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Offer: Definition, Example and Related Terms

What is an Offer ?

An offer is a clear proposal made by one party (the offeror) to another party (the offeree) expressing a willingness to enter into a contract on specific terms. It's like extending an invitation that, if accepted exactly as proposed, creates a binding agreement between the parties.

For an offer to be legally valid, it must contain three essential elements: 1. A clear intention to be bound by the terms if accepted 2. Definite and certain terms (including price, quantity, and other material terms) 3. Communication to the offeree

It's important to note that not all proposals or statements qualify as legal offers. For example, advertisements, price quotes, or invitations to negotiate are generally considered 'invitations to treat' rather than offers. An offer can be revoked at any time before acceptance unless it's supported by consideration or made irrevocable by statute.

Understanding what constitutes a valid offer is crucial in contract management because it marks the beginning of contract formation. Without a valid offer, there can be no valid contract. Contract managers need to be able to distinguish between genuine offers and mere negotiations or promotional statements.

Example(s)

  • Scenario Description
    A software company emails a potential client with a detailed proposal to develop custom software for $50,000, including specific deliverables and timeline. This is a valid offer because it contains specific terms (price, deliverables, timeline) and shows clear intention to be bound if accepted. The email serves as communication to the offeree.
    A store displays products in its window with price tags. This is not typically considered an offer, but rather an invitation to treat. The store is inviting customers to make offers to purchase the items at the displayed price.

Related terms