In Norwegian contract law, the exchange of matching offer and acceptance is the traditional model for contract formation. Chapter 1 of the Contracts Act is based on this model and regulates when and how binding agreements come into existence. This article reviews the central principles of contract formation, including the promise principle, offer and acceptance, the legal effects of party statements, and when binding obligations arise between parties.
Main Principles for Contractual Binding
Promise Principle vs. Contract Principle
In Norwegian law, the promise principle applies. This means that the offeror becomes unilaterally bound by their offer once it has come to the recipient's knowledge, even before acceptance is given. This unilateral binding creates what in legal terminology is called a "limping" contractual relationship - the offeror is bound while the recipient remains free.
This contrasts with the contract principle that applies in Anglo-American law, where the parties only become bound simultaneously when acceptance is given. In international sales regulated by the CISG Convention, the contract principle is applied.
Will and Declaration
Although contract binding originates in the principle of private autonomy, today it is not the subjective will that is decisive. What's central is what the promise recipient can reasonably interpret from the promise - whether legitimate expectations have been established for the recipient. This aligns with the expectation principle in Norwegian property law.
What Characterizes a Binding Party Statement?
For a party statement to create legal obligations, several criteria must be fulfilled:
The statement must be of such a nature that it can establish rights and duties
It must be distinguished from purely narrative statements or preparatory actions
It must be reasonably clear, definite, and final
A line must be drawn against non-binding communications
When assessing whether a statement is binding, the entire situation surrounding its issuance is relevant. In case law, both the wording of the statement and the surrounding circumstances are emphasized.
Offer or Invitation to Make an Offer?
A key distinction exists between binding offers and non-binding invitations to make offers. Invitations do not obligate the issuer to enter into any agreement. For example, price-marked goods in shop windows are traditionally considered offers, while advertisements, catalogs, and price lists are usually just invitations to make offers.
The Contract Mechanism in Chapter 1 of the Contracts Act
The Offer and Its Legal Effects
The offer binds the issuer when it comes to the recipient's knowledge. The issuer can revoke the offer, but this must happen before or simultaneously with the offer coming to the recipient's knowledge, cf. Contracts Act § 7.
In practice, this means:
The issuer can change their mind as long as the offer has not come to the recipient's knowledge
Once the offer has come to the recipient's knowledge, the offeror is bound as long as the offer extends in time and content
Acceptance Deadline
How much time the recipient has to accept depends on:
Whether the offeror has set an explicit acceptance deadline
Whether the offer is given orally or in writing
Oral offers must be accepted immediately, while written offers must be accepted within "reasonable time" if no deadline is set. What constitutes reasonable time must be assessed specifically based on the nature and character of the agreement and whether it is made in a business context.
Acceptance and Its Legal Effects
A timely and adequate acceptance has two legal effects:
The offeror becomes bound to the contract when the acceptance reaches them within the deadline (notice effect)
The acceptor becomes bound to the contract when the acceptance comes to the offeror's knowledge (promise effect)
This means that in practice there are two different points in time when the parties become bound. However, the contract as a whole is not established until the acceptance has come to the offeror's knowledge.
Special Issues in Contract Formation
Late Acceptance
The main rule is that a late acceptance is considered a new offer. It is up to the original offeror whether they will accept this new offer.
An important exception is found in the Contracts Act § 4, second paragraph: If the offeror must understand that the acceptor believes the acceptance is timely, the offeror must object "without undue delay." If they fail to do so, they become bound to the contract.
Discrepant Acceptance
The main rule for discrepant acceptance is that it is considered a rejection combined with a new offer (the "mirror image principle"). The offeror is then unbound both by their own previous offer and by the new offer.
The exception in § 6, second paragraph applies when the offeror must understand that the acceptor believes the acceptance is in accordance with the original offer. The offeror must then object to avoid being bound.
Hidden Dissent
Hidden dissent exists when neither party is aware at the time of contract formation that there is disagreement between them, but this later becomes apparent. In such cases, the main rule is that no agreement is considered to have been established, especially when the disagreement concerns central contractual points.
If time has passed and the parties have relied on the agreement, there will often be a presumption that an agreement has been established, but that it must be supplemented through interpretation.
Revocation and Right of Withdrawal
Revocation re-integra
In special cases, an extended right to revoke an offer applies, called revocation re-integra ("before anything has happened") cf. Contracts Act § 39, second sentence. Two conditions must be met:
The recipient must not have relied on the promise
There must be special reasons that warrant revocation
Examples of special reasons could be that the promise has the character of a favor among friends, or that the content of the agreement is especially burdensome for the promisor.
Right of Withdrawal, etc.
In consumer relationships, the Right of Withdrawal Act provides an extensive right of withdrawal for distance sales and sales outside permanent business premises. The withdrawal period is 14 days.
There are also rules about cancellation rights in certain contractual relationships, both statutory and non-statutory, such as for purchases on trial, appointments with doctors or dentists, hotel reservations, etc.
Conclusion
The Contracts Act's rules on offer and acceptance provide clear guidance on when and how contracts are formed. At the same time, practical application shows there is room for discretion, especially regarding what constitutes a binding offer and when the acceptance is considered timely and in accordance with the offer.
It is important to be aware of these mechanisms, not least because Norwegian law is based on the promise principle, which differs from the contract principle applied in Anglo-American law and in international sales.
