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What does 'offer and acceptance' mean in contracts?

Two of the most important parts of any contract are "offer and acceptance." Without them, your contract doesn't exist -- but most people aren't entirely clear on what offer and acceptance actually mean.

What's an offer?

Essentially, an offer is an expression of someone's willingness to enter into a contract with another party. Once an offer is made, the offerer can be legally bound to the offeree's acceptance of the offerer's terms, even if the offer was insincere. An offer can even be implied based on a person's conduct.

What's acceptance?

Acceptance, on the other hand, means merely that another party steps up and agrees to the terms of an offer. Once acceptance has been made, even orally, you may have a valid contract.

What comes in between?

People make contracts all the time without even thinking about it. For example, your neighbor may offer to pay you to cut her lawn each summer for $20 a mow. Once you agree, you have an oral contract. It can be as simple as that.

In business, however, contracts may have a lot more steps in between offer and acceptance. It's common to see counteroffers, which means that the party receiving an offer rejects the initial terms and proposes a new set. Doing so automatically voids the first offer.

Similarly, it isn't unusual for one party to take time to think an offer over -- which is fine, as long as they don't let the offer expire. Offers may also be rescinded right up until they are accepted.

Contracts can be confusing, and many people get into trouble with them. They don't understand the terms, overlook an important clause or don't realize they've become legally obligated in some way to another party. Don't let yourself be caught unaware. Talk to an experienced attorney about your contract issues.

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