Contract Termination
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Termination by Operation of Law
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In addition to termination by the acts of the offeror and offeree, an offer can terminate by operation of law. The three ways in which an offer terminates by operation of law are the following: (i) termination by death or insanity of either party; (ii) termination by a supervening illegality; and (iii) termination by destruction. Let’s look at each one of these in more detail.

An offer can terminate by the death or insanity of either the offeror or the offeree. Here, if the person who makes or accepts the offer dies or is established as legally insane, then the offer will terminate.

An offer can also terminate by a supervening illegality. Here, an offer will terminate if after the offer was made a new law prevents a party from carrying out the terms of the contract. Let’s use a hypothetical to describe supervening illegalities. Let’s assume that a United States company has a contract to sell metal to Canada. Before the terms of the contract are performed, the U.S. and Canada enter into war. At that time, the U.S. government passes a law that prevents any U.S. companies from selling goods of any kind to enemies during war time. Here, it would be illegal for the U.S. company to carry out the terms of the contract due to the newly-passed federal law. This would be a supervening illegality that would terminate the offer previously made.

An offer can also terminate when the subject matter of the contract in question is destroyed. For example, let’s say that a farmer offers to sell his tractor to a neighbor for a certain amount of money. Before the transaction is completed, the barn in which the tractor is stored burns down in a fire, destroying everything in it, including the tractor. Under these circumstances, the offer would terminate because the subject matter of the proposed contract no longer exists.

Finally, let’s wrap up this article with some key points to keep in mind.