Contract Formation in Norwegian Law: Offer and Acceptance According to the Provisions of the Contract Act

In Norwegian contract law, the exchange of coinciding offers 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 are established. This article examines the central principles of contract formation, including the promise principle, offer and acceptance, the legal effects of party statements, and when binding occurs between the parties.

Main Principles of Contract Binding

The Promise Principle vs. The 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 attention of the recipient, even before acceptance is given. This unilateral binding creates what is legally termed a "lop-sided" contractual relationship - the offeror is bound while the recipient is free.

This is in contrast to the contract principle 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 the basis.

Will and Declaration

Although contract binding originates from the principle of private self-determination (autonomy), today it is not the subjective will that is decisive. The central issue is what the promisee can reasonably interpret from the promise—whether legitimate expectations have been established with the promisee. This aligns with the expectation principle in Norwegian property law.

What Characterizes a Binding Party Statement?

For a party statement to result in legal obligations, several criteria must be met:

1. The statement must be of such a nature that it can establish rights and obligations

2. It must be distinct from mere narrative statements or preparatory actions

3. It must be reasonably clear, definite, and final

4. There must be a lower boundary against non-binding communications

When assessing whether a statement is binding, the entire situation surrounding its issuance is significant. In legal practice, emphasis is placed on both the wording of the statement and the circumstances surrounding it.

Offer or Invitation to Make an Offer?

A crucial distinction exists between binding offers and non-binding invitations to make offers. Invitations do not oblige the issuer to enter into any agreement. For example, goods marked with prices in shop windows are traditionally considered offers, whereas advertisements, catalogs, and price lists are usually merely invitations to make offers.

The Mechanism of the Contract Act's Chapter 1

The Offer and its Legal Effects

The offeror is bound by the offer once it has come to the recipient's attention. The offeror can retract the offer, but this must occur before or simultaneously with the offer coming to the recipient's attention, according to Contracts Act § 7.

In practice, this means that:

• The offeror can change their mind as long as the offer has not come to the recipient's attention

• Once the offer has come to the recipient's attention, the offeror is bound as long as the offer lasts in time and content

The Acceptance Period

The time the recipient has to accept depends on:

1. Whether the offeror has set an explicit acceptance deadline

2. Whether the offer is given orally or in writing

Oral offers must be accepted immediately, while written offers must be accepted within a "reasonable time" if no deadline is set. What is considered reasonable time must be evaluated specifically based on the nature of the contract, its character, and whether it is entered into in a commercial context.

Acceptance and its Legal Effects

A timely and covering acceptance has two legal effects:

1. The offeror becomes bound to the agreement when the acceptance reaches them within the deadline (obligation effect)

2. The acceptor becomes bound to the agreement when the acceptance comes to the offeror's knowledge (promise effect)

This means that there are practically two different points in time when the parties become bound. However, the agreement as a whole is not concluded until the acceptance has come to the offeror's knowledge.

Special Issues in Contract Formation

Late Acceptance

The main rule is that late acceptance is considered a new offer. It is up to the original offeror whether they wish to accept this new offer.

An important exception exists in 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 not, they become bound by the agreement.

Non-Conforming Acceptance

The main rule for non-conforming acceptance is that it is considered as a rejection combined with a new offer ("mirror image rule"). The offeror is then unbound by both their own previous offer and the new offer.

The exception in § 6 second paragraph applies when the offeror must understand that the acceptor believes the acceptance conforms with the original offer. The offeror must then object to avoid becoming bound.

Hidden Dissent

Hidden dissent exists when neither party, at the time of the contract, is aware of a disagreement between them, but this later comes to light. In such cases, the main rule is that no agreement is considered to have been concluded, especially when the disagreement concerns essential contract points.

If time has passed and the parties have adapted to the agreement, there will often be a presumption that an agreement has been concluded, but it must be supplemented by interpretation.

Withdrawal and Cancellation Rights

Re-Integrate Withdrawal

In special cases, an extended right to withdraw an offer applies, so-called re-integrate withdrawal ("before anything has happened"), according to Contracts Act § 39 second sentence. Two conditions must be met:

1. The recipient must not have relied on the promise

2. There must be special reasons justifying the withdrawal

Examples of special reasons may be that the promise resembles a favor, or that the content of the agreement is particularly burdensome for the promisor.

Right of Cancellation, etc.

In consumer relations, the Right of Cancellation Act provides a broad cancellation right in distance selling and sales outside fixed business premises. The cancellation period is 14 days.

There are also rules regarding cancellation rights in certain contractual relationships, both legislated and non-legislated, such as trial purchases, appointments with doctors or dentists, hotel reservations, etc.

Conclusion

The rules of the Contracts Act on offers and acceptance give clear indications on when and how agreements are formed. At the same time, practical application shows that there is room for discretion, especially concerning what constitutes a binding offer and when acceptance is considered timely and consistent with the offer.

It is crucial to be aware of these mechanisms, not least because Norwegian law is based on the promise principle, which differs from the contract principle that underpins Anglo-American law and international sales.