Offer and Acceptance in Modern Contract Law: A Needless Concept
40 Pages Posted: 22 Feb 2013 Last revised: 22 Feb 2014
Date Written: February 7, 2014
The notion that contracts require an offer and an acceptance is one of the last remaining bastions of classical contract law. On reflection, it is striking how poorly the offer-and-acceptance paradigm fits large areas of contracting practice; it is simply untrue that all or even most contracts are formed by means of a salient or even recognizable offer followed by a similarly salient acceptance. Instead, contracts are formed in different ways as suit the different circumstances of contracting parties. For example, the parties might contemporaneously sign a common document, shake hands, use a series of escalatingly certain verbal cues to indicate that they believe themselves to be bound, or allow for a third party or computer technology to match them firmly with one another. Moreover, even in cases that may fit factually into the classical offer-and-acceptance paradigm, the model tends to obscure the substantive and interpretive questions that underlie contract formation.
The problem is not necessarily debilitating. Perhaps surprisingly, doing away with the paradigm and terminology of “offer” and “acceptance” would not, on its own, amount to a radical change to modern contract law. Nonetheless, there are several reasons to highlight the weakness of the offer-and-acceptance paradigm. Most directly, highlighting the weakness of the model may discourage courts and commentators from extending it beyond the cases to which it is most directly applicable; stretching the paradigm in this way invites at best awkwardness and at worst poor decisions. Similarly, brushing away the offer-and-acceptance paradigm can highlight useful modes of contract formation that have not received sufficient attention or study.
Perhaps more importantly, moving past the offer-and-acceptance paradigm suggests the relatively poor functional basis for what is taken to be a core principle of contract law — namely, that immediately subsequent to an offer that concludes a contract, a promise is established and expectation damages are available. This rule may be loosely justified on grounds of administrability, but it has overall a poor fit in many circumstances with both commercial practice and with the functional, substantive goals of contract law. Once the classical, formalistic offer-and-acceptance model is exposed as inadequate, a question arises as to what should replace it. In modern contract law, a formation doctrine that depends more directly on the timing and possibility of performance preparations, promise reliance, and speculation comports better both with morality and with efficiency.
Keywords: contracts, contract law, offer, acceptance, formation, offer and acceptance, conceptualism, formalism
JEL Classification: K12
Suggested Citation: Suggested Citation