Friday, December 27, 2013

Definition and Meaning of Promise in Contract Law

Promise, Undertaking, Commitment (Contract Law Definition)

For communication to be an offer, it must contain a promise, undertaking, or commitment to enter into a contract, rather than merely an invitation to begin preliminary negotiations. In other words, there must be intent to enter into a contract.

The criteria that is used to determine if communication is an offer include:
1. Language:

Language used may show that an offer either was or was not intended. Language that is technical, such as “I offer” or “I promise” is helpful to show that an offer was indeed made, but not necessary. Keep in mind that certain language can be construed as merely contemplating an invitation to deal, preliminary negotiations, or feelers, rather than actually being an offer. This type of language oftentimes includes phrases such as “I am asking $20 for,” “I would consider selling for,” and/or “I quote.”

2. Surrounding Circumstances:

The circumstances surrounding the language that is used will be considered by the courts in determining whether or not an offer actually exists. If the statement is made in jest, anger, or by way of bragging, and the statement is reasonably understood by others in this context, it will, as a result, have no legal effect.

However, if the statement is subjectively intended to be a joke but is reasonably understood by the hearer to have been made seriously, the statement is an offer because it is interpreted objectively. In other words, it goes with the expectations of a reasonable person.

3. Prior practice and Relationship of the Parties:

In making the determination whether certain remarks constitute an offer rather than preliminary negotiations, courts will look to the prior relationship and practice of the parties that are involved.

4. Method of Communication:
  • Advertisements
Advertisements, catalogs, circular letters, and similar media that contain price quotations are usually construed by courts as being mere invitations for offers. They are announcements of prices at which the seller is willing to receive offers. However, keep in mind that in certain situations courts have treated advertisements as offers where the language of the advertisement can be construed as containing a promise, the terms are certain and definite, and the offeree(s) is/are clearly identified.
  • Industry Custom
Courts will look to generally accepted industry custom in determining whether the proposal qualifies as an offer.
  • Use of Broad Communications Media

The broader the media (such as publications), the more likely it is that the court will view the communication as merely the solicitation of an offer. There is an exception to this rule with reward offers, however.

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