Contracts should be a meeting of the minds. One party makes an offer and the other party accepts that offer. Sounds obvious, right?
This is called the mirror image rule. But it isn’t as simple as you might first think. Read this Juro explainer to find out what the mirror image rule is, how it works and when it applies.
What is the mirror image rule?
The mirror image rule is a concept in contract law. It means that when you say “yes” to an offer, that becomes the basis for a contract, so you’re accepting that offer exactly as it is – with no changes or modifications. Therefore, the acceptance must be a mirror image of the offer. If it isn’t, there’s no contract.
Also called the “unequivocal and absolute acceptance requirement” (which is a mouthful), the mirror rule is a common law concept (i.e. a set of accepted rules based on past legal cases) that must apply for a legally binding contract to be formed.
Since the term “mirror image rule” is rarely (if ever) used in the UK, you might also recognize the concept as a“mutual agreement”, “mutual assent”, “meeting of the minds”, or “consensus ad item”. Regardless of the label used, the concept itself is the same.
But what does the mirror image rule look like in practice? Let’s run through an example together now.
Mirror image rule example
Imagine you’re negotiating a contract for some building work. You offer to pay the builder a certain amount for your new extension. They say they’ll build the extra room as you ask, but they want a payment of 25% up front before they’ll start work.
At this point, the mirror image rule hasn’t been met. Because even though they’ve accepted some of the terms of your offer, their acceptance isn’t a mirror image of it, and they’re asking for a change. In fact, they’re making a counteroffer.
You make another counteroffer of a 15% upfront payment, which they agree to. Boom. The offer mirrors the acceptance – you’ve got a legal contract, and you better start making the tea.
But if the builder doesn’t accept the 15% then no contract is formed, because the offer and acceptance aren’t the same. That means that the mirror image rule hasn’t been satisfied.
This might all seem a bit obvious – if you’ve read any of our previous posts, you’ll know that two of the essential elements of a valid contract are offer and acceptance. So why is it important?
Well, it’s important because no party to the contract is liable if the terms as they were originally offered have changed. That means if your builders suddenly start demanding the original 25% payment before they’ll pick up their tools, you can walk away with no fear of having breached the contract.
Does a counteroffer destroy the original offer under the mirror image rule?
As we said above, acceptance must be a mirror image of the offer. If it isn’t, it becomes a counteroffer. What we didn’t mention is that, if this happens, the original offer is destroyed.
The UK case Hyde v. Wrench is a good (if old) example of this. The defendant said they’d sell a farm to the claimant for £1,000. The claimant offered £950 which the defendant refused. The claimant then tried to accept the original offer of £1,000, but the defendant refused to sell.
As a result of this, the claimant took them to court for breaching their contract. But the court held that there was no contract because the counteroffer of £950 destroyed the original offer – so the claimant couldn’t accept to buy the farm for £1,000.
How is this relevant to the mirror image rule, though?
Well, if the claimant canceled the original offer of £1,000 by proposing a counteroffer, it’s impossible for his acceptance to later mirror the original offer, as it no longer existed. Therefore, the mirror image rule couldn’t be satisfied and no contract had been created. No contract means no breach.
To ensure we fully understand the principle, let’s explore a few more cases that discussed the rule. We’ll cover one from the UK and one from the US.
Mirror image rule cases
Example of the mirror image rule in the UK
In Gibson v. Manchester City Council, Mr Gibson filled in a form from Manchester City Council to find out the value of his council house and get mortgage terms, with a view to buying it.
The council sent him the details in a letter, along with an application form to fill in if he wanted to go ahead. He returned the completed form. But shortly after that a new government came to power and stopped sales of council houses. So Mr Gibson was told he couldn’t carry on with his purchase.
He sued the council, arguing that a binding contract was already in force, and that he should be able to complete the sale.
The court held that the council’s letter wasn’t an offer because it said “The Corporation may be prepared to sell the house to you” and “If you would like to make formal application to buy your Council house, please complete the enclosed application form and return it to me as soon as possible.”
As there was never an offer to be accepted, no contract was formed for the council to breach. This is because there was no offer for Mr Gibson to mirror with his acceptance. Subsequently, poor old Mr Gibson couldn’t buy his house.
Example of the mirror image rule in the US
Minneapolis & S. L. Ry. v. Columbus Rolling Mill is yet another piece of case law that ruled on the mirror image rule. It involved an action by a railroad corporation against a manufacturing company. The Minneapolis & St Louis Railway Co asked Columbus Rolling Mill Co. for a quote to deliver iron rails in March 1880.
They replied with an offer to sell 2,000 to 5,000 tons of 50lb rails, which the railroad company had to accept by 20 December 1879 in order for the acceptance to be valid. On 16 December the railroad company wrote ordering 1,200 tons of rails at the same price.
Columbus said that they couldn’t fulfill the smaller order at the original price, and the railway company attempted to sue for breach of contract.
The court found that the mirror image rule hadn’t been satisfied in this case. That’s because Minneapolis & St Louis Railway Co. had tried to change the terms of the original offer, and Columbus Rolling Mill hadn’t accepted these. Therefore, the contract wasn’t valid as the acceptance hadn’t mirrored the offer.
To recap: we’ve discussed what the mirror image rule is, and explored situations that the mirror image rule applies to. But when doesn’t it apply? Let’s discuss that next.
When doesn’t the mirror image rule apply?
We know that, under common law contract rules, counteroffers don’t constitute acceptance. However, this doctrine doesn’t necessarily apply to all contracts. In fact, under the Uniform Commercial Code (UCC), contracts for the sale of goods are exempt from the rule. Here’s how.
The UCC mirror image rule
Transactions involving the sale of goods are governed by Article 2 of the UCC (in states where this law applies). Importantly, the UCC says that if a deal is between merchants, then it’s possible to add any new terms after an offer has been made and use these in the acceptance of that offer.
This rule does away with the well-established common law rule that a contract won’t be formed unless the terms of acceptance match the original offer exactly. This is because adding new or additional terms doesn’t automatically cancel the original offer, unlike in common law (remember Hyde v Wrench).
Of course, there are a couple of exceptions to the UCC mirror image rule, such as when:
- The offer explicitly limits acceptance to the original terms
- The counterparty rejects the new terms in a reasonable timeframe
- The changes to the terms materially alter the original terms of the offer
It’s also important to remember that this exception only applies to contracts that are governed by the UCC. This means that the common law version of the mirror image rule still applies to other types of contract, as well as for sales of goods with people who aren’t merchants.
Need help managing contracts?
If managing contracts is a pain point for your business, or you just want to find out more about how you can improve the process, fill in the form below.