples when offer and acceptance test is not clear/communicated

Answer 3

• contracts which are reduced to writing and signed simultaneously by both parties, or
• drafted by a public notary
• multipartite contracts
• supermarket purchases
• displays in shop windows

Question 4

What does an acceptance mean?

Answer 4

• whether a contract has been concluded
• who the parties of the contract are (i.e. the one who offered and the accepting offeree)
• what the express terms of the contract are (i.e. those contained in the offer and accepted by the offeree)
• when the contract comes into being (i.e. the time at which the offer has been accepted by the offeree)
• where the contract comes into being (i.e. the place at which the offer has been accepted by the offeree)

Question 5

When do we have an offer?

Answer 5

1. if other party accepts it
2. if its elements are enough to form a contract (it has all the relevant terms)
   
   1. the essential elements are those that are not applied by default rules
   2. those elements are the type of good (requirement of definiteness)
3. recognise if there is an intention to be bound

Question 6

When does it not amount to an offer?

Answer 6

Preliminary discussions and incomplete proposals do not amount to offers, but remain mere invitations to treat

if the recipient of such invitation is interested in negotiating, she/he can issue a proposal and dispatch it to the other party, thus properly being the offeror

Question 7

Flow of process

Answer 7

Invitation to treat -> Offer -> Acceptance -> Contract

Question 8

Display of goods and offer

Answer 8

A proposal to supply goods from stock, or a service, at a stated price made by a business in a public advertisement or at a catalogue, or by a display of goods, is treated, unless the circumstances indicate otherwise, as an offer to supply at that price until the stock of goods, or the business’s capacity to supply the service, is exhausted

Question 9

National jurisdictions and withdrawal of offer

Answer 9

While weighing up these two interests, national jurisdictions may adopt different rules

Question 10

Rules for revocation of offer

Answer 10

Revocation of an offer must be received and understood by the offeree before she/he has accepted

Question 11

Offer, acceptance and timing

Answer 11

irrelevant whether the offer is expressed to be open for acceptance for a given time or not

Question 12

Revocation of offer in German law

Answer 12

generally banned

Who offers a contract to someone else, is bound to her/his own offer, unless otherwise stipulated in it

Question 13

Characteristics of irrevocable offer

Answer 13

• Jurisdictions which generally allow the withdrawal/revocation of an offer, stipulate, however, that the offeror can voluntarily bind herself/himself to her/his own offer (which thus turns irrevocable)
• In the civil law: it suffices that the offeror unilaterally promises to keep open the offer (for a given time)
• In the common law: a proper contract shall be concluded between the negotiating parties, which is called option (if gratuitous, it must be made by a deed)

Question 14

Define contract of option

Answer 14

An option is a preliminary contract through which one party (option issuer or writer) binds herself/himself to her/his own offer and the other party (option holder) is given the right to close unilaterally the deal

Question 15

Types of options

Answer 15

• Call options: give the holder the right to purchase an underlying asset at a specified price (strike price)
• Put options: give the holder the right to sell an underlying asset at a specified price (strike price)