In contract law, an offer is a communication that gives another person the power to form a binding contract simply by saying yes. The Restatement (Second) of Contracts calls it a manifestation of willingness to enter into a bargain, made in a way that justifies the other person in understanding that their assent will close the deal.1H2O. Restatement Second of Contracts 24, 50 That sounds straightforward, but the line between a real offer and a casual remark decides whether you have a deal or just a conversation.
What Makes a Communication an Offer
Three things separate a legally enforceable offer from idle talk: serious intent, definite terms, and communication to the person who can accept.
Serious intent is measured objectively. Courts don’t care what the speaker was secretly thinking. What matters is whether a reasonable person in the same situation would believe a genuine deal was being proposed. Someone who says at a formal business meeting, “I’ll sell you this building for $500,000,” can’t later escape by claiming it was a joke. The test looks outward at observable behavior, not inward at private thoughts.
Definite terms give the agreement enough substance to enforce. Under traditional common law, an offer typically needs to identify the parties, the subject matter, the price, and the timeframe for performance. A proposal so vague that a court couldn’t figure out what was promised isn’t an offer at all.
Communication to the offeree is the final requirement. The offer has to actually reach the person who holds the power to accept. An offer sitting unsent in a drawer, or living only in someone’s head, creates no legal power in anyone.
Looser Rules for the Sale of Goods
Common law demands fairly complete terms, but the Uniform Commercial Code is more forgiving when the deal involves goods. Under UCC § 2-204, a contract doesn’t fail just because one or more terms were left open, as long as the parties intended to make a deal and there’s enough to fashion a remedy.2Legal Information Institute. UCC 2-204 Formation in General Price is the most common gap. UCC § 2-305 lets a contract go forward without a settled price; the law supplies a “reasonable price at the time for delivery.”3Legal Information Institute. UCC 2-305 Open Price Term Merchants routinely agree to buy or sell before every detail is nailed down, and the UCC accommodates that reality instead of voiding deals over technicalities.
When It’s Not an Offer at All
Not every communication that looks like an offer actually is one. The Restatement draws a clear line: if the recipient knows or should know that the speaker doesn’t intend to close a deal without further expression of agreement, the communication is just preliminary negotiation.4H2O. Restatement Second of Contracts 26 Lawyers sometimes call this an “invitation to treat.”
Price tags on store shelves, catalog listings, and classified ads all fall into this category. The seller is showing what’s available and at what price, but the customer makes the actual offer by presenting an item at the register or placing an order. This protects sellers from being locked into contracts beyond their inventory or with every person who happens to read a listing.
The rare exception is an advertisement so specific it leaves nothing to negotiate. A store that publishes “first customer through the door at 9 a.m. Saturday gets this television for $99” has arguably made an offer, because the terms are definite and the language signals a commitment. Most ads don’t come close to that specificity, which is why the default runs the other way.
Bilateral and Unilateral Offers
Offers come in two structural forms depending on what the offeror expects back.
A bilateral offer asks for a return promise. Most business contracts work this way: you promise to pay, and the other side promises to deliver. Both parties are bound the moment the return promise is made. Home purchase agreements, employment contracts, and supply deals are all bilateral.
A unilateral offer asks for an action, not a promise. The classic example is a reward poster for a lost dog. Nobody has to go searching, but whoever finds and returns the dog earns the reward. The contract forms only when the action is completed, not when someone says they’ll try.
Unilateral offers raise a timing problem. Imagine someone offers $1,000 to anyone who paints their fence, and you’re halfway through the job when the offeror says “never mind.” Under Restatement § 45, once you begin the requested performance, an option contract kicks in automatically, and the offeror can no longer revoke.5H2O. Restatement 2d 25, 45 and 87 – Option Contracts The offeror’s duty to pay still depends on you finishing, but you’re protected from having the rug pulled mid-task. Merely preparing to perform, like buying paint, doesn’t trigger this protection. You have to actually start the work.
When an Offer Can’t Be Taken Back
Most offers can be pulled back any time before acceptance. Two mechanisms take revocation off the table.
An option contract is a separate agreement that keeps an offer open for a set period. The person wanting the option typically pays something, even a small amount, in exchange for the guarantee that the offer won’t disappear while they deliberate. This is common in real estate, where a buyer pays an option fee to hold a property off the market while arranging financing or inspections.
For merchants selling goods, the UCC provides a different path. Under UCC § 2-205, a merchant who signs a written offer promising to keep it open cannot revoke, even without receiving anything in return.6Legal Information Institute. UCC 2-205 Firm Offers This irrevocability maxes out at three months. If no time period is stated, the offer stays open for a reasonable time, but never beyond that ceiling. If the irrevocability language appears on a form the buyer supplied, the merchant must separately sign that specific term.
Courts sometimes also prevent revocation through promissory estoppel. Restatement § 87(2) says an offer the offeror should reasonably expect to cause significant action or expense becomes binding as an option contract to the extent necessary to avoid injustice.5H2O. Restatement 2d 25, 45 and 87 – Option Contracts
When Acceptance Actually Takes Effect
The default timing rule for acceptances catches many people off guard. Under Restatement § 63, an acceptance takes effect the moment the offeree sends it, not when the offeror receives it. If you drop an acceptance letter in the mail on Monday, the contract forms Monday, even if the letter doesn’t arrive until Wednesday.
This “mailbox rule” applies only to acceptances. Rejections, counter-offers, and revocations take effect only when received. So if an offeror mails a revocation on Tuesday but you already mailed your acceptance on Monday, the contract was formed Monday and the revocation arrives too late.
Two limits keep this rule from causing chaos. It doesn’t apply to option contracts, where acceptance must actually reach the offeror to be effective. And the offeror can override the default by stating in the offer that acceptance is effective only upon receipt. Sophisticated commercial offers routinely include that kind of language, so read the terms before assuming the mailbox rule applies.
Clicks, Taps, and Electronic Offers
Federal law puts electronic offers and acceptances on equal footing with paper. The E-SIGN Act provides that a contract cannot be denied legal effect solely because it was formed using electronic signatures or records.7Office of the Law Revision Counsel. 15 U.S. Code 7001 – General Rule of Validity A “click to accept” button carries the same legal weight as a handwritten signature, provided the basic elements of offer and acceptance are present.
Courts distinguish between clickwrap agreements, which require an affirmative step like checking a box, and browsewrap agreements, which assume you’ve agreed to terms simply by using a site. Clickwrap is generally enforceable because the click shows awareness. Browsewrap is often rejected unless the terms were conspicuous enough that a reasonable user would actually notice them.
How an Offer Ends
An offer doesn’t last forever. It remains open only until one of a few events ends the offeree’s power to accept.
Revocation
The offeror can withdraw an offer any time before acceptance, and the withdrawal takes effect when the offeree receives it. Until that notice actually reaches the offeree, the offer is still live. For offers made to the general public, like a published reward, the offeror must revoke through the same channel used to make the offer, or one equally visible.
Rejection and Counter-Offers
If the offeree flatly declines, the offer is dead. A counter-offer has the same effect. Saying “I won’t pay $10,000 but I’ll pay $8,000” kills the original $10,000 offer unless either party indicated otherwise.8H2O. Restatement Second of Contracts 39 You can’t counter-offer and then circle back to accept the original terms. The original vanished the moment you proposed different ones. This is where informal negotiations often go sideways.
Lapse of Time
If the offer sets a deadline, the power to accept expires when it passes. If no deadline is stated, the offer lapses after a reasonable time based on the circumstances.9H2O. Restatement Second of Contracts 41 What counts as reasonable depends on the deal. A verbal offer to buy shares in a volatile market might expire within minutes. A written offer to purchase a house might stay open for a week. Courts look at the nature of the transaction, industry norms, and prior dealings between the parties.
Death, Incapacity, or Destruction
If either party dies or loses legal capacity before acceptance, the offer terminates automatically. No notice is required; the termination happens by operation of law. The same applies if the subject matter is destroyed. A house that burns down before the buyer accepts can’t be the basis of an enforceable sale. This automatic rule generally does not apply to option contracts, where the offeror’s death doesn’t necessarily end the offeree’s right to accept during the option period.