Business Law - How Offer Termination Works

Hi there. Thanks for joining for this video and we're going to be discussing how an offer may actually be terminated in contract law. In our prior video, we talked about some of the elements of an offer and so if that's something that you have not been exposed to just yet, I would encourage you to take a listen to that. In this session, we're going to explore the various ways in which an offer can come to an end, terminating the possibility of forming an actual contract.

Of course, understanding these termination methods is very crucial for both the offer or as well as offerees. So let's go ahead and dive in. Now, when an offer is made, it's important to remember that it's not always open indefinitely and there are several ways in which an offer can be terminated and we'll discuss the most common ones in this video. The first way an offer can be terminated is through what's known as revocation.

Now, revocation occurs when the offer or withdraws or takes back the offer before it's actually accepted by the offeree. Now, it's important to note that revocation is only effective if the offeree receives the revocation before accepting the offer. If they've already accepted, then revocation is not possible. Now, let me give you an example of what this might look like.

Let's say that you are selling your car and you verbally offer it to a potential buyer for $10,000. However, before the buyer has a chance to accept the offer, you change your mind for whatever reason and inform them that you no longer wish to sell the car. In this case, the offer has been revoked and the potential buyer cannot accept it since they've already been notified. Now, the second way that an offer can be terminated is through what's known as rejection.

Now, rejection occurs when the offeree declines the offer either explicitly or implicitly. Once the offer has been rejected, it cannot be accepted at a later time. Now, rejections are a pretty simple concept to understand, so if you were to sell something to a friend, let's say a piece of artwork and you were selling that artwork for $500, but your friend says that they're not interested in purchasing it, that would qualify as rejection and of course, terminate the offer. In which case, you would be free to offer the piece of artwork to someone else or just withdraw the offer altogether.

The third way an offer can be terminated is through a counteroffer. Now, a counteroffer is made by the offeree in response to the original offer and introduces new or somewhat modified terms. Now, when a counteroffer is made, it acts as a rejection of the original offer and presents a new offer to the original offeror, so the roles kind of switch. So, an example of a counteroffer would be if you were selling, let's say, a laptop to someone for $1,000, but they respond by saying that they would be only willing to pay $800.

Their response constitutes a counteroffer as they've introduced a different price, so at this point, the original offer is terminated and you can choose to either accept or reject their counteroffer. The fourth way an offer can be terminated is through a lapse of time. If the offeree does not accept the offer within a specified time frame or within a reasonable period of time, if no time frame is specified, then the offer expires and cannot be accepted thereafter. So, in the example prior, when you were attempting to sell your laptop, what you could do is specify a specific period of time that the offer is valid.

So, let's say a week, and at that point, if your friend has not accepted the offer or responded for that matter at all, then the offer would be terminated. If they attempted to accept after that time, you would not be bound by the terms of that offer since the time has lapsed. Now, the fifth and final way, at least that we're going to discuss, that a contract or an offer rather can be terminated is through the death or incapacity of the offeror. Now, if the offeror passes away or becomes incapacitated before the offeree accepts the offer, the offer is automatically terminated.

This can sometimes occur in business situations. So, let's say a business owner offers to sell their business to a potential buyer, however, before the offer is accepted, the business owner unexpectedly passes away. In this case, that offer is terminated as no longer valid due to the death of the offeror. So, to wrap up, let's quickly summarize some of the key points here.

So, first, an offer can be terminated through revocation, rejection, a counter-offer, the laps of time, or the death or incapacity of the offeror. It's essential for both offerors and offerees to be aware of these termination methods to navigate contract negotiations more effectively. Thank you for taking the time to watch this video on how offers can be terminated. I hope that gives you a better understanding of the different ways that an offer can come to an end.

We'll see you next time.