Key Takeaways:

  • An offer is the basis of legally binding contracts and must be clear and definite.

  • Types of offers include express, implied, specific, general, cross, counter, and standing.

  • A counter-offer nullifies the original offer and proposes new terms.

  • Offers differ from invitations to treat, which do not create binding contracts.

  • Offers can be revoked before acceptance, but proper communication is key.

In contract law, an offer is a legally binding agreement that outlines the terms under which parties are willing to enter into a contract. Understanding the types of offers in contract law is crucial for both legal professionals and students of law, as it lays down the groundwork of how agreements are formed and what obligations are expected from the parties involved. 

What Constitutes As An Offer In Contract Law?

An offer in contract law is a proposal by one party to another, indicating a willingness to enter into a legally binding agreement under specific, clearly laid out terms. The party that makes the offer is known as the "offeror," while the party to whom the offer is made is the "offeree." 

In contract law, for an offer to be legally valid, it must be clear, definite, and communicated to the offeree, who can then accept, reject, or counter the proposal.

Once an offer is accepted, a contract is formed, and both parties are legally bound by its terms. If either party fails to fulfill these terms, it could result in breach of contract, which could lead to lawsuits or legal disputes. For this reason, understanding the different types of offers in contract law is crucial.

Types of Offers in Contract Law

Offers in contract law can be categorized into various types. Each of these types of offers comes with unique characteristics and legal consequences. Below is a detailed explanation of the main types of offers in contract law.

1. Express Offer

An express offer is made through clear and specific terms, either orally or in writing. One common example of an express offer is a job offer letter stating the position, salary, and start date. The essential aspect of an express offer is the explicit communication of the terms to the offeree.

Legal Implications: Once an express offer is made and accepted, both parties are bound by the specified terms. If there is any ambiguity or vague language in the offer, it can lead to disputes. For this reason, clarity of language is crucial when drafting an express offer. 

2. Implied Offer

An implied offer is not communicated directly but may arise from certain actions, conduct, or the circumstances of the parties involved. It is more of a routine interaction rather than a written offer. For example, when a customer places goods on a store counter, they are making an implied offer to buy the goods.

Situations: Implied offers commonly occur in routine business transactions and where customs or established practices dictate certain behaviors.

3. Specific Offer

When an offer is directed toward a particular individual or a defined group of people, it is called a specific offer. This type of offer cannot be accepted by anyone outside the targeted group. 

Legal Cases/Examples: One example of a specific offer can be when a landlord offers to rent his property to a specific tenant or group of tenants. If an unintended party accepts the offer, there can be grounds for legal disputes and lawsuits. 

4. General Offer

A general offer is open to the public at large and can be accepted by anyone who fulfills its conditions. Once accepted, general offers are binding, provided the party accepting the offer performs the specified conditions. Revoking or terminating a general offer may also require a similar level of public communication as the original offer.

If the offer is accepted by a large number of people, the number of contracts formed will be equal to the number of individuals who accept the offer. If a reward is offered for completing a certain task, only the person who completes the task can accept the offer.

Legal Cases/Examples: The famous legal case of Carlill v Carbolic Smoke Ball Co. is a classic example, where the company made a flu remedy and publicly promised to pay anyone who used their product as instructed and still contracted influenza.

5. Cross Offer

Cross offers occur in a situation where two parties make identical offers to each other simultaneously, without any prior knowledge of the other party’s offer. For example, if Company A sends an offer to Company B to purchase a product for $1000, and at the same time, Company B also sends Company A an offer to sell a product for $1000, we would call that a cross offer.

Differences from Counter Offers: The key difference between counter offers and cross-offers is that a counter offer is a response to an offer previously made. In addition, counter offers alter the terms of the original offer, but cross offers do not create a contract as there is no acceptance. Cross offers simply indicate a mutual intention to contract, but further communication is needed before a legally binding agreement can be formed.

6. Counter Offer

As mentioned above, a counter offer is a response to an offer that has been made already. It modifies the terms of the original offer, and therefore effectively terminates it and proposes a new modified offer. 

One common example of a counter offer can be if a customer offers to purchase a product for $1000 and the seller responds with a price of $1200, the seller has made a counter-offer.

Legal Effects: The key legal implications of a counter offer is that it nullifies the original offer, which cannot be accepted unless it is proposed again. A counter offer can be accepted or rejected by the party who proposed the initial offer. If that party accepts the counter offer, a contract is established.

7. Standing Offer

An offer is regarded as a standing offer if it is meant to remain open for a certain amount of time and can be accepted any time before the deadline. However, accepting the offer does not make it a legally binding contract in this situation–the party that is accepting the offer must place the actual order for it to be legally binding.

Revocation: A standing offer can be revoked at any time before acceptance, provided it has not yet been acted upon. 

Offer vs. Invitation to Treat

One of the most common areas of confusion in contract law is the difference between an offer and an invitation to treat. While they may seem similar, they hold very distinct legal meanings and consequences.

The first difference is that an offer is a clear, definite proposal made by one party to another to form a contract upon acceptance. It therefore reflects the willingness of the offeror to be legally bound by the terms if the offeree accepts them.

However, an invitation to treat is an indication that a party is open to negotiations. It does not directly indicate a willingness to form a contract. In other words, it is an invitation to discuss the possibility of making an offer. 

Below are some common examples of an invitation to treat that you may already be familiar with:

Advertisements: Most advertisements you see on newspapers, online platforms, or posters are considered invitations to treat, not offers. This is because the advertisement is an invitation from a seller to a customer to purchase a product–once the customer makes an offer to purchase, the seller can choose to reject or accept the offer.

Goods Displayed in Stores: Items on store shelves are considered invitations to treat. It is not considered an offer until the customer takes the item and goes to the checkout counter to purchase it. The store can choose to then accept the offer by processing the payment. 

Auctions: When an auctioneer calls for bids, they are not making an offer but inviting potential buyers to submit offers. Each bid represents an offer from a bidder, and when the auctioneer accepts the highest bid, a contract is formed.

Revocation of Offers

When an offer is withdrawn by the party who made the original before it has been accepted, it is considered a revocation. It is important to note that if the other party has already accepted an offer, revocation is usually not possible unless it was stated prior. 

Legal Rules For Revocation Of An Offer

In contract law, an offer can generally be revoked at any time before acceptance, but certain conditions and rules may apply to how revocation can be carried out. Below are some of the laws governing how an offer can be withdrawn or revoked.

Effective Communication: For a revocation to be valid, it must be effectively communicated to the offeree. The offeror must ensure that the offeree is made aware of the withdrawal before they accept the offer. If the offeree accepts the offer without knowing of its revocation, a contract may still be formed.

Mode of Communication: The method of revocation can vary. It can be directly communicated through written or verbal notice or indirectly, such as when the offeree learns of the revocation through a reliable third party. 

Public Revocation for General Offers: If an offer is made to the public at large (a general offer), the revocation must be communicated in the same manner as the original offer. For example, if the offer was made through a public advertisement, the revocation must also be published in a way that reaches the same audience.

Revocation of Standing Offers: For standing offers, revocation must be communicated before the offeree acts upon it. A standing offer remains open for a period or until revoked, but revocation is only effective if communicated before the other party acts on the terms stated in the standing offer.

When Can An Offer Not Be Revoked?

Once an offer is accepted, it cannot be revoked as a contract is formed at the point of acceptance. Furthermore, if an offeree has started performing an act in response to an offer, such as completing the conditions set out in the offer, the offeror may not be able to revoke the offer.

Final Thoughts

Understanding the different types of offers in contract law is essential for forming valid contracts and managing legal obligations effectively. This is because each type of offer has unique characteristics and legal implications that can impact all parties involved. It is strongly recommended to consult with an attorney when forming a contract to make sure you are complying with all relevant laws and regulations.

If you need professional guidance on forming a contract, you can reach out to UpCounsel’s resources for contract attorneys for further assistance.

FAQ

What are examples of offers in a contract?

Examples of offers in a contract can include job offers, real estate purchase offers, and bids in auctions.

What are the four types of contracts?

The four types of contracts are bilateral, unilateral, express, and implied contracts.

What are the three parts of an offer?

The three parts of an offer are intent, communication, and definiteness.

What are the four items an offer should contain?

The four items an offer must contain are identifiable parties, subject matter, price, and terms for acceptance.