Length of Contract Offer

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 What Is an Offer?

In contract law, an offer is defined as a promise that is made from one party to another. It is the first step in forming a contract and demonstrates the offeror’s willingness to bargain with the offeree. After the offer is made, the power shifts to the offeree to decide whether to accept the offer, reject it or make a counteroffer.

All offers must be reasonable considering the surrounding circumstances. For example, no contract is formed if Party A makes an offer of $500 for Party B’s house, which is worth $150,000. The offer is not valid because it is not reasonable. The two people can go through the transaction, but it will be as a gift instead of a contract.

For the contract to be valid, the offeree must understand the terms of the offer before they accept it. If the offer is accepted, the offer will transform into a binding agreement between the parties, so long as the offeree is aware that accepting the offer would create such an arrangement.

More situations can arise when there is a question about the validity of an offer. For example, did a party legally rescind the offer before the offeree accepted it? The answer to that question will determine whether a contract was formed. There are complex rules and procedures to follow when making an offer.

Finally, there are several types of offers found in contract law. Each kind has unique features that separate it from other types of offers. For instance, a conditional offer is an offer that requires a certain condition to be met before the offer can be accepted. A common example of a conditional offer is when an employer promises to hire a prospective employee, but only if they can pass a drug test.

How Long Does an Offer Last?

Some offers come with an expiration date: “This offer is good until September 30.” When an offer does not specify how long it will remain open, the general rule is that it will terminate after a “reasonable” amount of time. How long is a reasonable amount of time will depend on:

  • The type of offer is
  • The subject matter of the potential contract
  • The laws of the state in which the offer occurs

If there is a dispute over the offer, the court will decide how long would be considered a reasonable time. For example, an offer for perishable goods (e.g., goods that go bad after a while, like fruits and vegetables) will have a shorter time frame than a more durable object, such as a car or a piece of real estate.

Revoking the Offer before the Agreed Time Expires

Generally, an offeror can revoke an offer before the offeree accepts it. This principle applies even when the offeror claims that they would keep the offer open for a set period. However, there are some exceptions to this rule.

The following is a list of some common exceptions to the rule that an offeror can revoke an offer before acceptance. An offeror cannot rescind their offer if any of these situations arise:

  • Option Contracts: An option contract is formed when an offeror promises to leave an offer open for a certain amount of time, the offer contains a specific price term, and the offeree has provided at least nominal consideration to keep it open. These are common in employment contracts: an executive courted by a company may be offered stock options as part of the new contract.
    • In a stock option contract, the future employee will have the right to buy the company’s stock in the future, but at today’s prices. In such a scenario, an offeror will breach the option contract if they revoke it before the agreed-upon time expires. The offeree can sue the offeror for damages.
  • Bilateral Offers: The majority of offers are part of bilateral agreements. Unless there is language in the contract to the contrary, one should assume that it is a bilateral contract, and thus, it was created with bilateral offers.
    • The main difference between bilateral and unilateral offers is that they are open to the acceptance method (e.g., they can be accepted by substantial performance or consideration). There are more ways to revoke a bilateral offer than a unilateral contract. This is especially true if an offeree has already accepted a unilateral offer through performance.
  • Unilateral Offers: A unilateral offer refers to a contract in which one party promises to pay the other for performing a specific act. For example, if an offeror says they will pay the offeree $50 to mow their lawn, and the offeree does it, then the offeror will be required to pay the offeree $50 for completing the act. In most instances, a unilateral offer cannot be revoked if the offeree has already started to perform the act (e.g., mowing the lawn) or if the offeree has completed a substantial portion of the requested act. Three ways in which an offeree can determine whether an offer is unilateral or not are:
    • Seeing if the offer explicitly requires a performance to constitute an acceptance;
    • Accepting the offer in exchange for a reward, prize, or contest (e.g., reward for finding lost dog); and
    • Checking if the offer contains the phrase, “Offer…only by.”
  • Reliance: A court may bar an offeror from rescinding their offer if it can be shown that an offeree reasonably relied on the offer to their detriment and would suffer harm if the court allowed the offeror to revoke it.
    • An example would be moving all your goods and selling your house to take a job offer in a different state. If the offer is withdrawn, your moving expenses will be for no purpose. The company that offered the job may be obligated to pay for all the expenses incurred with the job loss and the moving expenses. Sometimes, the company may be required to fulfill the offer and give the offeree a job.
  • Merchant Firm Offer rule: In contract law, a merchant is defined as a person who deals in tangible goods. If the offeror is a merchant who offers to sell or purchase goods and signs a written agreement promising to keep the offer open for the offeree, then the offeror may not revoke their offer. Also, if the merchant does not specify a time limit for when the offer will expire, the merchant firm offer rule states that the offer must remain open for a reasonable period of three months.

In addition, some important points to bear in mind when dealing with offer revocation issues are:

  • The offeree must receive notice of the revocation from a reliable source
  • Only the offeror has the power to revoke an offer. While the offeree may reject the offer, they cannot revoke it unless they have made a counteroffer during the parties’ interaction.
  • Make sure that an offer is an actual offer and not a solicitation (e.g., vague advertisements).

Should I Consult an Attorney?

Whether an offer creates a binding contract is one of the more difficult concepts to understand in contract law. There are many requirements to form a valid offer, but these rules are subject to change depending on the state where the case is being heard. Therefore, if you are experiencing issues with an offer, it may be best to consult a local contract lawyer for guidance.

An experienced contract lawyer will know the laws in your state. After an offer is made, your lawyer can also assist you in drafting a contract so that the offer is in writing and can serve as a protective measure in case of a future lawsuit.

In addition, your lawyer can explain your legal rights and obligations under the contract and ensure that those rights are protected.

Finally, if you fail to resolve a dispute over an offer, your lawyer will also be able to guide you through the mediation process and, if necessary, provide representation in court on the matter.


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