Contract Tip: Understanding the Offer

In Business Tips, Contracts by Larry DonahueLeave a Comment

Contract law can be a confusing mess, especially for busy business leaders. It pays, however, to know some of the basics of contract law in running a business. Such basic knowledge will help avoid potential liability or disaster down the road.

If you don’t already know what a contract is, it is a “bargained for exchange of value” between two or more parties, that binds the parties to perform certain tasks or fulfill certain promises. Business leaders enter into contracts practically every day. Some are business-critical contracts, such as acquisitions for significant assets or a new partnership. Others may not even register as agreements with those who enter into them, such as the waivers an employee may sign, when a package is delivered or water is dropped off.

In order for a contract to be formed, though, several elements must exist. First and foremost, a contract cannot be established without first one party making an offer. There are an infinite number of things that a person (or company) can make an offer on and the following paragraph will generally discuss several types of offers that may form the bases of contracts. Readers should note, however, that the contents of this post are offered as information only and anyone who requires assistance with the creation of a new contract is encouraged to speak with a contracts or business law attorney.

A contract may form when one person offers another person a job. It may form when a company offers to buy a business from another entity. It may begin when a consumer offers to buy a product or service, even at a discount. It can start when a party offers to help the other party. Offers can be made for goods, services, and a variety of types of property. Offers can be made to restrict behavior or to give up a legal right.

Offers can be made to you the business owner, or one of your employees even if they don’t have your permission or the authority to enter into a contract.

There are some offers that are not acceptable as the basis of a bargain for a contract. Examples of such unacceptable offers include, illegal, illicit and immoral offers, and such offers generally do not form the bases of contracts. An offer can encompass as many or as few of terms as the offer needs to secure that which they want from the other party.

Once an offer is made, it may be treated in several different ways by the party that receives it. It may be accepted as offered, or it may be directly rejected. In many cases, an offer is met with a counter-offer, in which a party returns an offer to an offeror with modifications that may suit their needs.

As a business leader, it’s critical you understand when an offer is being made, and it’s critical you unambiguously reject the offer if that is your intention. Similarly, it’s critical you train your employees on how to recognize and deal with situations that could otherwise bind your company. Otherwise, your actions can be viewed as either acceptance or a counter-offer that could be accepted by the original offeror (i.e. the customer), even if that wasn’t your original intention.

Business Law Southwest (BLSW). Business Law that Makes Business Sense. A Slingshot company.

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