 Hello, it's Weyland Chao and this is Law of Contract Formation, Module 2A, Part B. In this module, we will look at what is an agreement and then look at what is an offer and the various rules regarding offers. To have an agreement, we must have what is called a meeting of minds. So we have a meeting of minds where, firstly, one person or one party makes an offer to another person. And that other person accepts all of the terms of that offer, which results in what we call an agreement. By having an agreement between the two parties, we have what is called a meeting of minds. To help us understand the rules of offer and acceptance, we will be using a scenario called Daria and Jamal. In this scenario, Daria and Jamal are classmates and friends. Daria is thinking of upgrading to a newer laptop computer. One day, Daria says to Jamal, I need some money for a new laptop. Do you want to buy my Apple laptop for $500? Jamal says, I will buy your laptop for $500. So what has happened here? Daria has made an offer to Jamal. Jamal has accepted that offer and therefore there is an agreement between Daria and Jamal. What exactly is considered to be an offer? The legal definition is that an offer is an indication of a willingness to enter into a contract on certain terms. In our scenario, Daria made an offer by indicating a willingness to sell her Apple laptop computer for $500. The terms are that what was being sold was the particular laptop, Apple laptop that she was holding, and she wanted $500 for that laptop. The offeror in that situation was Daria. She was the person who was making the offer, and the offeree was Jamal. He was the person who was receiving the offer. To have a valid offer, it has to be communicated by one party to the other, and that communication may take a number of different forms. The most traditional form, most formal form would be a written document. If instead of having a verbal conversation, Daria had sent an email to Jamal offering the laptop for sale, that would be written communication of an offer. But in that actual scenario, the communication was done orally or verbally. There was a verbal conversation between Daria and Jamal. Now communication of an offer can also be done by someone's conduct. For example, when you go to buy a coffee from Tim Hortons, the offer is being made by you, the customer. When you put money in your hand and offer it to the cashier, that act of putting out the money is considered to be you making an offer to Tim Hortons. Let's now make a few changes to our scenario. We still have Daria asking Jamal, do you want to buy my Apple laptop for $500? But Jamal now says, maybe, can you let me think about it? The questions that I'd like you to think about are, if Daria says in reply to Jamal, sure, that's fine, but let me know by noon tomorrow. What happens if Jamal accepts the offer tomorrow at 12.01 p.m., like one minute after noon? The second question is, what if Daria had said only to Jamal, sure, that's fine, go ahead and think about it, but does not set any precise deadline? To help us answer those questions posed by the scenario, let's look at the rules regarding the life of an offer. In other words, how long is an offer valid for or when does an offer get terminated or die? An offer may die due to a number of different reasons, and we'll look at each of them in detail. The first reason is due to the lapse of time, the second is a revocation, the third is death or insanity, and they could also die because of rejection, and lastly, it can also be terminated by way of the making of a counter offer. The rule is that once an offer has been terminated or it's dead, the offer can no longer be accepted after that point in time. An offer can die due to the lapse of time. The lapse of time could be a specific time specified by the offer or. So once that specific time is over, once it's lapsed, the offer is dead and can no longer be accepted. In a situation where the offer or has not specified a specific time or deadline, the rule there is that the offer is open for a reasonable period of time, and then that begs the question, what is considered to be a reasonable period of time? So the answer to that is that it depends. In determining what's reasonable, courts will look at the specific subject matter of the contract, the nature of the agreement, or the volatility of the market price of the item being sold, and also what is the usual practice in the industry. Let's go back and consider the scenario questions. If Daria says, sure, that's fine, but let me know by noon tomorrow. What happens if Jamal accepts the offer by 12.01 pm tomorrow? The result is that Daria's offer expires at noon, precisely at noon. Any time after that, there is no longer any offer to accept. So at 12.01, there is no offer for Jamal to accept, and therefore no agreement has been formed. The second question, what if Daria said only, sure, that's fine, and did not set any specific time or deadline? Since Daria did not specify any expiry time, her offer is open for a reasonable amount of time. What is considered reasonable will depend on the circumstances of each case. Let's say, for example, in this case, we know that Daria needs to sell her computer as quickly as possible, so that she can use the money to buy a new laptop that she desperately needs for a class that is about to start very soon. So in that type of situation, what do you think is reasonable, one day, one week, one month, one year? Under that fact, based on that fact, I would say that a reasonable period would be shorter rather than longer. There is no one right answer, as long as the answer can be supported by facts, which indicate the reasonableness of the time period. Let's change our scenario once again. We still have Daria asking Jamal, do you want to buy my Apple laptop for $500? Jamal says, maybe, can you let me think about it? Daria says, sure, that's fine, but let me know by noon tomorrow. And now, Sean, another guy, a third guy, third party, overhears this conversation. Without Jamal's knowledge, Sean offers Daria $600 for the laptop. So what can Daria do, and what if Jamal had paid Daria $5 to keep the offer open until noon tomorrow? Let's now look at the rules about revoking an offer. An offer can be revoked anytime before acceptance, anytime before it's been accepted, on communication of the revocation by the offeror to the offeree. So as long as it has not been accepted, an offer can be revoked at any time. The second rule is that even if there is a specified expiry time, in other words, a firm offer has been made. The offer can still be revoked as long as it has not been accepted yet. So you can revoke it before that expiry time has come up. An offer, however, is irrevocable if the offeree has paid something, something of value, usually money, for the offer to remain open for a period of time. So we call that an option. So Sean has made a better offer. What can Daria do? Daria's offer to Jamal can be revoked anytime before noon tomorrow, which is the deadline that she had set for the offer to expire. She can do that as long as Jamal has not yet accepted her offer. What Daria can do is she can contact Jamal to tell him that she is canceling her offer. Then Daria can then contact Sean to accept his higher offer. Now what if Jamal had paid Daria $5 or any amount really to keep the offer open until noon tomorrow? If Jamal had paid Daria any amount to keep the offer open until noon tomorrow, the offer would be considered irrevocable and therefore cannot be cancelled by Daria. So what that refers to is an option. So Jamal would have purchased an option to buy Daria's laptop for the or at the $500 price.