Business Contracts—What Is an Offer?

What Must an Offer Contain? When Is an Offer Not an Offer?

One of the basic requirements of a valid and enforceable contract is an “agreement.” Under contract law, an agreement requires an “offer” and acceptance of that offer. In business, though, it’s common to explore potential relationships with vendors, customers and others. When does the language of an oral conversation, e-mail or text exchange, or written communication rise to the level of an offer that can be accepted? When might a statement that seems like an offer not really be an offer?

What Are the Requirements of an Offer?

At its most fundamental level, an offer is a promise made in exchange for another party’s promise or performance. The person making the offer, known as the “offeror,” is essentially saying “I promise to do something for you if you will either promise to do something in return, or actually do something in return.” It’s an invitation to enter into a contract, but the promise is not binding until the other party agrees to the return promise or performance.

The first requirement of a valid offer is that it must be intentionally communicated to the other party (the offeree). A verbal statement made within earshot of another party, but not directed to that person, will generally not be considered an offer that can be accepted by that person. Furthermore, a written communication that goes to an unintended party won’t be considered an offer that can be accepted.

Additionally, an offer must generally be definite or specific enough that the party to whom it is made understands that it is an offer and understands the terms of the offer. Typically, that requires that the offer clearly state things like quantity, price and quality, as well as time and place of delivery.

An offer must also express an intent to be bound by its terms. Offers that are clearly made in jest or that contain conditions that cannot be met will typically not be valid. For example, a promise to deliver an unreasonable number of goods—a billion widgets—in a given time period won’t customarily be considered an offer than can be accepted.

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