Transcript Formation of Contract

Formation of
Contract
Offer
 How to make an effective contract?
 Relation between offer and “declaration of
intention”
 Distinction between an offer and an “invitation
to make an offer”
 Binding effect of an offer
 What is the binding effect of an offer? What is the
differences between an binding effect of an offer
and the effect of a contract made by this offer? Can
offeror withdraw or revoke an offer made by him?
 When does the binding effect start and extinguish?
The manner to make a
contract
 A contract is mutual assent resulting from an
exchange of reciprocal declarations of
intention by two or more persons for the
purpose of creating certain legal effects.
 When the parties have reciprocally declared
their concordant intent, either expressly or
impliedly, a contract shall be
constituted.(RCC153I)
 A contract is concluded by the exchange of an
offer and an acceptance.(PCL13)
exchange of reciprocal
declarations of intention
 An offer and an acceptance
 Offer:
 Express or implied declarations of intention
 Real offer: declarations of intention accompanied with a
“thing”.
 Acceptance:
 Express or implied declarations of intention
 Accomplishment of intention: performance, acceptance
of the other party’s tender
 Exchange of offers
Invitation to make an offer
 An invitation to offer is a party's manifestation of intention to invite
the other party to make an offer thereto. (PCL art.15I)
 A delivered price list (PCL15I); the sending of pricelists is not;
deemed to be an offer.(RCC154II)
 Exposing goods for sale with their selling price shall be deemed to be an
offer. (RCC154II)
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Announcement of auction
Call for tender
Prospectus
Commercial advertisement
 A commercial advertisement is deemed an offer if its contents meet the
requirements of an offer. (PCL art.15II)
 An offer is a party's manifestation of intention (or declaration of intention) to
enter into a contract with the other party, which shall comply with the following:
(i) Its terms are specific and definite;
(ii) It indicates that upon acceptance by the offeree, the offeror will be bound
thereby. (PCL art.14)
Definition of Offer
 An offer is a party's manifestation of
intention to enter into a contract with the
other party, which shall comply with the
following:
 (i) Its terms are specific and definite;
 (ii) It indicates that upon acceptance by the
offeree, the offeror will be bound thereby.
(PCL art14)
 Binding effect of contract, not binding effect offer.
When offer effect?
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An offer inter presents
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A declaration of intention inter presents becomes effective at the moment when the
person to whom it is made understands it well. (RCC art 94)
An offer to enter into a contract, made during conversation, shall lapse if not immediately
accepted by the offeree. (Japan commercial Code 507)
An offer inter absents
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A declaration of intention inter absents becomes effective at the moment when the
notification of the expression reaches such other party, except when the withdrawal
of the notification previously or simultaneously reaches such other party. (RCC art 95I)
An offer becomes effective when it reaches the offeree. (PCL art.16I)
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When a contract is concluded by the exchange of electronic messages, if the recipient of an
electronic message has designated a specific system to receive it, the time when the electronic
message enters into such specific system is deemed its time of arrival; (PCL art.16II)
if no specific system has been designated, the time when the electronic message first enters into
any of the recipient's systems is deemed its time of arrival. (PCL art.16II)
A declaration of intention made to a person at a distance shall be effective from the time
notice of it has reached the other party.(PCC97I)
Can an offer be withdrawn?
 An offer may be withdrawn. (PCL17)
 The notice of withdrawal shall reach the offeree before or at
the same time as the offer. (PCL17)
 If a notice of withdrawing an offer arrives after the arrival of the
offer itself, though it should usually arrive before or
simultaneously with the arrival of the offer within a reasonable
time by its transmitting manner, and this might be known to the
other party,
 the other party so notified should notify the offeror immediately of
such delay. (RCC162I)
 If such other party delays the notice specified in the preceding
paragraph, the notice of withdrawing the offer shall be
deemed to have arrived without delay.
(RCC162II)
Withdrawal
arrived
after offer
effected
Withdrawal
arrived before
offer effected
Effective offer
Offer on the way to the offeree
withdrawal
Offer on the way to the offeree
Ineffective offer
withdrawal
Delayed
withdrawal
arrived after it
should have
arrived
Offer on the way to the offeree
Offer dispatched
Ineffective offer Effective offer
Notice of Delay
withdrawal
Offer arrived
Binding effect of an offer
in RCC
 Irrevocability (substantive binding power)
 A person who offers to make a contract shall be bound by his
offer. (RCC art 154) (German Civil Code 145 and Swiss Civil
Code)
 Exception
 At the time of offer, the offeror has expressed he will not be bound
by the offer; or
 it may be presumed from the circumstances or the nature of
affairs that he do not intend to be bound by the offer.
 Acceptability
 Substantive binding power.
 An offer is acceptable if its acceptance by an offeree is suficent
to establish a contract.
Irrevocability of an offer in ROC Civil Code
Offer on the way
to the offeree
Binding offer
revocation
Notice of acceptance
Offer on the way
to the offeree
Binding offer
revocation
Offer
dispatched
Offer
arrived
Contract Formed
Notice of acceptance Contract Formed
Expired day
of Acceptability
Binding effect of an offer
in PCL
 Revocable in principle
 An offer may be revoked.
 The notice of revocation shall reach the offeree
before it has dispatched a notice of acceptance. (art.
18)
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 Exception of revocability
 An offer may not be revoked:
 if it expressly indicates, whether by stating a fixed time for
acceptance or otherwise, that it is irrevocable;
 if the offeree has reason to regard the offer as irrevocable,
and has undertaken preparation for performance. (art. 19)
CISG art.16
 (1) Until a contract is concluded an offer may be
revoked if the revocation reaches the offeree before he
has dispatched an acceptance.
(2) However, an offer cannot be revoked:
(a) if it indicates, whether by stating a fixed time for
acceptance or otherwise, that it is irrevocable; or
(b) if it was reasonable for the offeree to rely on the
offer as being irrevocable and the offeree has acted in
reliance on the offer.
Revocation of an offer in PRC Contract Law
Offer on the way
to the offeree
Revocable offer
revocation
Offer on the way
to the offeree
Ineffective offer
Notice of
acceptance
Binding offer (irrevocable)
revocation
Notice of acceptance
Contract Formed
Offer on the way Binding offer (irrevocable)
to the offeree
revocation
Notice of
acceptance
Offer
dispatched
Offer
arrived
Contract Formed
Expired day
of Acceptability
Binding effect of an offer
in JCC
 Irrevocability
 An offer specifying a period of acceptance
 An offer specifying a period of time for acceptance may not
be revoked. .(JCC521I)
 If the offeror does not receive notice of acceptance within
the period specified, the offer shall lapse.(JCC521II)
 An offer without specifying a period of acceptance
 An offer which has been made to a person at a distance
without a time limit for acceptance may not be revoked
before the expiration of such time as is reasonably
necessary for the offeror to receive notice of
acceptance.(JCC524)
 Acceptability
Revocation of an offer in Japan Civil Code
Offer on the way
to the offeree
Binding offer
(irrevocable)
revocation
Notice of acceptance
Contract Formed
Expiration of a specific
period for acceptance
Offer on the way
to the offeree
Binding offer (irrevocable)
Notice of acceptance
Offer
dispatched
Offer
arrived
Expired day for reasonably
receiving notice of
acceptance
Extinction of an offer (An offer is
extinguished in any of the following
circumstances)

Termination
 by offeree
 The notice of rejection reaches the offeror (PCL art 20); An offer ceases to be binding
if it is refused.(RCC art.155)
 The offeree makes a material change to the terms of the offer. (PCL art 20)
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Counter offer
 by offeror
 The offeror lawfully revokes the offer (PCL art 20)
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lapse of time

The offeree fails to dispatch its acceptance at the end of the period for
acceptance (PCL art 20)
 An offer made inter presentes ceases to be binding if it is not accepted at
once.(RCC art.156)
 An offer made inter absentes ceases to be binding if it is not accepted by the
other party within the time during which notice of acceptance may be expected
to arrive under ordinary circumstances. (RCC art.157)
 If a period of time for the acceptance of the offer has been fixed, the offer
ceases to be binding if it is not accepted within such period. (RCC art.158)
If Offeror Dies
 The fact that after the notification of the
expression the expresser dies, or becomes no
capacity to make juridical acts, or is limited in
capacity to make juridical acts, shall not null
the expression of intent. (RCC art 95)
 If an expression of intent is made to a person
with no capacity or limited in capacity to make
juridical acts, it becomes effective when the
notification of the expression reaches the
guardian of the person.(RCC art 96)