What Constitutes as an Offer?Buyers' Training
February 6, 2013 — 1,030 views
An offer is made when one person indicates his willingness to form a legal contract with another person based on fixed terms. A contract is created on acceptance of an offer. An offer states the terms on which the person making the offer, called the offeror, is prepared to be bound by.
Conditions that Make the Offer Valid
1. Intention to Create Legal Contract
An offer has to show intent to create a legal contract. An agreement entered into by two parties has to be enforceable by law. An agreement can be enforced by law only if it has a legal sanctity. Without the promise of creating a legal association, an offer is not valid
2. Terms and Conditions of Offer Should be clear, not Vague
A contract is valid only if the parties state clearly as to what exactly they intend to do and when. There should be no uncertainty or vagueness in any term of the offer. An agreement between two parties in the absence of settled terms written in a detailed manner is not valid.
3. Offer should be Distinguishable from Declaration of Intention
A Declaration of Intention is a statement made by a person without an intention of creating any legally binding commitment of fulfilling it. There is no hint that an offer will follow this Declaration of Intention. If a person does not follow up on his declared intent, he cannot be held in a court of law. In contrast, a valid offer is legally bound.
4. Offer should be Different from Invitation to Offer
An Invitation to Offer is made to obtain an offer, after which the person, who has made the Invitation to Offer, will agree to the offer and form a legally binding contract. It is different from a valid offer, wherein if the other person agrees to the offer made, a contract is binding.
5. Offer must be Communicated
To make a valid offer, you need to communicate it to the concerned person. Likewise, if you accept an offer, you need to communicate that to the person who made the offer. If an offer is accepted without the knowledge of the person who made the offer, it does not lead to a legally binding contract.
6. Offer Should not Impose an Obligation to Reply
A valid offer cannot contain a statement which mentions that if the offer does not get a reply before a certain date, it will be considered as accepted. An offer cannot impose an obligation to respond, on the person to whom the offer is being made.
7. Additional Terms and Conditions Should be Communicated
All the terms and conditions that are stated in the offer have to be accepted by the person accepting the offer. The person accepting the offer is legally bound by the terms in the contract. If the offer contains any special conditions and terms, those must be communicated to the other party.
8. Clarity about Standing Offer
A standing offer is an offer which is continuous in nature. A standing offer remains open for a certain fixed period. During this period, the order can be accepted multiple number of times. A standing order can be withdrawn before placement of any specific order by both the parties involved.
9. Cross Offer
Cross offers are two completely similar offers, made to each other by two parties, without knowledge of the offer made by each other. A cross offer does not imply acceptance of the other party’s offer. A cross offer does not lead to any contract because the offers were not made in reference to each other.