Understanding what constitutes an “offer” is fundamental to figuring out whether a contract is legally binding and enforceable. An offer is the starting point of every contract, but confusion around what is (and isn’t) an offer can lead to costly disputes or unenforceable arrangements.
This article, written by our contract lawyers, explains the essential elements of an offer under Australian contract law.
Key Takeaways
An offer is a clear and definite proposal to enter into a contract on specified terms
The offer must be communicated and intended to create legal relations
Invitations to treat (e.g., advertisements or displays) are not offers
Offers can terminate through revocation, rejection, lapse of time, or counter-offer
Clear drafting at the offer stage reduces the risk of contractual disputes
What is an Offer?
In Australian contract law, an offer is a definite promise made by one party (the offeror) to another (the offeree) to be legally bound by specific terms, once accepted.
To form a legally binding agreement, the offer must be:
Clear and complete
Communicated to the offeree
Made with the intent to create legal relations
Example: A company emails a supplier offering to purchase 500 items with a deadline for acceptance. This is a legal offer. A late reply becomes a counter-offer, not acceptance.
Acceptance in contract law is just as crucial as the offer itself, as it determines when a binding agreement is formed. Learn more in our article on what constitutes valid acceptance in Australian contract law.
Essential Elements of a Valid Offer in Australian Law
To be enforceable, an offer must include:
1. Clear Terms
The offer must specify key terms such as:
- Price
- Quantity
- Parties involved
- Subject matter
2. Communication to the Offeree
The offer must be communicated to the offeree.
Acceptance made without knowing about the offer is not valid.
3. Intent to Create Legal Relations
There must be an objective intention to enter into a legally binding agreement.
Once a contract has been formed, circumstances may change. Find out how to vary a contract legally in Australia to ensure the changes are enforceable.
Who Can an Offer Be Made To?
An offer can be made to:
An individual
A group of people
The general public
Legal Precedent: In Carlill v Carbolic Smoke Ball Co, the court upheld an advertisement as a valid offer to the public at large.
Offer vs Invitation to Treat
It is important to distinguish between a true offer and an invitation to treat. An invitation to treat is an invitation for others to make offers, not an offer itself.
Examples of an invitation to treat include:
- Displaying goods for sale in a shop
- Advertisements in print or online
- Auction listings before the fall of the hammer
Only when a party makes a clear proposal to be bound on specific terms does it become an offer.
Terminating an Offer
Offers do not last indefinitely. They can end in several ways:
Method | Description |
Revocation | The offeror withdraws the offer before acceptance |
Lapse of time | The offer expires after a set period or reasonable time |
Rejection | The offeree rejects the offer |
Counter-offer | The offeree proposes new terms, extinguishing the original |
Failure of condition | A condition precedent to the offer is not satisfied |
Real Life Example
An Australian retail company emails a packaging supplier on Tuesday, offering to buy 5,000 custom-branded boxes at $2.50 per unit. The offer states that acceptance must be received by 12:00pm Friday, as the company needs to meet a product launch deadline.
The supplier replies at 4:00pm Friday with a message confirming the order – but the deadline has already passed. Since the acceptance was late, it does not form a binding agreement. Instead, it is treated as a counter-offer, which the retail company can accept or reject at its discretion.
This example highlights the importance of clear timelines and prompt responses when making or accepting offers.
For help drafting legally effective offers, speak to our team of Australian contract lawyers today.
Legal Tip: Businesses must also be cautious of unfair contract terms that may render certain clauses void under Australian Consumer Law.
Frequently Asked Questions
What is the difference between an offer and an invitation to treat?
An offer is a proposal that, if accepted, results in a binding contract. An invitation to treat invites others to make offers (e.g., displaying goods for sale).
Can an offer be revoked after it is made?
Yes, an offer can generally be revoked at any time before acceptance unless consideration is given to keep it open (option contract).
Does silence amount to acceptance of an offer?
No, silence does not generally constitute acceptance under Australian law unless there is a prior agreement or established course of dealing.
What happens if acceptance is sent after the offer has expired?
If acceptance is sent after the offer has lapsed or expired, it is treated as a counter-offer that the original offeror may accept or reject.
Are emails considered valid offers?
Yes, an offer can be communicated in writing or verbally. The method of communication is irrelevant.
In today’s digital age, many people ask: do text messages count as a contract? The short answer is yes – under the right conditions, they can be legally binding.
