In volatile times it is vital to make clear the period for which offers remain open for acceptance. If currencies plunge or inflation or deflation makes a price uneconomic, or a business has less cash to spend, finding that an ‘old’ offer is accepted when it was expected to have expired can be very damaging for a business. In this case from the Victorian era, Montefiore had made an offer to buy shares in the Ramsgate Victoria Hotel for a particular price. The offer was accepted six months after this, and by then, the value of the shares in the claimant company were worth much less.
The offer had never been withdrawn, but Montefiore said it was too late and would not go ahead with the sale. The claimant went to court to obtain an order of ‘specific performance’ – a court order forcing the other party to perform a binding contract. The court held the offer lapsed after a ‘reasonable time’ and so the order was not granted. In determining ‘reasonable’, the courts will look at the subject matter of the contract (if the goods are perishable, or if there is some clear, time-sensitive element, such as the Olympics), what normally happens in that trade and the custom and practice.
Offers for sale of shares must be quick, whereas contracts for land might be longer. In practice, it is best to put time limits on offers. In relation to offers to buy businesses, most lawyers would mark these ‘subject to contract’ and until a final agreement is signed, nothing is legally binding. Always be clear on the document as ? to whether heads of agreement, memoranda of understanding, letters of intent and similar documents are intended to be legally binding or not.
As for price quotes, perhaps the most common ‘offers’ made, it is a relatively simple matter to state: “After 30 days the prices in this offer are open to acceptance. ” Some might also want to add: “All acceptance is subject to contract and we reserve the right to alter the prices at any time on notice to you. ” For offers to settle litigation – another area where “old” offers may be accepted and where there are complex legal rules under Part 36 of the Civil Procedure Rules and case law under them not addressed here – it is wise to put a time limit and take legal advice as that area can be ? a minefield.