As we saw in the previous lesson, agreement is a key element to every contract. In this lesson, we are going to talk about offers. Offers are one part of a valid agreement. What constitutes an offer, how do you accept an offer and how are offers terminated? We know that every contract has to have valid agreement between the two parties, and one important part of agreement is that there has to be an offer and an acceptance. In this lesson we are going to talk about offers and the next lesson we'll talk about acceptance. What is an offer? A good definition is, an offer is an invitation to enter into a contract. So, if I say, ''I'll sell you my bike for a hundred dollars.'' I'm inviting you to accept that offer and enter into a contract with me. Now, as we saw in the previous lesson, there's two parties to every offer: the offeror, the person making the offer and the offeree, the person who has the power to accept or reject the offer. There are a few requirements that every offer must meet in order to be a valid offer. First, the offeror has to actually intend to make an offer. You can't make a joke like, ''I'll buy your bike for a million dollars.'' There's no actual intent there so it can't be a valid offer unless your bike really is worth a million dollars which is a pretty unlikely. Second requirement. It has to be communicated properly and proper communication just means that the offer has to be communicated to the offeree in such a way that they would reasonably know about it. You can't whisper it so quietly that they can't hear it. I mean, this just is a reasonable standard that you have to allow the offeree means to receive the offer. And the third and probably most important is, the offer from the offeror must have all of the material terms of the contract. So, if I said, ''I would like to buy a thousand widgets from you.'' Well do we know the price of those widgets? We know the amount so that's good. Things like price, amounts, maybe time for delivery, anything that's fundamentally important to forming a contract must be included in the offer so the offeree knows whether it can or cannot accept. Now, a quick note about three special types of offers that come up pretty frequently versus auctions. In an auction, you might wonder, well, if I put something up for auction like on eBay or any sort of auction, am I making an offer to sell it? Am I required to sell it? I don't even know what the purchase price is, we're missing in material terms. Well, what's special about auctions is that the seller who puts an item up for auction is generally required to sell to the highest bidder unless you put an auction with the reserve. If the bids don't meet the reserve price you're not required to sell, but if they do you are required to sell. Now I might say, "Wait a minute, I've been on eBay forever. And people bid all sorts of ridiculous prices and never pay and we can't enforce it." Well, that's more of a problem of enforcement than of the law of auctions. So, the law is that you should be required to sell to the highest bidder. Sometimes there are problems with enforcing that rule. Second type of special offers, a reward. So, say you have a software company and you say, ''Hey anybody who finds a bug in our software we'll give you a thousand dollars.'' That's a reward. Now that is an offer that invites the offeree to accept the offer not by promising to do anything, but by actually doing something, by performing the duty of finding a bug. So, reward is an offer to enter into a contract but the only way you can accept that offer is by actually doing it, by finding the bug and telling them about it. Now, unique thing about rewards is just that you can generally only collect and reward if you knew the reward existed when you performed the duty. So, if you find a bug in my software and just out of the goodness of your heart you say, ''Hey I found a bug in your software.'' And you didn't know there's a reward, I wouldn't be obligated to pay you the reward. No, I should, it's the right thing to do but I wouldn't be legally obligated to do so. Another third type of special offer, advertisements. And this can actually be a sticking point for a lot of folks. When you see an advertisements, often times we think that this is an offer such that we can walk into a store and say, ''I saw your advertisement, I accept your offer of the sale price.'' This is actually not the way that courts usually interpret advertisements. Advertisements are not offers. Instead, they are held to be invitations for you to come and make an offer. So, if a store offers a TV on sale for a hundred dollars and you go in there and say, ''Here's my $100.'' They're not obligated to sell you a TV for a hundred dollars. But there is one important exception to that. If the advertisement is so specific that it identifies an individual item or a set of individual items on sale for a certain price, in that case, the store is obligated to sell you those items for that price. So, for instance, if you see an advertisement for a car for a very low price. And in the advertisement, this happens a lot, they say, ''This vehicle identification number identify a specific car.'' And you go to the dealership and that car is on their lot, they must sell it to you for that price. They don't have to sell to you any other cars for that price. Okay, let's wrap up by talking about how offers are terminated. Now obviously, if you're the offeror you want the offeree to just accept your offer. But offers can also be terminated in other ways without forming a contract. So, the offeree, the person on the receiving end of an offer can terminate an offer in two ways. First by rejecting it. If you just say, ''No.'' The offer is dead. Now, when it's dead it can't be revived. There's no resurrection of offers, so if I say, ''I'll sell you my bike for a hundred dollars.'' And you say ''No.'' No, I changed my mind, yes. Thus, we don't have a contract. Once you rejected, the offer dead and it cannot be resurrected and accepted later. A second way offeree can terminate an offer is by making a counteroffer. Now, a counteroffer is in a legal sense a rejection and a new offer. So if I say, ''I'll sell you my bike for a hundred dollars.'' And you say, ''I'll buy it for 75 instead.'' You have rejected my offer of a hundred dollars and made me a new offer for $75. So, now you are the offeror and I'm offeree. My original offer is dead and your new counteroffer is on the table. Now, offer can also be terminated by the offeror, the person making the offer can terminate the offer through a process called revocation. Revocation is just that you communicate to the other party, ''Hey, my offer is dead. I don't want to enter into this contract anymore.'' Now the big thing about revocation is that you have to do it before it's accepted. Once it's accepted, you have a contract and the offer cannot be revoked at that point. So, if I say, ''I'll sell you my bike for a hundred dollars, no way I don't want to do that.'' That's a revocation. But if between the time I say, ''I'll sell you my bike for a hundred dollars.'' And then I say, "No way I don't want to do that.'' If between that time you say, ''I accept.'' Then, I can no longer revoke my offer. The third method by which offers will be terminated is called operation of law. And there are just some instances where public policy or statutes say that, ''If there is an outstanding offer and one of these things happen, then the offer is just terminated.'' There are things like the death or incompetence of one of the parties, the destruction of the subject matter. So if I have an offer out to buy your house and you're thinking about it and a sinkhole swallows up your house and it's destroyed, well, the offer terminates. The subject matter of the contract has been destroyed. An unreasonable lapse of time. If I say, ''I'll sell you my bike for a hundred dollars.'' and then you say, ''let me think about it.'' And you never get back to me until five years later you call me up and say, ''I accept your offer.'' That's an unreasonable lapse of time. My offer has terminated long before that. So that's our overview of offers. In the next lesson we're going to talk about acceptance and how you accept an offer.
