Offer and Acceptance

AuthorJohn D. McCamus
The analytical fr amework for determining whether or not the parties
have reached a mutual understanding on the terms of their agreement
is referred to as the law of offer and accepta nce. The basic idea running
through the law of offer and acceptance is that the parties wi ll be held
to have reached an agreement when they have formed a mutual inten-
tion to enter into a bargain with e ach other and, further, are in agree-
ment as to the terms of th at bargain. It is only then that the partie s have
reached a true consen sus ad idem or “meeting of the mi nds,” which,
in theory at least, is a n indispensable requirement for the formation
of an agreement. In the calculus of offer and accepta nce, the commu-
nications of the parties must have created an “offer” that sets out the
offeror’s willingness to enter into an agreement on certain term s; this
is then matched with a cor responding agreement or “acceptance” forth-
coming from the other party, the offeree, which also communicates
a willingness to enter into an agreement on the proffered terms. The
acceptance must precisely match the ter ms of the offer, a proposition
often referred to as “the mirror image rule.” A purported acceptance
that indicates di fferent terms cannot create the required consensus.
Under the orthodox analysis, the offeree must intend to accept the
off er.1 Thus, the fact that two parties send out identical offers, one to
1 See, however, the disc ussion of rewards in Sect ion B(1)(b), below in this chapt er.
another, would not create the requisite consensus.2 The rules of offer
and acceptance, then, establish the analytical mech anism whereby the
common law attempts to identify fact situations in which the parties
have reached agreement and dist inguish them from situations in which
parties have merely negotiated un successfully toward that end.
Application of the offer and acceptance analysis requires an exam-
ination of the communications between t he negotiating parties w ith a
view to isolating communications that constitute an offer in the requi-
site sense and a correspondi ng acceptance. The detailed rules articulate
the basic tests for isolating offers from other forms of communication
and for identifying genuine acceptances. Further, they prescribe such
requirements as exi st for the communication of the initial offer and
the acceptance. They also determine whether and when offers may be
revoked. Each of these topics will be considered below. Although there
are many factual circumstances in which the applicat ion of these rules
is quite straightforwa rd, there are also many situations, including fai rly
common transactional p atterns, in which their application is subtle and
contentious. Moreover, as we shall see, application of the concepts of
offer and acceptance in particul ar fact situations is often easily manipu-
lated to produce the particular analyst’s desired outcome. In a complex
fact situation, various plausible candid ates for the category of offer or
acceptance may emerge. In applying the ana lytical framework, then,
it will often be important to assess the practical implications for the
parties of determi ning whether a particular point in time in a course of
negotiations is the moment when a consensus should be considered to
have been reached.
The test for determining whether either part y intended to communicate
an offer or an acceptance is objective and does not rest on the subjective
intentions of the parties. Thus, in determining whether the offeror has
communicated an offer to the offeree, the question to ask is whether
the offeree reasonably understood the communications, by word or
conduct, of the offeror to constitute an offer.3 If so, the offeree is able
to accept the offer. The fact that the offeror may not have subjectively
intended to enter an agreement is irrelevant. Similarly, the test of an
intention to accept is whether the offeror reasonably understood that
2 Tinn v Hoffman & Co (1873), 29 LT 271 [Tinn].
3 See, for example, Singh v British Columb ia Hydro and Power Authority, 2001
BCCA 695, leave to appeal to SCC re fused, [2002] SCCA No 45. And see Allied
Marine Transport Ltd v Vale do Rio Doce Navegacao SA, [1985] 1 WLR 925 at
936 (CA), Goff LJ. For an illustration in the conte xt of a unilateral contract , see
Goldthorpe v Logan, [1943] 2 DLR 519 (Ont CA) [Goldthorpe].
Offer and Acceptance 33
the communications of the offeree constituted an accept ance.4 If so, the
contract is formed. This approach is often referred to as the “objective
theory of contract for mation.”5 The objective theory protects the rea-
sonable expectations of a par ty reasonably relying on the other party’s
objective manifestation of assent, thereby avoiding the risk that might
otherwise accrue of that party detrimentally relying on its belief in
the existence of an agreement. The objective theory doe s not create an
agreement where neither party believes that a contract has been cre-
ated. In such a case, there are no rea sonable expectations to protect and
no risks of detriment al reliance to avoid. In such a case, the objective
theory would serve no purpose. It does apply where one person reason-
ably believes, on the basis of the other party’s communications, that a
contract has been formed.
In the course of this an alysis it will be useful to distingui sh, from
time to time, between bilateral contracts and unilatera l contracts. A
bilateral contract is an agreement constituted by an exchange of prom-
ises. A simple illustrat ion of a bilateral contract would be a contract
for the purchase and sale of goods under which the seller promises
to deliver the described good s on a stipulated date and the purchaser
promises to pay the agreed pr ice for the goods at that time. Such an
agreement would typically be formed by t he utterance of an offer to
sell by the seller or to buy by the buyer followed by the other part y’s
communication of an acceptance of that offer. A unilateral contract, on
the other hand, is constit uted by a promise given in excha nge for an act.
A unilateral contract is t ypically formed by the communication of an
offer that indicates th at the offeror is prepared to be bound by certain
promises if the offeree performs a stipulated act. In such a case, perfor-
mance of the stipulated act wil l constitute the acceptance of the offer.
Offers of rewards are a commonplace illustr ation of the phenomenon.
An offer in the form, “I will pay you f‌ive hundred dollar s if you climb to
the top of the f‌lagpole,” is an offer of an agreement pursuant to which
the offeror will be bound to pay a cert ain amount of money only if the
offeree performs a pa rticular act. A more realistic illustr ation is the offer
of a reward for a provision of information concerning the comm ission
of a particular cr ime, a promise to pay money in return for the act of
4 UBS Securities Can ada Inc v Sands Brothers Canada , Ltd, 2007 ONCA 405,
leave to appeal to SCC re fused, [2007] SCCA No 386. See also Heming way v
Desire2Learn Inc (2008), 68 CCEL (3d) 207 (Ont SCJ) [Hemingway]; Vollmer
v Jones (2007), 36 RFL (6th) 340 (Ont SCJ); Ve ntura Land Co Inc v F & L Erb
Holdings Ltd, 2007 MBQB 297; Ball v Hard y (2006), 45 RPR (4th) 14 (Ont CA).
5 For a classic statement of t he theory, see Smith v Hughes (1871), LR 6 QB 597 at
607 (Div Ct), Blackburn J.

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