Assuming that the very basic elements of a contract are met, then what are the other terms of that contract?

• Will you pay me now or later?
• Will I give you the work/materials/advice now or later?
• What happens if one of us does not fulfill our obligations under the contract?

There are other issues involved in contract formation such as whether the agreement is supported by sufficient consideration or whether the agreement is illegal or prohibited by public policy.

For most purposes the simple "offer/acceptance" rule provides good general guidance.

Traditionally, if the "acceptance" differed from the "offer," it was not an acceptance and there was no contract (this is known as the "mirror" rule: if the acceptance did not mirror the offer, there was no agreement). In today's world, this traditional rule is often modified and does not have much real-world applicability. For example, in contracts involving the sale of goods, the Uniform Commercial Code ("UCC") changes the traditional rule. Like all other states, the Oregon Legislature has adopted the UCC with various modifications.

Before determining whether an offer has been accepted, we must first figure out whether an offer has been made and what are the terms of that offer. A classic offer is the situation where a buyer says "I will buy two of those widgets for $10." In the construction context, a common situation is where a contractor gives an estimate that says "I will build that project for $10,000." When the owner signs the estimate, then the contractor's offer has been accepted and a binding agreement is formed.

Figuring out when an offer has been "accepted" is a critical step in analyzing whether a contract has been formed. As a general rule, an acceptance can be made in any manner unless the language or circumstances of the offer unambiguously limit the acceptance to a particular medium, such as written acceptance. For example, any affirmative conduct in response to a purchase order may be sufficient "consideration" to create a contract.

As noted, simply performing pursuant to an offer can be an acceptance, as long as the offeror obtains notice of the performance within a reasonable time. Thus, if a buyer offers to purchase a thousand widgets and the seller promptly responds by notifying the buyer that the seller has begun shipment of the thousand widgets, then the parties have a contract for the widgets.

In construction this can be significant. When a subcontractor delivers a bid, it is generally an offer. If the prime contractor issues a "start work" authorization, the sub may reasonably believe that his offer (bid) was accepted. A sub can control the terms of how the offer may be accepted. An expiration date is a common stipulation. The bid can even state that acceptance occurs when the prime contractor uses the subcontractor's bid as part of the general contractor's bid to the owner. The issue of subcontractor bids (and their acceptance) is a very complicated one that beyond the scope of these materials.

Click on the links at left for a somewhat more detailed look at the issues associated with contract formation.