 This is Wayne Lanchao. Welcome to the Law of Contract Formation, Module 3A, Part C. In this part, we will continue looking at the different aspects of the life of an offer and also examine the concept of an invitation to treat and understand why often an invitation to treat is not considered to be an offer. Let's now go back again to our old friends Daria and Jamal and make a few more changes to their story. As before, Daria says to Jamal, I need some money for a new laptop. Do you want to buy my Apple laptop for $500? Jamal says, can you let me think about it until tomorrow? And Daria says, sure. So we've heard all that before. But this time, something horrible happens. That evening Daria is killed in a car accident. Jamal is sad about Daria, but he still wants to buy her computer. Can Jamal still accept Daria's offer before noon tomorrow? In a situation where an offer is made and the offer is still open, but before it's accepted or even rejected, either the offer or the offeree either dies or goes insane. What are the rules that apply then? The general rule is that when you have an offer or an offeree die or become insane, while an offer is still open for acceptance, the offer dies as well. So we cannot form an agreement because either the offeree or offeree has died before there was any acceptance. Now that is the general rule, but there is a big exception to that rule. So an offer can still be accepted if the deceased or insane party, which could either be the offeree or offeree, is not required under the proposed contract to perform personally, meaning they're not required to perform some kind of personal service. Personal service is something that's actually done by the person. So it could be something as complex as providing consulting services or writing an article or something as simple and menial as mowing someone's lawn. So those are personal services. So if it involves a personal service, then obviously that dead or insane person is just not capable of doing that service anymore and the offer is dead. But if it's something else, let's say if it's a real estate deal, that can still happen because it doesn't involve any personal service on the part of the dead or insane person. So if it doesn't involve a personal service, that offer can still be accepted and we can still have a valid agreement. After Daria's tragic death, can Jamal still accept Daria's offer before noon tomorrow? The answer is that since the sale of the computer or the laptop did not involve any personal service by Daria, the agreement can still proceed after her death. Jamal can still go ahead and accept the offer and it would be a binding agreement. What would actually happen in terms of the logistics is that Jamal would pay Daria's estate and the executor of the estate would give Jamal the laptop. Thankfully, the news of Daria's death was premature. She is actually alive and well. So our scenarios continue. Daria says again to Jamal, I need some money for a new laptop. Do you want to buy my Apple laptop for $500? And Jamal refuses her offer by saying no thanks. But a day later, Jamal says to Daria, I've changed my mind. I do want to buy your computer for $500. Is there an agreement? So what happens when an offer is rejected? A rejection of an offer causes the termination or the death of the offer. Which means that the offer can no longer be accepted after that rejection. The offer no longer exists. It has died. So is there an agreement between Daria and Jamal? Jamal's rejection of Daria's offer causes the termination of that offer. There is no offer for Jamal to accept after that time. Therefore, there is no agreement. Let's again change the scenario. Again, Daria asked Jamal, do you want to buy my Apple laptop for $500? Jamal now says yes, but only if it includes your iPod. Daria says no way. Jamal replies, OK, I'll take just the laptop for $500. Is there an agreement between Daria and Jamal? Let's now look at the rules for 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 than the terms contained in the offer. For an offer to be considered to be a proper acceptance, it has to accept all of the terms of the offer, not just some or even most. It has to be all of the terms of the offer. If it's not all of the terms, then the offeree could be considered to be making a counter offer. The effect of a counter offer is to, firstly, reject the offer. So by rejecting the offer, the offer is terminated or has been killed or is not dead. And secondly, the counter offer is creating a new offer. Counter offer is an offer unto itself. It's an offer being made by the offeree to the offer or. Now there could be some situations where the offeree in response to an offer is merely making an inquiry instead of a counter offer. An inquiry is where the offeree is trying to get more information, is asking for information from the offer or. For example, if Jamal had asked, would you consider throwing in your iPod with the laptop? So that's just merely a question, trying to get information from Daria. The legal effect of inquiry is none. It has no effect. It does not terminate or have any effect on the original offer. Let's now go back to the scenario and look at the legal effect of each part of the conversation between Daria and Jamal. So the first statement was by Daria to Jamal, do you want to buy my Apple laptop for $500? So we know that is an offer being made by Daria to Jamal. The second statement Jamal says yes, but only if it includes your iPod. That's considered to be a counter offer by Jamal to Daria. It is not an acceptance since it is not a full and unconditional acceptance of Daria's offer. It causes that offer to be terminated. The third statement, when Daria says no way, that's considered to be a rejection of the counter offer. So that causes the counter offer to be terminated. And the last statement by Jamal, okay, I'll take just the laptop for $500. Now, it sort of looks like he's accepting the original offer by Daria. Now, remember that original offer was terminated by the counter offer by Jamal. So that original offer no longer exists. So Jamal's statement now is considered to be a brand new offer by Jamal to Daria. So again, Daria's original offer was terminated by Jamal's counter offer and that original offer can no longer be accepted by Jamal. So the final conclusion is that, at least for now, there is no agreement between Daria and Jamal. Jamal has made an offer to Daria. Now it's up to Daria to decide whether or not to accept or reject or make a counter offer to that offer. So that's why it says no agreement yet. Let's change our scenario once again. Instead of speaking to Jamal, what if Daria had placed an ad on Craigslist stating used Apple laptop for sale $500. And Jamal saw the ad and responded by emailing Daria saying, I agree to pay the $500 you are asking for the laptop. Is there an agreement between Daria and Jamal? What an item or a service is put up for sale. If it's in a retail store, you'll usually see the price indicated on the shelf where the item is displayed or the price could be on a price tag that's affixed to the item itself. Or another way that you find out that something is for sale is you see an ad. And the ad could be online, which is probably the most common place that you'll see ads these days. But in the pre-online world, you would see ads in newspapers and magazines. And another place you'll see items or services for sale are on companies' websites, e-commerce websites that are designed to show people what's for sale and what the prices are and allow you to order online. The old-fashioned version of an e-commerce website is a physical catalog, like the old Sears catalog. Now, all of these things, they're not considered to be offers, but they are considered to be something called an invitation to treat. Or specifically, they are presumed to be invitations to treat. Now, an invitation to treat legally is not an offer. So the seller or the person who put up the ad or put up the display or the website is not making an offer. They're only making an invitation. They are specifically inviting people who whoever sees the ad or the price tag or the website, they're inviting the people who see it to make an offer for the item that's for sale. So the invitation to treat is only an indication of a willingness to receive offers. Now, I said that these price tags and ads or websites, they are only presumed to be invitations to treat, which means that that's your starting point, that it's an invitation to treat. But it can be shown in that situation that there's some indication that it's more than an invitation to treat, but it's really an offer. So the legal test that we apply is, or the question that we ask is, would a reasonable person believe the person making the statement, which is the person who put up the price tag or put up the ad, was prepared to enter a contract upon a receipt of an acceptance? So if you put up an ad saying car for sale for $5,000, that is likely to be an invitation to treat, because if everyone who replied to your ad saying, I'll take that car for $5,000, that seems to be an acceptance. So if the ad is treated as an offer, which it should be, but if it is treated as an offer, then if five people reply saying, I'll buy the car for $5,000, you would have five legally binding contracts to sell the car, to sell that one car five times over. So the person selling it is in big trouble. He'll be in breach of contract four different times. There's only one car that he can sell. So in that situation, it's more likely that the ad is an invitation to treat. Now, if the ad is rewritten in a different way to make it more like an offer. So if the ad says car for sale for $5,000, first person to reply or to offer $5,000 to buy the car gets it. So if the ad says something like that, very specific, the first person who responds saying that they'll pay $5,000 will get it, that would lead a reasonable person to believe that when you send the email or call and say, I'll take the car for $5,000, that seems to indicate that the ad is indeed an offer. So is there an agreement between Daria and Jamal when Jamal responded to Daria's Craigslist ad? The answer is no. The Craigslist ad is presumed to be only an invitation to treat not an offer. The ad was not directed to specific persons and nothing in the ad indicates an intention by Daria to make a binding offer. Compare that result to a case that we'll look at in the next part of this module, which is the Carbolic Smokeball case. So just keep that in the back of your mind. Now, Jamal responded to that invitation by making an offer to Daria. It is now up to Daria to decide whether or not to accept Jamal's offer. His offer is to purchase the laptop for $500.