The power of acceptance is terminated if the offeror dies before the offeree can accept. This is the case whether the offeree knows of the offeror’s death or not. Do not confuse this rule with the performance of contracts. If one party to a contract already formed dies, the contract is typically binding on their heirs. But that is not the case if the offeror dies before the contract is formed. If the offeree dies before accepting an offer, the deceased’s heirs or representatives cannot accept the offer on the deceased’s behalf nor for their estate.
Incapacity, like death, can affect contract formation. As with death, the incapacity must arise after the offer is made but before it is accepted. For that to happen, there must basically be a legal judgment of insanity. That is a rare case. In cases where the issue of capacity is in doubt, most courts will hold in favor of formation of a contract unless the offeree knows of the offeror’s incapacity. As with death, the representatives of a person who lacks the capacity to contract cannot accept on that person’s behalf unless they have the specific written authority to do so, i.e., a power of attorney.
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