While any Georgia business owner knows the fundamental role that contracts play in the success of their enterprise, many business contract disputes in Georgia begin because of conflicting views of whether an agreement has been reached and when a binding contract has been created. Our Georgia business law attorneys recognize that business clients with a fundamental understanding of when a contract is formed combined with solid business law advice are in the best position to avoid potentially costly and disruptive contract disputes. We have provided a primer for understanding when a contract is legally formed in the context of real world contract disputes. Georgia Contract Formation: Offer, Acceptance & Consideration Offer The first phase in the development of a valid contract is the offer stage. An offer is a written or spoken declaration to be bound to specific terms upon acceptance by the other party to the proposed agreement. While this is a very basic and fundamental concept, this is the origin of many Georgia business disputes. Our Georgia contract attorneys review countless transactions where the contract dispute begins with a disagreement between the parties regarding whether or not a communication was actually intended as an offer. The company that made the alleged offer will contend they were just engaged in a discussion of options with no intention to commit to any specific terms. Essentially, the dispute involves whether there was a genuine offer or simply initial discussions. It is important that any Georgia business owner carefully analyze his or her intentions when communicating with the other party during the early stages of a business negotiation. If there is no intention that the communication, which may include suggested terms like price, quantity, means of delivery and other material terms, be taken as an offer than it must be communicated in a way that makes it clear that these are merely preliminary discussions with no intention by the party to be bound to the terms as provided. There are some factors a court may consider in evaluating whether a communication with material terms like these was intended as an offer including:
- Definiteness of the terms: If the material terms of the contract are clearly delineated in the communication including price, quantity, parties to the agreement, subject matter of the transaction and dates for performance, the court may interpret the communication as an offer. The point is that if the court has all of the information necessary to determine damages for a breach of contact, there is a higher probability the communication will be considered an offer.
- Intention to be bound: When a court is analyzing whether a communication constitutes an offer, the court will carefully scrutinize the communication to determine whether it contains an indication that the person who transmitted the communication was prepared to be bound to the terms if accepted by the recipient. If you are merely requesting a price estimate or initiating negotiations, it is important to make it clear that you are not yet prepared to move forward even if the recipient agrees to all of the terms in the communication. Material that is in the nature of advertising is usually not regarded as an offer.
- Seriousness of the Communication: The court will pay attention to the context of the communication to determine whether an offer was intended. Something as informal as terms scribbled on a napkin during a business lunch may be considered an offer. However, a statement made in jest that you would trade your successful Georgia business to anyone who could provide a decent martini will not be considered a real offer. The point is that the court may look past the actual words in the communication to the surrounding circumstances and terms to determine if an offer was intended.