1. Mutual Assent

A contract is an agreement and mutual assent reached through a negotiating process, which can be divided into two essential steps, offer and acceptance.

2. Offer

2.1 Elements of Offer

All offers contain three elements:

(1) an expression of intent to enter a present contract;

(2) a sufficient articulation of the essential terms of the proposed bargain; and

(3) communication of that intent and those terms to another person who is endowed with the capacity to form a contract by a timely and conforming acceptance.

An offer is different from an invitation offer, which is not to make an offer but, invitesthe other party to do so. It is not capable of being turned into a contract by acceptance.

2.2 Types of Contract

There are generally two different types of contracts by the offer:

(1) Bilateral contract: an offer that promises to do something in exchange for another promise is an offer for a bilateral contract.

(2) Unilateral contract: an offer that promises something in exchange for performance of some act is an offer to enter into a unilateral contract.

2.3 Duration of an Offer

An offer terminates at the end of the time stated in the offer, and an attempted acceptance after that time is merely a counter-offer (反要约).

If no time is stated in the offer, it will lapse after a reasonable time.

The duration of a reasonable time is a question of fact, dependent upon the nature of the contract, business usages, and other circumstances of which the offeree either knows or should know.

2.4 Lapse (失效) of Offer

（1）By revocation: revocation of offer means withdrawal of the offer and it will only be effective if it is communicated to the offeree before he accepts the offer.

As a general rule, an offer is not binding on the offeree. If the offeree does not acceptit, he has no obligation to give a notice to the offeror.

(2) By rejectionby the offeree, that is, by non-acceptance within the time prescribed for acceptance by the offeror.

(3) By counter-offer, an acceptance is not a valid one and constitutes a new offer and a counter-offer if it contains additions or reductions or amendment to the offer, which may be accepted by the original offeror.

(4) By lapse of time: an offer will expire after the expiration of a fixed time limit if it has been specified.

(5) By death of either party: an offer lapse on the death either of the offer or or the offeree before acceptance. Death after acceptance does not affect the obligations arising from a contract unless they are of a personal nature.

(6) By failure of a condition subject to which the offer was made. If the offer was made subject to a condition and that condition is not fulfilled, the offer is incapable of acceptance.

3. Acceptance

3.1 Definition of Acceptance

The offeree’s manifestation of assent to the terms of the offer, made in a manner invited orrequired by the offer.

3.2 Requirements of Acceptance

(1) Acceptance must be made in the mannerexpressly or impliedly prescribed by the offeror;

(2) Acceptance must be made by the offereeor by someone acting with his authority;

(3) Acceptance must be made within the period of validity of the offer, or within the reasonable time;

(4) Acceptance must be unqualified and should be distinguished from a counter-offer, a conditional assent, a standingoffer.

3.3 Mode of Acceptance

In general, the offeror may specify the required means of acceptance.

If the method of acceptance is not specified, acceptance may be given in any manner and by any medium that is reasonable under the circumstances.

(1) If the offer is an offer to form a unilateral contract, the offeree can usually only acceptby full performance.

(2) If the offer is for a bilateral contract, the offeree may accept by words or actions that indicate the offeree intends to enter a contract.

(3) If the offer is unclear as to the modes of acceptance, an offeree can accept either by promising to perform or by actually performing.

(4) Acceptance by Silence in the following situations:

• Where the offeror gives reason to understand that silence may constitute acceptance;

• An offeree that silently accepts services will be held to have accepted a contract for the if the offeree had an opportunity to reject them and knew or should have known that the provider expected compensation for his services;

• Or where the parties have in the past allowed the offeree to accept by silence.

Most countries follow the mirror image rule. It requires that an acceptance be unconditional and that it not attempt to change any of the terms proposed in the offer.Otherwise, the acceptance contained different or additional terms is considered a counter-offer and thus a rejection of the original offer.

3.5 Time of Acceptance

Under the common law, a contract is formed when the acceptance is dispatched by the offer. Each contract comes into being at the moment of acceptance. It is therefore often important to determine the time and place the acceptance becomes effective.

When acceptance is by post and telegram, it is generally deemed to occur as soon as the letter or telegram is posted. This is known as “Mail-box rule.”

There are two exceptions to this rule:

(1) The postal rule can be excluded by the terms of the offer.

(2) The postal rule does not apply to acceptances made by some instantaneous mode ofcommunication.

 

4. Consideration

Common types of consideration include real or personal property. Consideration is required to have a contract. Consideration is one of the three basic elements of contract formation in common law, the other two being offer and acceptance. It is not present in other legal systems.

4.1 Definition of Consideration

Consideration means something which is of some value in the eye of the law, moving from the plaintiff; it may be some detriment (损失，损害)to the plaintif for some benefit to the defendant, but at all events it must by moving from the plaintiff.

Consideration is something bargained for and given in exchange for a promise. That “something”may be an act, a forbearance, or a return promise. It may either be a benefit to the promis or or a detriment to the promisee. To constitute consideration,there must be a detriment to the promisee.

4.2 Characteristics of Consideration

(1) It must be real and of some value. It must not be vague, indefinite or abstract.

(2) It need not be adequate. This principleis sometimes explained as “consideration need not be equal to the promise” or“consideration may not be adequate but must be sufficient.”

(3) It must be legal.

(4) It must move from the promise.

(5) It must be possible to perform.

(6) It must not be past. “Past consideration is no consideration.”

(7) Performance of an existing contractual duty, or a public duty imposed on the promise by law.