What is a Contract Offer: Everything You Need to Know
What is a contract offer? A contract contains two ingredients: an offer and acceptance of that offer. An offer is a promise made by one person to obtain a promise from another person. 3 min read
What is a contract offer? A contract contains two ingredients: an offer and acceptance of that offer. An offer is a promise made by one person to obtain a promise from another person.
What is an Offer of a Contract?
The person (which could also be a company) who makes the offer is the "offeror." The recipient of the offer is the "offeree." The offeror promises to do something, forfeit something, or give something in exchange for the offeree's promise to do, forfeit or give something. Examples of an offer look like this:
- If you repair the damaged part of your roof, I will buy your house for $125,000
- If you pay me $50 a week, I will mow your lawn during the summer
- I will not sue you if you pay me $3,500 for the damages to my car
- I will pay you $100 if you eat a cicada
- If you give up smoking for 30 days, I will buy your airplane ticket
The offeror has the right to revoke the offer prior to the offeree accepting or rejecting it. Otherwise, unless the offer contains an expiration date or time, the offer remains open until the offeree accepts it, rejects it, or makes a counteroffer. To correspond with the examples above, a counteroffer could be:
- I will sell you the house as-is for $124,000
- I will pay you $40 a week to mow my lawn this summer and let you use my swimming pool whenever you want
- I will pay you $3,000 in exchange for your promise not to sue me
- I will not eat a cicada for less than $150
- I will give up smoking for 30 days if you pay for 4 acupuncture treatments and buy my airplane ticket
A counteroffer can make minor changes to the original offer or propose different terms and conditions. It replaces the offer and shifts the burden back to the offeror to either accept, reject, or make another counteroffer.
In order to qualify as an enforceable contract upon the offer's acceptance, the offer cannot be illegal. Blackmail is one example of this. Another example would be an offer to murder or commit another crime in exchange for a fee.
When the parties have agreed to specific terms, a contract is formed, and the performance of the contract can begin.
What Does Not Constitute a Contract Offer
Just because both parties have consented to a contract does not mean that the contract will be enforceable. Some of the common pitfalls in the offer-and-acceptance process are:
If the language in a contract offer is subject to more than one interpretation, the contract could fail due to vagueness. In one example of an ambiguous contract, a court did not know how to interpret the word "foreclosure." Did it mean a foreclosure lawsuit filing or the foreclosure sale?
2. Lack of Consideration
Contracts must have consideration. A promise from the offeror must be supported by a reciprocal promise of the promisee. If A promises B "one of these days I am going to paint your porch," A has not breached the contract if he does not follow through. There was no contract because B has not made a promise.
3. The Statute of Frauds
Putting the offer and acceptance in writing is optimal. In some cases, however, a rule of contract interpretation called "the Statute of Frauds" requires a written offer and acceptance. These situations can include (among others):
- conveying an interest in land
- answering for the debt of another
- prenuptial agreements
- contracts that the parties cannot perform within a year
When Conduct Rather than Words Can Constitute an Offer
The "meeting of the minds" described above sometimes happens without words. Unlike "express contracts" (where parties express the specific terms of the contract), parties can create contracts by conduct alone. These contracts are known as "implied contracts" or "quasi-contracts. Here, a court could assume the existence of a contract because it would be unfair to one party not to. Perhaps your neighbor comes over to clean your gutters, and you thank him by giving him $50. This happens again next month. By the third month, you may have created a contract even though that was not your original intention.
If you need help making a contract offer or preparing a contract, you can post your legal need (or post your job) on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.