An offer or proposal given by one party to another is the beginning of the entire process of entering into a contract. Such a proposal must be accepted by the offeree in order to form an agreement. In contract law, this offer may be of many types depending on its nature, timing, etc. It can be a general or specific offer, an express or implied offer, a cross offer, a standing offer, and so on.
What are cross offers?
When two parties make the same offer to one another while being unaware that the other party has already made an offer and the terms of both offers are identical, this is referred to as a cross offer. There will not be a contract in this instance since it cannot be assumed that one party’s offer has been accepted by the other party.
The following are the two essential elements of a cross-offer:
1. Same offer to one another: Here, an offer is made by an offeror to an offeree and later, that same offer is made to the offeror by the offeree without prior knowledge of the offer already made.
2. Ignorance of the offer: The two parties must make their offers in complete ignorance of one another.
Cross offer example
An example of a cross offer is when A offers to sell B his horse for $250, and B, who is not aware of A’s offer, offers to buy the same horse from A for $250. It is assumed that both A and B are making a cross offer in this case. Furthermore, there is no acceptance in this situation, so it cannot be seen as mutual acceptance.
Difference between counter offer and cross offer
A cross offer is not the same as a counter offer.
If the offeree is only willing to accept the offer if specific adjustments or modifications are made, he or she is making a counteroffer. A counteroffer is an offer in and of itself, and it is regarded as a rejection of the original offer. It is a new offer that cancels the previous one, thereby rendering it difficult to revive at a later time.
The party who made the initial offer has the option of accepting or declining a counteroffer. A contract is established if that party accepts the counteroffer, i.e., if the offeror accepts the conditions so mentioned by the offeree in the new offer.
For instance, in the above example, if in response to A’s offer, B proposes to buy the horse at $200 instead of $250, it amounts to a counter-offer by B. It shall mean a rejection of the original offer. Now, if A accepts this and agrees to sell his horse to B for $200, it shall give rise to a contractual relationship.
Cross offer & Counter-offer (Contract law) cases
The English case of Tinn v Hoffman & Co. (1873) is the most significant in this regard. In that case, the defendant wrote to the complainant with an offer to sell him 800 tons of iron for a price of 69s per ton. At the same time, the complainant also wrote to the defendant with an offer to purchase the iron on the same terms & conditions. In this instance, the question of whether or not the parties had a contract and whether simultaneous offers would constitute a valid acceptance was raised before the Court. According to the Court, these were cross offers as they were made concurrently without the parties being aware of each other’s offer. Hence, they were not binding.
In Hyde v Wrench (1840), it was stated that the original offer is superseded and cancelled when a counter-offer is made. It is no longer possible to accept or move forward with the original offer. In this case, Mr. Hyde revoked the initial offer proposed by Mr. Wrench. Mr. Wrench offered to sell a farm for £1,000 and Mr. Hyde made a £950 counter-offer instead, and thus, could not track back.
It is important to note that in order for a valid contract to be established, there must be an offer and acceptance of the same, however in a cross offer, there is no acceptance, rather only simultaneous offers are made, and therefore a cross offer will not result in the formation of a contract.
Cross offers are not valid offers.
On the other hand, a counter-offer results in the termination of the offer originally made. And a valid contract will be formed if the counter-offer has been accepted.
You might also like: