  Contract Offer and Acceptance An agreement, often referred to as a "meeting of the minds," is essential to any contract. No magic language is necessary to form an agreement. However, there must be an offer by one side and an acceptance of the offer by the person to whom the offer was made. In other words, the parties to a contract must agree on its fundamental terms and must intend to be bound by those terms. Thus, contracts are most often formed when one party (the offeror) makes an offer to perform a specified action (e.g. deliver goods or pay a sum of money) and another party (the offeree) accepts that offer. Notably, while offers are generally a promise to perform a specified action, they may also be a promise to refrain from acting in a certain way. Furthermore, the precise terms of a contract are determined by an objective, "reasonable person," standard. Thus, what each party subjectively believes to be the terms of the contract will not be determinative. Instead, courts ask whether the hypothetical "reasonable person" would conclude that the parties intended to enter a binding agreement and agreed to its terms. If so, there is a contract between the parties. As a final point in this section, parties in negotiation must be aware of the effect of a counteroffer. A counteroffer is not an acceptance. Rather, it acts as a rejection of the original offer and a wholly new offer. Thus, in a sale of real estate, where the seller offers to sell the property for $1,000,000.00 and a buyer instead counters with an offer of $950,000.00, the buyer's counteroffer constitutes a rejection of the seller's original offer. If the seller agrees to a $950,000.00 sales price, a valid real estate contract may be formed. Previous Page  Next Page
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