Concept
Offer and Acceptance
Manifestation of mutual assent and intent to be bound
Offer and Acceptance
The preceding sections asked what the parties manifested and whether they meant it to operate legally. This section asks about the shape that manifestation usually takes. The usual shape is an offer followed by an acceptance, and the law treats that sequence as a convenient model, not a mandatory script. The subsections below present the model, show that mutual assent can exist when the model cannot be mapped onto the facts, and then tie the model to the two ways an offeree can accept: by promise or by performance.
The Offer-Acceptance Model
Mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties.1 The party who proposes the exchange is the offeror, and the party to whom the proposal is addressed is the offeree. A valid offer gives the offeree the power of acceptance, which is the legal ability to complete the agreement and bind the offeror by saying or doing what the offer invites. The model is familiar at the level of everyday conduct: a firm makes known that its services are for sale, a client offers to hire it, and the firm accepts.2
The two-step structure exists because the law needs a way to separate the haggling from the deal. Parties to a nonstandard exchange will bargain over price and terms until each concludes that further bargaining is not worth the effort, and contract law must be able to say which moment ended the haggling and began the commitment.3 Offer and acceptance supply that moment. The offer fixes what is on the table, and the acceptance is the offeree's outward response that closes the deal. Disputes arise when a party who has second thoughts argues that the other side never made an offer or never accepted one, and the question then becomes whether that party went far enough, in words or conduct, to create a commitment that could not be undone.4
The model also explains why a reply that changes the proposal does not close the deal. At common law an acceptance has to match the offer's terms, a principle usually called the mirror image rule, and any variation operates as a rejection and at the same time as a counteroffer, which is a new proposal that the original offeror may accept or decline.5 A rejection ends the offeree's power of acceptance. That consequence lets the offeror rely on the reply and look for other buyers, and it means the offeree cannot return later and accept the original terms.6 In Minneapolis & St. Louis Railway Co. v. Columbus Rolling-Mill Co., the mill offered to sell 2,000 to 5,000 tons of rails, and the railway responded by ordering 1,200 tons. The Court treated that reply as a counteroffer and therefore a rejection, so the railway's later telegram ordering 2,000 tons had no offer left to accept.7
The same reasoning decided Ardente v. Horan. The buyer there signed the sellers' purchase agreement, which alone would have been an acceptance, but his lawyer enclosed a letter asking the sellers to confirm that certain furnishings were part of the transaction and stressing that they would be hard to replace. The Rhode Island court read the letter as a condition on the acceptance, not as a collateral request, held that it operated as a rejection, and found no contract.8 The court also stated the counterpart: an acceptance remains valid despite a request for something extra if it is clear that the offeree accepts whether or not the request is granted.9 The two situations differ on one fact. In Ardente the letter tied the furnishings to the deal itself, while a reply that says in effect "we accept, and we would appreciate it if you threw in the furniture" leaves the acceptance standing on its own. A court deciding which reading is right applies the same objective approach to the reply's words that it applies to every manifestation of assent, asking what the language reasonably conveyed to the offeror.10
Assent Without an Identifiable Offer
The model is the ordinary pattern, but the Restatement (Second) of Contracts does not make it a requirement. A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.12 The question is whether the parties' words and conduct, taken together, show that they reached agreement. The question is not whether a lawyer can point to the sentence that was the offer and the sentence that was the acceptance.
The reason is that real dealings are messier than the model. Two businesses may spend months trading drafts, each revising the other's language, until a final version emerges that neither one formally proposed or formally accepted. Imagine a landlord and a tenant who negotiate a lease renewal across a dozen emails, and who then each act on the resulting terms, the tenant paying the new rent and the landlord cashing the checks. No one can say which email was the offer, and no one can fix the day the deal closed. If the law insisted on a identifiable offer and a identifiable acceptance, a party who regretted the deal could escape by pointing to that gap, and the technicality would defeat a bargain both sides had in fact made. Section 22(2) removes that escape route by looking to the overall manifestation.
Performance often supplies the missing evidence. The mirror image rule is easiest to apply before anything has been done, because a varying reply can be labelled a counteroffer and the negotiations ended. After the parties begin to perform, the picture changes: their conduct shows that they meant to contract, and the remaining difficulty is working out which terms they agreed to when their documents conflict.13 Routine sales of goods are the common example, where each side's printed form covers the same price, quantity, and description but carries different fine print, and where a statutory rule for the sale of goods now displaces the strict mirror image approach.14 The next section returns to that rule.
A contrasting case shows the limit. Suppose a seller and a buyer exchange letters on price, the buyer's last letter adds a condition the seller never answers, and neither side does anything further. Here nothing in the conduct supplies assent beyond the letters, and a court applying the model to the conditional reply would find a counteroffer that was never accepted. The difference is not the absence of a neat offer, since both situations lack one. The difference is that in the lease example the parties' own conduct manifested agreement, and in the letter example it did not.
Bilateral and Unilateral Contracts
How an offeree accepts depends on what the offer asks for. A bilateral contract is formed by an exchange of promises, so the offeree accepts by promising what the offer requests. A unilateral contract is formed when the offeror asks for performance instead of a promise, so the offeree accepts by completing the requested act. The distinction matters here because it determines what outward conduct counts as the acceptance. Under the objective approach to assent, the offeree must manifest agreement in the way the offer invites, and where an offer leaves the mode open, either a promise or the performance can ordinarily serve.
A reward offer is the standard unilateral example. In Broadnax v. Ledbetter, the sheriff of Dallas County offered $500 for the capture and return of an escaped convict, and a bounty hunter captured the convict and sued for the reward. The Texas Supreme Court held that a reward offer may be accepted by anyone who performs the service called for when that person knows of the offer and acts in performance of it, but not otherwise.16 The reasoning ties performance back to manifestation. Acting is a manifestation of assent only when the actor is acting in response to the offer, and a person who does the requested thing without knowing of the reward is not assenting to anything, so the performance was not given in exchange for the promise.17
A matched pair shows which fact carries the result. Suppose a homeowner posts a notice offering $200 for the return of a lost dog. A neighbor who has seen the notice finds the dog and returns it, and the neighbor accepted the offer by performing. A different neighbor who has never seen the notice finds the dog and returns it as a favor. The act is identical and the outcome is not, because only the first neighbor's performance was a response to the promise and therefore a manifestation of assent to the exchange. Contrast a bilateral arrangement, where the homeowner offers $200 in return for the neighbor's promise to search for the dog all week. The neighbor accepts at once by making the promise, and the commitment arrives before any searching begins.
The Offer-Acceptance Model
The starting point for analyzing assent is the pattern that most agreements follow. Mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other.19 The party who proposes is the offeror, and the party to whom the proposal is directed is the offeree. A valid offer gives the offeree a continuing power of acceptance, which is the legal ability to complete the agreement by signifying assent to the proposed terms.20 Until the offeree uses that power, no contract exists, and once the offeree uses it in the way the offer invites, the contract is formed.
The two-step structure exists because bargaining has to end somewhere. Parties to a nonstandard exchange can reach a deal at many different prices and terms, so each side haggles until further effort no longer seems worth it, and the law needs a way to separate that haggling from the commitment that follows.21 Offer and acceptance mark the boundary. The offer fixes what is on the table, and the acceptance is the offeree's response that closes the deal. Splitting assent into a proposal and a response also gives each party a moment at which it alone decides whether to be bound, and it gives a court something concrete to examine when it must fix the terms: what was proposed, and what was accepted.
The model also explains what happens when the offeree answers with different terms. An offeree who wants a deal, but not on the terms proposed, may respond with a counteroffer. A counteroffer ends the original offer and reverses the roles, so the original offeror becomes the offeree and holds the power of acceptance.22 The power of acceptance is terminated by rejection or counteroffer, by lapse of time, by revocation, or by the death or incapacity of either party.23 The exchange can pass back and forth several times until the parties agree or give up. Later sections of this chapter take up the mechanics of counteroffers and of termination in detail.
Both steps are judged by the objective test that the chapter began with. An offer is the first outward manifestation of willingness to bargain, and the question is whether a reasonable person in the recipient's position would understand the words and conduct as inviting assent that would conclude the deal.24 Acceptance is judged the same way: the question is whether a reasonable person would believe the offeree intended to accept the offeror's terms, not what the offeree privately meant.25 That is why, in Lucy v. Zehmer, a farm owner who claimed to be joking was held to a signed writing that the buyer reasonably took seriously.26 Because the inquiry turns on what the communications reasonably conveyed in context, the model is a framework for analysis and not a mechanical formula.27
Two situations that differ in one fact show where the model applies. Suppose a seller tells a buyer that the seller will sell a car for $8,000, and the buyer replies, "I accept." The seller has proposed a definite exchange and the buyer has answered it without changing anything, so assent is manifested by offer and acceptance. Now suppose the seller instead circulates a price list and invites buyers to inquire. A reader who replies "I accept" has not completed anything, because a reasonable reader would understand that the seller was inviting proposals and had not yet committed to any sale. The replies are identical, but only the first proposal invited an acceptance that would conclude the bargain. How courts tell a true offer from an invitation to deal is the next topic, so this section only identifies the question.
Assent Without an Identifiable Offer
The offer-acceptance model describes the usual shape of an agreement, but the Restatement (Second) of Contracts does not make that shape mandatory. Section 22(2) provides that a manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.29 The inquiry therefore shifts from a search for particular sentences to a question about the whole record: do the parties' words and conduct, taken together, show that they reached agreement? A court that asks that question can find a contract without being able to say which message was the offer and which was the reply.
The reason lies in how real bargains are reached. Parties to a deal with no market price must haggle toward one, and at some point each concludes that further bargaining is not worth the effort, so contract law's task is to separate the moment of agreement from the haggling that preceded it.30 Nothing about that task requires the moment to look like a proposal followed by an answer. If the law insisted on an identifiable offer and acceptance, a party with second thoughts could point to the gap and walk away from a deal that both sides had in fact made. Section 22(2) closes that exit by directing attention to what the parties showed each other, so that a drawn-out negotiation cannot defeat the very agreement it produced.
The first typical case is a long negotiation that ends in a signed writing. Imagine two corporations merging. Each retains a team of lawyers, the sides trade drafts for months, and each insists on particular terms along the way. Finally an authorized representative of each signs the final document.31 Throughout, the lawyers were revising each other's language, so no one draft was the offer that the other side accepted. The signing and exchange of the final copies is the manifestation of assent, and in a transaction such as the acquisition of a business the parties understand that neither side is bound until the signed documents are exchanged.32 That shared understanding also fixes the moment of formation in these cases, which means "moment of formation cannot be determined" describes a possibility rather than a requirement. Even here the offer-acceptance model can remain a useful tool for analysis, because it supplies the vocabulary for asking what each side proposed and what each side agreed to.33
The second typical case is simultaneous agreement. Suppose two neighbors are discussing a joint purchase of a snowblower when a third person suggests a division of cost and use, and both neighbors say "agreed" at the same moment. Neither spoke first in any sense that matters, yet each manifested assent to the same terms.34 Conduct can do the same work as words. A tenant who is handed a lease for signature may never sign it, but if the tenant takes possession and pays the rent, the tenant has accepted the lease by acting on it.35 The same approach appears in the sale of goods, where the Uniform Commercial Code allows a contract to be made in any manner sufficient to show agreement, including conduct by both parties that recognizes a contract.36
The rule has a limit that the typical cases make easy to miss: it relaxes the search for labels, and it leaves in place the requirement of assent. Take the same two corporations and change one fact. They negotiate for months, but the major terms remain unresolved, and neither side ever signs a final agreement. No offer is identifiable here either, but now the absence of an offer is not the problem. The problem is that nothing the parties said or did showed that they had reached agreement, and assent is judged by what the other side could reasonably understand from the outward words and conduct, not by what one party privately hoped.37 The two corporations differ only in whether their manifestations, taken as a whole, show agreement, and that fact decides the case in each direction. A party who is unable to point to a neat offer may still be bound, and a party who is unable to point to one may also be free, depending on what the record shows.
Bilateral and Unilateral Contracts
The form acceptance takes depends on what the offer asks the offeree to give in return. A bilateral contract exists when, at the moment of acceptance, both parties have made promises of future performance. If the owner of a farm offers to sell it for $2 million and the offeree replies that the offer is accepted, the seller has promised to convey the land and the buyer has promised to pay.39 A unilateral contract exists when the offeree accepts by rendering the very performance the offer requires. The act of accepting then completes the offeree's side of the bargain, and only the offeror still has a promise outstanding.40 The word is easy to misread. "Unilateral" does not mean that only one party gave something, because both sides still furnish consideration. The offeree simply furnishes it as a performance at the moment of formation instead of as a promise.41 Most contracts are bilateral, which is why the distinction usually goes unnoticed.
The next question is who decides which mode of acceptance is called for. The offeror does. An offer may invite acceptance by an affirmative answer in words or by performing a specified act, and unless the language or circumstances indicate otherwise, it invites acceptance in any manner reasonable in the circumstances.42 Sometimes the nature of the deal makes the mode obvious even without express words. An employment offer made on May 1 for work beginning June 1, and requiring a reply by May 7, can only be accepted by a promise, because the performance lies in the future. A sign at a construction site offering $1,000 to anyone who reports theft of equipment can only be accepted by actually reporting a theft, because no one would understand it to ask for a promise to report.43
Many offers are less clear, and for those the Restatement (Second) of Contracts supplies a default. It provides that "[i]n case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses."44 The default rests on a practical observation. Most offerors care that they receive the requested thing, not whether the offeree says so first. An offeror who truly cares about the mode can say so in the offer, so reserving the performance-only mode for offers that clearly demand it respects that control. It also keeps an offeree from losing a deal because of a guess about a preference the offeror never expressed. The result is three categories of offer: those that unambiguously require a return promise, those that unambiguously require performance (most reward offers), and those that do not say, which the offeree may accept in any reasonable way.45
A lawn-mowing offer shows the default at work. Suppose a homeowner leaves a note on a teenage neighbor's windshield: "I'll pay $20 if you cut my grass by noon tomorrow." Nothing in the note demands a promise or demands performance only. If Ned phones to say "I accept," a bilateral contract forms when the homeowner receives the call. If Ned instead simply begins mowing at 8:00 a.m., his beginning of performance is also an appropriate acceptance, and it carries an implied promise to complete the job.46 Beginning counts as a promise because a reasonable person who watched Ned start the requested work would understand the conduct as an immediate acceptance, which is the objective test of assent applied to conduct.47 The same reasoning applies to longer jobs. An arborist who begins removing a dead tree at the time the offer specified has accepted by an implied promise to finish, and a bilateral contract is formed at that point. Mere preparation for performance does not count; the performance itself must have begun or been tendered.48
Change one fact and the answer changes. Suppose the note instead reads "I will pay $100 for the return of my dog, Barfy." A true offer for a unilateral contract of this kind is accepted only by returning the dog. A neighbor's reply of "I accept, I will search for your dog" is not an acceptance, and neither is the start of a search.49 The offeror wants the dog, and a promise to look for it is worth little to someone who needs the dog found. The two notes differ in whether the offer calls for a promise-compatible performance or for a result, and that difference determines which conduct manifests assent. Beginning a performance can still have consequences when the offer demands performance only, because the offeror may lose the power to revoke. That protection and its limits are taken up in later readings and are not part of the formation question here.
Reward offers raise a further point about manifesting assent by performance. In Broadnax v. Ledbetter, a sheriff offered $500 for the capture and return of an escaped convict, and a bounty hunter captured the convict and sued for the reward. The Texas Supreme Court answered that a reward offer "may be accepted by anyone who performs the service called for when the acceptor knows that it has been made and acts in performance of it, but not otherwise."50 The reasoning ties performance back to assent. Acting manifests assent only when the actor is responding to the offer, and a person who captures the convict without knowing of the reward is not agreeing to anything, so the service was not given in exchange for the sheriff's promise.51 Imagine the construction-site theft reward again. A worker who has read the sign and then reports a theft has accepted by performing. A passerby who reports the same theft without ever seeing the sign has done the same act but has not accepted, because the report was not made in response to the promise.
The Restatement (Second) of Contracts largely abandons the labels "bilateral" and "unilateral," treating them as describing only the mode of acceptance, but many courts still use them, and the concepts remain the same.52 The distinction also often makes no practical difference. An offeree who completes the requested performance has formed a unilateral contract if the offer required that, and has also manifested a promissory acceptance if the offer allowed one, so which one the offer first called for no longer matters. The distinction matters mainly when the offeror tries to revoke, or when the offeree begins performing and then stops and the offeror claims the beginning was already an acceptance.53