Reaching agreement - offer and acceptance
Agreement occurs when one person accepts the other's offer. This can be done in a number of ways. There can be verbal negotiations resulting in agreement. There may be an exchange of letters in which the parties agree on something. An agreement can be made by one or both persons signing a document, such as a lease or mortgage. It can be made by the parties themselves, or through a third person such as an agent or broker. Or it can happen without any real formalities, as when you buy something from a shop. By presenting the goods and your money at the counter, you are offering to buy the items, and by taking your money, the shopkeeper is accepting your offer. You become the legal owner of the goods.
Sometimes, an offer does not get a simple 'yes', but is met with a counter-offer. For example, a car dealer might offer a particular vehicle for a stated price, and the consumer, instead of accepting the offer, might make a counter-offer to take the vehicle at that price if it includes free air conditioning. This is not an acceptance but a counter-offer. It is then up to the dealer whether they will accept this counter-offer, by including air conditioning, or not. If the dealer declines, there is no contract. (Even if the counter-offer is described as a 'conditional acceptance', if it is proposing something different from what was offered, it is a counter-offer, and there is no contract until it is accepted.)
The effect of a counter-offer
Any counter-offer cancels out (rejects) the previous offer. It is then up to the other person whether they want to accept the counter-offer, making a contract, or not. So when the consumer makes the counter-offer to buy the car with air conditioning thrown in, he or she is rejecting the offer to buy the car without air conditioning at the price previously offered. That offer then no longer exists and is not available to be accepted, unless the dealer makes it again.
The effect of acceptance
A contract becomes legally binding the moment the acceptance is communicated. This can be done by telling the other person that you agree, or demonstrating this to them by your actions, or, in some circumstances, just by carrying out the contract. For instance, if a bank advertises that it will waive the application fee on any loan application made before a certain date, you accept this offer by making the application before the date. (There are special rules about offers which are accepted by post, facsimile and the like, and you should seek legal advice if you are unsure whether an acceptance was communicated.)
Withdrawing an offer
Up until an offer is accepted, the person making it can withdraw it at any time, by letting the other person know that they are no longer willing to do that, but if the offer is not withdrawn, it becomes binding as soon as accepted. Once there is agreement, any change needs the agreement of both parties.
Difficulty establishing whether agreement has been reached
During the negotiations numerous offers may be exchanged. A party may at some point argue that a definite contract exists. If you are not sure whether a contract was made, or if you are in dispute with the other person over just what was agreed, seek legal advice. In deciding whether a contract was made, the court will look at all the circumstances. Evidence of money passing between them or of some expense being incurred would suggest a contract.
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