What constitutes an offer of contract?

Understanding what constitutes a proper offer of contract is important not only in constructing an offer, but also if need be as a contract defense to avoid an attempt to place your business into a disadvantageous contract. Working with an experienced Illinois business and commercial law firm can help you to craft a valid offer or to analyze an offer from a prospective business partner to determine whether to accept it or to craft a counter-offer.

To create a valid contract, you must have three elements in place: an offer, its acceptance, and consideration. This post will address the specifics of what constitutes an offer of contract.

To understand what an offer is, you must know that this element of contract construction itself has sub-elements. These include:

Expression of purpose: What will the contract be for? Will it be a sale of goods? An exchange of services? An agreement to refrain from engaging in certain activities, like a non-compete or confidentiality agreement? The offer needs to be specific enough for the person receiving the offer to understand what the person offering the agreement wants from the agreement.

Terms: What are the material terms of the agreement, such as price, subject matter, duration, quantity? The offer needs to include sufficient information for the receiving party to understand what the offering party wants him or her to do upon acceptance.

Note that the terms can also include the form of acceptance: whether performance constitutes acceptance (a unilateral contract), or whether the offer requires acceptance before performance begins (a bilateral contract). Also note that courts will seldom if ever hold that an advertisement constitutes an offer, because it does not contain sufficient material terms.

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