Most people enter into agreements every single day – often without thinking about it. Purchases in stores, ordering services, bidding processes, and negotiations in business life are all based on fundamental principles of contract law.
Nevertheless, disputes regularly arise as to whether an agreement has actually been concluded, when the parties became bound, or whether an offer could be withdrawn. In this article, we take a closer look at the key rules governing contract formation under Norwegian law.
The main rule: Offer and acceptance
The classic model for contract formation is simple: an agreement is concluded when one party makes an offer and the other party accepts it.
When a valid offer is met with a timely and unconditional acceptance, a binding agreement arises between the parties.
An important starting point is that the acceptance must be given within the applicable acceptance period. If the acceptance is late, the general rule is that the offer is no longer binding.
What is an offer?
Not every inquiry or price indication constitutes a legal offer. An offer is characterised by the fact that the recipient has reason to understand that an acceptance will immediately result in a binding agreement.
The question is therefore how the recipient could reasonably interpret the statement made by the offeror.
The principle of promise in Norwegian law
Norwegian contract law is based on the so-called principle of promise. This means that the party making an offer becomes bound by it once it has come to the knowledge of the recipient – even before it has been accepted.
The purpose is to create security and predictability in contractual relationships. The recipient should be able to evaluate the offer without the risk that it is withdrawn because the offeror changes their mind.
When is a communication not an offer?
In some cases, the sender wishes to invite negotiations without becoming bound. If, for example, expressions such as:
- “without commitment”
- “without obligation”
- or similar reservations
are used, the communication will normally not be considered a legally binding offer. Instead, it will be regarded as an invitation for the other party to make an offer.
This distinction can be of significant practical importance in commercial negotiations.
Can an offer be withdrawn?
The general rule is that an offer may be revoked if the revocation reaches the recipient no later than at the same time as the offer comes to the recipient’s knowledge.
If the recipient first becomes aware of the offer and only afterwards receives the revocation, the revocation will normally not be valid. An exception applies under the so-called re integra rule.
The re integra rule
Even after an offer has come to the recipient’s knowledge, it may in certain special situations still be withdrawn. This follows from the so-called re integra rule.
For the rule to apply, special grounds must exist, and the recipient must not have relied on the offer.
Examples of circumstances that may justify withdrawal include serious illness or other extraordinary personal circumstances on the part of the offeror. However, it is not sufficient that the offeror has simply changed their mind.
How long is an offer binding?
An offer is only binding for a limited period. If the offeror has set an acceptance deadline, the recipient must accept within that deadline.
If no deadline has been specified, the time limit is determined under the Contracts Act based on a concrete assessment. The following factors are typically considered:
- The time the offer takes to reach the recipient
- A reasonable period of consideration for the recipient
- The time the acceptance takes to reach the offeror
For oral offers, a stricter rule applies: if no deadline is given, the offer must generally be accepted immediately.
What happens in case of late acceptance?
If the acceptance arrives late to the offeror, no agreement is normally concluded.
A late acceptance is generally treated as a new offer. The original offeror is then free to accept or reject this new offer.
The rationale is that a party sending a late acceptance often still wishes to enter into the agreement, even though the original deadline has passed.
However, exceptions apply where it is obvious that the agreement no longer has any practical interest.
Must acceptance be explicit?
Many associate acceptance with a written or verbal “yes”. Under Norwegian law, however, acceptance may also be given through conduct.
Conclusive conduct
A person may become bound by so-called conclusive conduct, i.e. actions that clearly indicate acceptance of the offer. Examples include:
- boarding a train
- boarding a bus
- taking goods through the checkout in a store
- or beginning to perform under an agreement
In such situations, it is the conduct – not the words – that establishes the contract.
Can silence constitute acceptance?
The general rule is that silence does not constitute acceptance. However, there are exceptions.
If the circumstances give the offeror reasonable grounds to interpret passivity as consent, silence may have the same effect as acceptance. This may, for example, occur:
- in trial purchases
- in established business relationships
- or where the parties’ previous practice indicates that failure to object implies acceptance
Such situations are assessed on a case-by-case basis, and the threshold for treating silence as acceptance is relatively high.
The significance of reservations
The parties may make offers or acceptances subject to various reservations. Common examples include:
- financing reservations
- board approval reservations
- due diligence reservations
- public approval reservations
For a reservation to be effective, it must be clear and unambiguous.
Ambiguities may lead to disputes as to whether the parties are actually bound. Norwegian law therefore imposes strict requirements that reservations have a clear and unequivocal content.
Conclusion
The rules on offer and acceptance form the foundation of most contract law. Although the principles may appear simple, complex questions often arise regarding when an agreement is concluded, how long an offer remains binding, and the significance of various reservations.
