Is it possible to revoke an offer, or terminate an offer? And can an offer terminate through some means other than the act of a party?

In this article, we’ll give a basic outline of what constitutes an offer. Then, we’ll look at how an offer can be terminated. Specifically, we’ll explore contract termination by the person making the offer, by the person accepting the offer, and by operation of law.

Next, we’ll take a look at the basic requirements of an offer.

An offer under the laws of contracts is something that creates the power of acceptance in another person. The person who makes the offer to another is called the offeror. The person who possesses the power of acceptance is the offeree.

To be a valid offer, there must be a clear expression of a commitment to enter into a contract, supported by definite and certain terms. Furthermore, the terms of the offer must be communicated to the offeree such that the power of acceptance is created. Let’s use a hypothetical to illustrate this concept.

Let’s assume that Amy and Bob are neighbors in a suburban area. Amy approaches Bob and says that she’ll paint Bob’s house on Saturday at 9:00 a.m. and have it finished by 5:00 p.m. that evening, only if he will pay her $500 on that same day. This is an example of a clear and definite offer. If Bob accepts Amy’s offer, and she performs as she promised to do, he’ll be legally obliged to pay her $500 on Saturday.

Now, let’s take a look at how an offer can be terminated by the person making the offer.

An offer can be terminated by an act of the person who made the offer (i.e. the offeror). In other words, the offeror can revoke the offer that he or she made to another person (i.e. the offeree). Termination by revocation can occur in three situations.

First, termination can occur if the offeror directly communicates that he or she is revoking the offer to the offeree. Second, termination can occur if the offeror acts in a manner that demonstrates his or her aversion to maintain the offer, and the offeree is given accurate information of this from a reliable source. Third, if the offer was communicated through some form of publication, the offer can be revoked through the use of some similar means of publication. Under each of these situations, the revocation of the offer goes into effect when it is received by the offeree (or when it is published).

It is important to note that there are certain limitations on the offeror’s power to revoke his or her offer. These limitations include option contracts, firm offers under the Uniform Commercial Code, detrimental reliance, and unilateral contracts.

Let’s look at each one of these concepts in a little more detail on the next page.

There are four main types of limitations on contract termination. In other words, there are four main ways in which a contract cannot be terminated by the offeror (i.e. the person who made the offer) once the contract is created.

The first limitation deals with option contracts. An option contract is a specific agreement, supported by consideration, which limits the offeror’s power to revoke an offer. Here, the party in whom the power of acceptance has been created pays the offeror in some manner that meets the criteria for consideration (e.g. with money). By paying the offeror, the offeree strips that person of his or her power to revoke.

The second limitation deals with firm offers under the Uniform Commercial Code. A firm offer is basically a written offer by a merchant that promises to keep the offer open for a certain period of time. A firm offer is similar to an option contract, except it deals with goods under the Uniform Commercial Code. Here, the offeror, once he or she memorializes the offer in writing and creates the power of acceptance in another person, is prohibited from revoking the offer.

The third limitation deals with detrimental reliance. Under this limitation, the person in whom the power of acceptance has been created detrimentally relied on the offer. Furthermore, in this scenario the person who made the offer could have reasonably expected that the offeree would rely on the offer in that particular way.

The fourth limitation deals with unilateral contracts. A unilateral contract is a contract that invites performance by the accepting party. For example, an offeror may offer to pay someone to paint a house. Painting the house is the performance requested. Under a unilateral contract, if the offeree has begun performing (e.g. painting the house) then the offeror is prohibited from revoking the offer.

The elements of a binding contract include an offer, acceptance of that offer, and consideration for the same. But how can an offer be terminated, thus preventing the creation of a contract? In this article, we’ll discuss how an offer can be terminated by the person making the offer, by the person accepting the offer, and by operation of law.

NOTE: The Uniform Commercial Code (UCC) is a contract statute that was drafted by a team of lawyers for certain types of contracts. The UCC is not actual law in and of itself, but is merely just a recommendation on how states should draft their contract laws. As such, many states have adopted many sections of the UCC in their own statutes.

Next, we’ll take a look at how the person accepting the offer, i.e. the offeree, can terminate the offer.

Like the offeror, the offeree also has the power to terminate an offer. Remember, the offeree is the person in whom the power of acceptance was created. With respect to an offeree, an offer can be terminated through a lapse in time, or through rejection. Let’s explore each one of these possibilities.

An offer can be terminated by the offeree through a lapse in time. Here, if the offeree fails to accept an offer within the time specified by the offeror, then the offer terminates. Furthermore, if no time is specified by the offeror, then the offer will terminate after a reasonable period of time has passed with no acceptance of the offer.

An offer can also be terminated by the offeree through rejection of the offer made. The rejection of an offer goes into effect when the rejection is received by the offeror. An offer can be rejected by an offeree through an express rejection, or through the creation of a counteroffer. A counteroffer is both a rejection of the original offer made to the offeree, and the creation of a new offer. Counteroffers often occur in the buying and selling of real estate. For example, assume a buyer offers a seller $180,000 for a house being sold by the seller for $200,000. The seller may counteroffer the buyer’s $180,000 offer with a price of $190,000.

Next, let’s take a look at how an offer can be terminated by operation of law.

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.

In this article, we went over a basic outline of what constitutes an offer. Then, we looked at how an offer can be terminated. Specifically, we explored how an offer can be terminated by the person making the offer, by the person accepting the offer, and by operation of law.

You should now have a much better idea on how contract termination works. Take a look at the related links below for more information on contract law.