 Hello, this is Waylon Chow. Welcome to this series on forming contracts. This video is part B, which focuses on the requirement of an agreement. An agreement is formed by an offer and an acceptance. We will focus mostly on the offer part of an agreement. There are three essential elements to form a contract. The first element is the one that we'll focus on in this video, which is an agreement between the parties. An agreement is made up of two things. The first is one person making an offer. The second is an acceptance of that offer by the other person. And having those two things together gives us an agreement. Let's now focus on an offer. Let's set up a simple scenario here. We have two friends and classmates named Sonia and Ahmed. They've gotten together to study after class. And Sonia says to Ahmed, hey Ahmed, I need some money for a new laptop. Do you want to buy my Apple laptop for $700? And Ahmed replies, yeah Sonia, sure, I'll take it for $700. So what's happened here is that Sonia has made an offer to Ahmed. Ahmed has provided an acceptance of that offer and that has formed an agreement. An offer is considered to be an indication of a willingness to enter into a contract on certain terms. So we have an offeror making an offer, communicating an offer to an offeree. And an offer has to be communicated in any form, including a written document, a verbal statement, or even by conduct. And the general legal test to determine whether an offer was made or not in any particular situation is that would a reasonable person think the communication was intended to be an offer? Let's now change our scenario between Sonia and Ahmed a little bit. Sonia is still making an offer. She asks Ahmed, somebody do you want to buy my Apple laptop for $700? This time Ahmed says, hey Sonia, I like your laptop, but can you let me think about it? And Sonia replies, that's fine, but let me know by noon tomorrow. So she's setting a deadline for her offer. And so by next day at 12.01 p.m., one minute after noon, Ahmed says to Sonia, about that laptop of yours, I'll take it for $700. And Sonia says, sorry Ahmed, but someone else has offered me more money for it. So the issue here, legal issue, is there an agreement between Sonia and Ahmed? To determine that legal issue between Sonia and Ahmed, we need to determine if Sonia's offer was still valid at the time that Ahmed provided his acceptance at 12.01 p.m. So we need to examine the rules regarding the life and death of an offer. Once an offer is communicated, the offer is valid until that offer dies due to some reason. So one reason could be the lapse of time. Another reason could be revocation. A third reason could be death or insanity. A fourth reason is a rejection of the offer. And the last reason for the death of an offer is the making of a counter offer. An offer can die due to the lapse of time. An offer lapses or dies at the deadline set by the offeror. If there is no specific deadline specified by the offeror, an offer remains open for a reasonable length of time. So then, what exactly is considered to be reasonable? Well, that depends on the circumstances of each situation. So those circumstances can include looking at the subject matter of the transaction, the nature of the agreement, the volatility of the market, the existence of other potential offerings, and the usual practice in the industry. But just generally, we look at the relevant circumstances of each situation to determine what is a reasonable period of time for an offer to remain open. Let's now resolve that situation between Sonia and Ahmed. Since Sonia had set a deadline of noon for her offer, her offer lapsed at noon. So at one second past noon, that offer no longer existed. So therefore, Ahmed's statement at 12.01 pm is not an acceptance but is a new offer by him to Sonia. And Sonia has rejected Ahmed's offer and therefore no agreement has been formed between Sonia and Ahmed. So let's play around with that scenario again between Sonia and Ahmed. So Sonia is still making an offer to sell her laptop for 700. And Ahmed has said that he does like the laptop but he wants to think about it. So this time, Sonia says that she needs to know soon. She needs the money to get her new laptop in time for the start of school next week. So she does not set a specific deadline or expiry for her offer. A week later, on the first day of school, Ahmed comes up to Sonia and says, about that laptop, I will take it for $700. So he's trying to accept that offer that Sonia had made. But Sonia says, sorry, I already sold it to someone else. So the legal issue again is there an agreement between Sonia and Ahmed. So now, since Sonia did not specify a specific deadline or expiry for her offer, that offer is open for a period of time that is reasonable based on the circumstances. Given what Sonia said about needing money to buy a new laptop by the start of school, it is not reasonable for the offer to be open until school has started. Presumably, she wanted to get that laptop before the start of school. So therefore, Sonia's offer had lapsed by that time, which is the start of school. And therefore, no agreement has been formed. So Ahmed waited a bit too long to respond to Sonia's offer. Let's change up that scenario once again. We still have Sonia making an offer to sell her laptop for $700. And Ahmed is still saying he likes it, but he wants to think about it. And Sonia is actually setting a deadline saying, that's fine, think about it, but let me know by noon tomorrow. And what's different this time is that we have a third person named Pablo who overheard this conversation between Sonia and Ahmed. And without Ahmed's knowledge, Pablo offers Daria $800 for the laptop. So the question is, what can Sonia do? Can she sell her laptop to Pablo for more money? And another question is, what if Ahmed had paid not $500, but $5 to keep the offer open until noon tomorrow? Does that make any difference to this situation? Let's now have a look at the legal rules for revoking an offer or revocation. The general rules and offer can be revoked anytime before acceptance on communication of that revocation by the offer or to the offeree. So there are two requirements built into that rule. One has to do with the timing of the revocation. It has to be done before an offer has been accepted. And it has to be communicated by the offer or to the offeree. So even if there is a specified time, a specified expiry time for an offer, in other words, it's called a firm offer, an offer can still be revoked under this rule. An offer can be made irrevocable, which means it cannot be revoked. You can only do that. You can only make it irrevocable if the offeree has paid some amount, some value to have the offer remain open for a period of time. That's what we call an option. Let's now resolve that situation between Sonya Ahmed and Pablo. Based on the rule that we just looked at, Sonya can revoke her offer anytime before noon tomorrow, as long as Ahmed has not yet accepted her offer. Sonya can contact Ahmed to tell him that she is revoking her offer, then she can contact Pablo to accept his offer. Now, if Ahmed had paid Sonya any amount, such as $5 or even $1, or any amount really, to keep the offer open until noon tomorrow, the offer would be irrevocable, which means that Sonya would not be able to revoke it before noon tomorrow. And therefore, Ahmed could have accepted her offer as long as his acceptance was given by noon tomorrow. And that would have formed an agreement. Let's change up our scenario a bit once again between Sonya and Ahmed. There's still the offer by Sonya to sell her laptop for $700. And Ahmed still wants to think about it. And Sonya has set an expiry of her offer to be noon tomorrow. Now, our story gets a little dark here. So that evening, Sonya is killed in a car accident. Ahmed is sad about Sonya, but he still wants to buy her computer. Can Ahmed still accept Sonya's offer before noon tomorrow in order to form an agreement? Let's have a look at the rule regarding death or insanity. The rule is that an offer is automatically revoked if either the offer or the offer E dies or becomes insane before the offer has been accepted. There is one important exception to that rule, however. An offer is still valid and can be accepted if the deceased or insane party is not required under the proposed contract to perform personally. Let's now resolve that unfortunate situation. So the answer is yes. Ahmed can accept the offer after Sonya's death. Since the sale of the laptop did not involve any personal service by Sonya, the agreement can still proceed after her death. Ahmed would pay Sonya's estate and the executor of the estate would give Ahmed the laptop. There is a proviso or a note there that Ahmed may have difficulty proving that Sonya had made the offer if there was nothing in writing. There would be difficulty in proving to the executor that there was an offer made if everything was just done verbally. So this would have been a good situation where having something in writing would be a good idea. Although it's not required, it would be a good idea. Let's change up our scenario once again. Sonya is no longer dead. So she's alive and healthy once more. So she's still making that offer again to Ahmed to sell her laptop for $700. But this time Ahmed says to Sonya, no, I'm not interested. But then a day later Ahmed changes his mind. He says to Sonya, I do want to buy your laptop for $700. So the legal issue is there an agreement between Sonya and Ahmed. The legal rule regarding the rejection of an offer is that a rejection of an offer causes the termination or death of the offer. An offer cannot be accepted after a rejection. So in this scenario, Ahmed's rejection of Sonya's offer terminates Sonya's offer. So at that point in time, Sonya's offer is dead. There is no offer for Ahmed to accept after that time. Ahmed's last statement where he says he does want to buy the laptop for $700 cannot be an acceptance but could be considered to be a new offer which Sonya may either accept or reject. As it stands, there is no agreement between Sonya and Ahmed. Let's change up that scenario once again. Sonya is still making that offer to sell her laptop for $700. This time, Ahmed says I like your laptop but I can afford to pay only $500. Sonya says no way, that's not enough money for me. I'll try to sell it on Kijiji instead. And Ahmed says it is a nice laptop. Okay, I'll take it for $700. So is there an agreement between Sonya and Ahmed? Let's look at the legal rules regarding counter offers. A counter offer is where the offeree responds to an offer by indicating a willingness to enter into a contract but on terms that are different from the terms of the original offer. To have an agreement, an offer must be entirely and unconditionally accepted. Any attempt to accept on different terms is considered to be a counter offer. The effect of a counter offer is that it is considered to be a rejection of the offer and the creation of a new offer. So therefore that original offer is terminated. Sometimes instead of a counter offer, the reply of an offeree may be considered to be an inquiry. So an example would be would you consider throwing in your earpods without the laptop and an inquiry does not terminate the original offer. Let's now examine in detail the legal status or effect of each of the statements in this conversation. The first statement by Sonya is of course an offer by Sonya to sell her laptop for $700. Ahmed's reply is considered to be a counter offer. It is not an acceptance of Sonya's offer since it is not a full and unconditional acceptance of the terms of Sonya's offer. This counter offer has the effect of terminating Sonya's offer. Sonya's reply to Ahmed is considered to be a rejection of Ahmed's counter offer. It has the effect of terminating that counter offer. And the last statement by Ahmed is considered to be a new offer by Ahmed to Sonya to buy her laptop for $700. It is not an acceptance of based on Sonya's original offer because that original offer was terminated at the time that Ahmed made his counter offer. So therefore no agreement has been formed between Sonya and Ahmed. Sonya is still looking to sell that laptop of hers this time. She decides to place an ad on Kijiji. The ad says, used Apple laptop for sale $700 excellent condition. Ahmed sees that ad and responds to Sonya by email. The email says, I saw your ad for the Apple laptop. I'll buy it for $700. The issue is again, is there an agreement between Sonya and Ahmed? To help us answer that question, we need to be familiar with the concept of an invitation to treat. An invitation to treat is not considered to be an offer. It is only an indication of a willingness to receive offers. It invites others to make offers. A person who responds to an invitation to treat is considered to be the offer or. What is considered to be an invitation to treat? There are certain things that are presumed to be an invitation to treat. If something is on sale in a retail store, there's a display with a price that's an invitation to treat. Or there's an advertisement, whether it be an online advertisement or a newspaper advertisement. That's also presumed to be an invitation to treat. A price tag or an item, whether it be in a physical store or even on an online e-commerce website. That is also presumed to be an invitation to treat. And also generally, things that are up for sale on a website or a catalog are presumed to be invitations to treat. A simple example is if you happen to be on amazon.ca, you see a pair of shoes that you like. That listing of the shoes along with the price would be presumed to be an invitation to treat. And as you would on amazon, you can click on buy now to submit in order to purchase those shoes. So that action by you by clicking buy now is considered an offer made by you to amazon. You are the offer or and amazon is the offer e. And once you place that order, you will receive by email, usually an order confirmation from amazon. So when you receive that order confirmation email, that is considered to be an acceptance of your offer by amazon. And then and only then is there an agreement between you and amazon. In this situation, there is no agreement that has been formed between Sonya and Ahmed. Sonya's Kijiji ad is presumed to be only an invitation to treat and not an offer. That ad was not directed to specific persons and nothing in the ad indicates an intention by Sonya to make a binding offer. So you should compare the facts of this scenario to the facts from a case called the Karbala smokeball case, which will examine a little later on. So Ahmed responded to that invitation to treat by Sonya by making an offer to Sonya. So that's that's the email that he sent that's considered to be an offer. It is now up to Sonya to decide whether or not to accept Ahmed's offer.