A valid offer in contract law is a proposal that gives the other side the power to form a binding contract just by saying yes. Three things have to be true for that power to exist: the person making the proposal must intend to be bound by it, the terms must be definite enough for a court to enforce, and the proposal must actually be communicated to the person meant to accept it. Miss any one of those, and no acceptance in the world will create a contract.
Intent to Be Bound
The first requirement is that the offeror genuinely means to enter a contract on the terms stated. Casual remarks, jokes, and social pleasantries fail this test because no reasonable listener would treat them as serious proposals. Context does most of the work here. The same sentence spoken over beers and spoken in a boardroom with lawyers in the room reads very differently.
Courts don’t try to climb inside the offeror’s head. They apply the objective theory of contracts: would a reasonable person in the offeree’s position, hearing the words and watching the conduct, believe a serious offer was being made? Private, unexpressed thoughts are irrelevant.
The case that teaches this best is Lucy v. Zehmer, decided by the Virginia Supreme Court in 1954. Zehmer wrote out an agreement to sell his farm for $50,000 on the back of a restaurant check after an evening of drinks and later said the whole thing was a joke. The court enforced the deal. Zehmer had discussed the price, redrafted the language, and had his wife sign, and any reasonable person watching that would have thought he was serious. As the court put it, the law looks at what a person’s words and acts reasonably mean, not at their “real but unexpressed state of mind.”1Justia. Lucy v. Zehmer
The same objective standard is why “I’ll give you a million dollars if you finish that sandwich” doesn’t create a contract. A reasonable listener would hear a joke, not a proposal.
Definite Terms
The second requirement is definiteness. An offer has to lay out enough for both sides to know what they’re agreeing to. Under traditional common law, that means identifying the parties, the subject matter, the quantity, and the price. “I’d sell my car for the right price” doesn’t qualify, because a court couldn’t tell what the parties actually agreed on.
Sales of goods are treated more flexibly. The Uniform Commercial Code, which governs goods in every state, says in Section 2-204 that a contract doesn’t fail for indefiniteness as long as the parties intended to make a deal and there’s a reasonably certain basis for a court to fashion a remedy.2Legal Information Institute. UCC 2-204 Formation in General Price is the term most often left open. Section 2-305 fills that gap by supplying a “reasonable price at the time for delivery” when the parties say nothing about price or try to set it later and fail.3Legal Information Institute. UCC 2-305 Open Price Term A reasonable price in practice usually means what the seller charges other buyers for similar goods, or what competitors charge in the same market.
For contracts outside the UCC’s reach — services and real estate, for example — the stricter common law standard still applies. An incomplete proposal for a service job can simply be too vague to enforce.
Communication to the Offeree
The third requirement is that the offer actually reach the person it’s directed to. A draft sitting in a desk drawer isn’t an offer, no matter how complete. Communication can happen in writing, in speech, or through conduct, but the offeree has to know about the proposal before they can accept it.
This matters most with rewards and other open-ended proposals. Someone who performs the exact act described in a reward poster, without ever knowing the poster existed, hasn’t accepted anything. There was no meeting of the minds because one of the minds was never in the room.
What Doesn’t Count as an Offer
Plenty of things that look like offers aren’t. Advertisements, product catalogs, price lists, and items on store shelves are generally invitations to deal: signals that someone is open to doing business, not proposals that create a power of acceptance. Price quotations and requests for bids fall in the same bucket, as do most statements traded during early negotiations.
The practical reason is obvious. If every advertisement were a binding offer, a store that ran out of stock would breach its contract with every customer who showed up too late. Instead, the customer makes the offer at the register or at checkout, and the seller accepts or doesn’t.
When an Advertisement Crosses the Line
Some ads are specific enough to be real offers. The leading case is Lefkowitz v. Great Minneapolis Surplus Store, decided by the Minnesota Supreme Court in 1957. The store ran a newspaper ad offering fur coats and scarves for $1 each on a “first come, first served” basis. Lefkowitz showed up first, offered to pay, and was turned away on the ground that the items were reserved for women.4Justia. Lefkowitz v. Great Minneapolis Surplus Store, Inc.
The court sided with Lefkowitz. The ad named the item, the price, and the method of acceptance, and left nothing open to negotiate. Where an offer is “clear, definite, and explicit, and leaves nothing open for negotiation,” it is a binding offer that acceptance completes into a contract. The store also couldn’t add a “women only” condition after the fact, because that limitation wasn’t in the ad.4Justia. Lefkowitz v. Great Minneapolis Surplus Store, Inc.
Most ads don’t come anywhere near this standard. They’re vague about quantity, about who can accept, or about how acceptance works. Flash sales and tightly worded promotions can qualify; general marketing almost never does.
Bilateral and Unilateral Offers
Not every offer calls for a promise in return, and the distinction changes what counts as acceptance.
A bilateral offer proposes an exchange of promises. One party says, “I’ll paint your house for $3,000,” and the other says, “Deal.” Both are bound from that moment, one to paint and one to pay. Most everyday contracts work this way.
A unilateral offer asks for performance rather than a promise. “I’ll pay $500 to anyone who finds my dog” is the classic example. You don’t accept by promising to look. You accept by finding the dog, and the contract forms only when performance is complete. That’s why someone who performs the requested act without knowing about the offer gets nothing: they can’t have intended their actions as acceptance of something they’d never heard of.
One wrinkle protects the offeree once performance starts. Courts generally hold that once the offeree has begun substantial performance under a unilateral offer, the offeror can no longer revoke. Someone who has already searched half the city for the dog can’t have the reward yanked out from under them.
How Long a Valid Offer Lasts
Even a valid offer only matters while it’s still live. The power to accept can disappear in several ways.
- Revocation. The offeror can withdraw an offer at any time before acceptance, but the revocation has to actually reach the offeree. An offeror who mails a revocation is still on the hook if the offeree accepts before the letter arrives.
- Rejection. If the offeree says no, the offer dies. Any clear signal of disinterest will do, and the offeree can’t later change their mind and try to accept.
- Counteroffer. Proposing different terms both rejects the original offer and creates a new one. A buyer who answers a $20,000 asking price with $18,000 has killed the $20,000 offer; the seller now holds the power to accept or reject $18,000.
- Lapse of time. An offer with a deadline expires when the deadline passes. If no time is stated, it lapses after a reasonable time, which depends on the subject matter: hours for a volatile commodity, weeks for a house. Oral offers made in conversation generally expire when the conversation ends.
- Operation of law. Death or legal incapacity of either party terminates the offer automatically, even if the other side doesn’t know. Destruction of the subject matter or a change in law that makes the deal illegal does the same.
Some offers are protected from revocation. An option contract keeps an offer open for a stated period in exchange for consideration from the offeree, which is why real estate deals so often use them. Under UCC Section 2-205, a merchant who signs a written offer to buy or sell goods and states that it will be held open creates a “firm offer” that can’t be revoked, with no consideration required, for the stated time or a reasonable time not exceeding three months.5Legal Information Institute. UCC 2-205 Firm Offers Courts also sometimes hold an offer open where the offeree has reasonably relied on it to their detriment, as with a subcontractor’s bid that a general contractor uses in assembling its own.