ISSUE: Does a valid and binding contract between Gerald and Luis for the sale of coffee exist?
RULE: For a contract to be valid, the following elements should be present: agreement, consideration, legality, capacity and consent. An agreement is formed through offer and acceptance. If an offer is followed by an acceptance, a contract is concluded. An acceptance should be unconditional. A reply to an offer which purports to accept it but is conditioned by the offeror’s consent to different or additional terms is not an acceptance but a counteroffer. In short, if an answer to an offer contains new conditions, it is not an acceptance but a counteroffer. A counteroffer relates to the same matter as an original offer, however, some slightly different conditions are proposed.
APPLICATION: On 2 February 2008, Gerald sent an e-mail to Luis, offering to purchase from certain amount of coffee for a specific price. This communication constitutes an offer. One may observe, that in the email of 2 February 2008 Gerald made a manifestation willingness enter into the bargain. Moreover, Gerald demonstrated that in case of an acceptance he will consider himself as legally bound. On 5 February 2008, Luis answered to Gerald’s email by stating that he would like to accept an offer but slightly changed the conditions. This communication does not constitute an acceptance, but a counteroffer. Indeed, Luis does not accept Gerald’s offer unconditionally. Instead, he agrees to supply coffee but on different terms. In particular, in his offer Gerald stated that the full price for the coffee will be paid by 25 March 2008. However, Luis suggested that the full price of the coffee should be paid at the time of delivery. Luis offered to send one more sort of coffee. Finally, Luis suggested introducing “Standard Conditions of Contracts of Sale” into the contract. In a word, one may observe that Luis introduced several new conditions, making, thereby, a counteroffer. Therefore, on 5 February 2008 a counteroffer was made to Gerald. On 6 February 2008, Gerald sent an answer to Luis stating that he agrees with Luis’s suggestions but in part. Gerald specifies that he cannot purchase the additional sort of the coffee. Gerald also believes that there the contract has been made among Gerald and Luis by virtue of his reply to Luis. However, Gerald mistakes. As it has been mentioned earlier, on 5 February 2008, Luis made a counteroffer to Gerald. The rules for a counteroffer are the same as for an offer – the acceptance should be largely unconditional. The supply of additional sort of coffee is a part of the Luis’s counteroffer. This part has been rejected by Gerald. Such a rejection requires Luis’s consent. If some new condition, in this case a rejection of a part of an offer, requires an offeror’s consent, the communication cannot be considered as an acceptance but as a counteroffer. Therefore, Gerald’s communication sent on 6 February 2008 is not an acceptance of the Luis’s counteroffer, but a new counteroffer. From the case, one may learn that Gerald’s counteroffer was not followed by the acceptance. Therefore, no legally binding contract was made between Gerald and Luis as of 6 February 2008.
CONCLUSION: Since no legally binding contract has been made between Gerald and Luis, neither Gerald nor Luis will succeed in claiming that there was an enforceable contract.