The very first element of an agreement – which also includes legally binding contracts of all kinds – is an offer. A German-born British law scholar, sir Guenter Treitel, gives the following definition of an offer: “an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed". Noteworthily, the willingness to enter a legal relationship is already implied in this definition.
Yet another crucial part is the offer containing the key terms of the potential contract one is willing to enter. The minimum required information, of course, varies depending on the kind of contract. Unless all of them are provided in the offer, it isn’t valid. Let’s illustrate that with the following example.
Mr Smith wants to sell his used car to Mr Green. He makes Mr Green the following offer: He will sell him his 2008 Toyota Corolla for 4000 USD, paid on delivery and in cash. The car is in a good condition, accident-free, with the braking pads needing to be replaced soon. He will deliver the car to Mr Green’s house next Monday.
Mr Smith’s offer includes: the price, the date of delivery, the terms of payment (including the date) and the description of the offer’s object. The above are the four pieces of information required for an offer in a sale of goods contract in common law. Therefore, Mr Smith’s offer is valid.
Based on the offer, two types of contracts can be distinguished: the unilateral contract and the bilateral contract. In the unilateral contracts the offer is to pay the offeree in return for performing a service, that is a specified act. The offer’s recipient accepts it by performing the stipulated act. Only then is the offeror obligated to pay. Then there are the much more common bilateral contracts - legal agreements between two (or more) parties, where all parties involved are obliged to fulfill their end of the contract from the moment the offer is accepted. This division does not exist in civil law, so it may be confusing to people not accustomed to common law.
Something that is often mistaken for an offer is an invitation to treat, an invitation to make offers. It isn’t necessarily a part of every contract, but when it appears, it comes before the actual offer. Let’s revisit Mr. Smith and his Toyota Corolla, and change the story a little bit. Instead of offering the car to Mr. Green, Mr. Smith posted the following on a message board: “For sale: 2008 Toyota Corolla, good condition, accident free, braking pads need replacing soon. 4000 USD, paid in cash on delivery”. It isn’t an offer yet, however persons willing to purchase Mr. Smith’s car can make him offers themselves. Another example of an invitation to treat is displaying the goods for sale in a store. What that means is, that the goods on the supermarket shelves don’t substitute a true offer, but merely an invitation to make one. This is exactly, what approaching the checkout with some wares will be.
Public auctions are often treated like an invitation to treat, however they are a special case thereof. The auctioneer invites the bidder to make offers by presenting the items to them, to then accept the offer (the highest bid) usually by the fall of the hammer.
