On May 1, Brand Name Industries, Inc. (BNI), sent Carol a letter, via overnight delivery, offering to employ her to audit BNI's financial statements for the current year for $1,000. In the letter, BNI stated that Carol had ten days to accept. On May 5, Carol sent BNI a fax that stated, "The price for the audit seems too low. Would you consider paying $1,200?" BNI received the fax. The next day, Dan offered to conduct the audit for $800. On learning of Dan's offer, Carol immediately e-mailed BNI, agreeing to do the work for $1,000. BNI received this e-mail on May 7. Explain why BNI and Carol do, or do not, have a contract.

Question

What will be an ideal response?

Answer 1

BNI and Carol have a contract. Carol effectively accepted BNI's offer to perform an audit of BNI's financial statements. Carol's fax was merely an inquiry about BNI's offer. An attempt to change the terms of an offer is a rejection of that offer, terminates it, and makes a counteroffer. Here, however, the fax did not indicate an intent to reject the offer, and a reasonable person in BNI's position would not conclude that the fax was a rejection. Carol was still considering the offer. Her learning of Dan's offer did not act as a revocation of BNI's offer (although the offer would have been revoked if BNI had accepted Dan's offer, and Carol had learned of this acceptance). Also, in accepting BNI's offer, Carol used a medium that was reasonable under the circumstances because BNI did not expressly specify any particular method of acceptance. Carol's acceptance was timely sent and received, and consequently, was effective on dispatch.