A contract can be thought of as an enforceable promise that creates binding relationships and defines legal obligations. Of course, not all promises are binding. For a contract to be valid, it must meet certain requirements.
- The Offer: The offer can be for a good or service and creates both an offeror and offeree. To be an offer, the offering party must show a manifestation of intent, meaning the offer must be serious and more concrete than preliminary negotiations. The offer must also be definite, complete with specified terms and conditions that are clearly communicated to the offeree. The offer may include a deadline for acceptance.
- Consideration: The consideration is essentially the payment for the goods or services offered. This element keeps the offer from being defined as a gift. Traditionally, the consideration must create a legal detriment or legal gain, and often creates both.
- The Acceptance: After the initial proposal, including definitions of both the offer and the corresponding consideration, the ball is now in the offeree’s court. For acceptance to be justifiable in court, the acceptance of the deal must be unconditional, unequivocal, and communicated using the proper channels prior to expiration of the offer.
Offer and Acceptance Disputes
Meeting of the Minds
The validity of contractual acceptance is based on the idea that all involved parties have a “meeting of the minds.” This means that parties have entered the contract knowingly, through their own free will, and have assented to all contract terms and conditions. Without this mutual understanding and agreement there is no contract, but there is sometimes a disagreement about whether an agreement was reached and this can lead to grounds for a contract dispute case. Meeting of the minds can be jeopardized due to coercion, fraud, limited capacity to accept (due to mental illness, intoxication, or minor status,) undue influence, or misrepresentation of material facts.
To be deemed an acceptance, the offeree must accept the terms and conditions presented by the offeror exactly as the offeror has presented them, something referred to as the “mirror image rule.” Should the offeree request a change in any term or condition, this request is considered a rejection of the offer. If the offeree presents altered terms in which he/she would then accept the initial offer, the offeree has still given a rejection. This type of rejection is called a counteroffer. If the offeror does not accept the proposed counteroffer, there is no enforceable contract.
Breach of Contract Disputes
This form of contract breach is also referred to as a total breach. A material breach occurs when the performance is substantially less than what the contract provides for. “[The breach] renders the agreement ‘irreparably broken’ and defeats the purpose of making the contract in the first place,” explains attorney Richard Stim. “The breach must go to the very root of the agreement between the parties.”1 Generally, in cases of a material breach, the non-breaching party is discharged from any responsibility associated with the contract.
A minor breach involves the same basic premise as a material breach, except part of the contract is not performed or is performed less than satisfactorily. The difference is that the performance has fulfilled the essential function for which the contract was created, sometimes deemed “substantial performance.” Typically, damages are awarded to the non-breaching party in order to cover the costs resulting from lack of complete performance.
If either party indicates that he or she will not be fulfilling the requirements established by the contract, or if one party learns of circumstances that make it impossible for very unlikely that the other party can perform, then the non-breaching party can request assurances that the contract will be performed. If these assurances are not provided, then the non-breaching party can immediately file an action for anticipatory breach. The non-breaching party can seek damages, demand reassurance of performance, or choose to terminate his or her part in the contract.
The experienced professionals at Bannister, Wyatt & Stalvey, LLC can provide comprehensive consultations for your specific legal needs. Contact us to learn more about how our qualified business litigation attorneys can help you with your case.
- All other relevant material obtained from The Legal Environment of Business, 13th Ed. | Meiners, Ringleb, Edwards