Contract formation begins with agreement, but not every proposal, advertisement, conversation, estimate, or expression of interest is an offer. The law distinguishes preliminary negotiations from a communication that gives another person the power to form a contract by accepting it.
Manifestation of Willingness to Bargain
The Restatement (Second) of Contracts describes an offer as a manifestation of willingness to enter a bargain made in a way that justifies the recipient in understanding that assent is invited and will conclude the bargain. The emphasis is objective. The question is not merely what the speaker privately intended, but what the communication would reasonably convey to the recipient.
Definiteness and Certainty
An offer must ordinarily identify the essential terms with enough certainty that a court can determine what was promised and whether performance occurred. The necessary detail depends on the transaction. Price, subject matter, quantity, timing, and performance obligations may be critical in one agreement while established course of dealing or commercial law can supply missing terms in another.
Commitment Versus Negotiation
A statement may be too tentative to constitute an offer if it merely invites further discussion. Phrases such as “I may be willing,” “subject to further approval,” or “let’s discuss” can signal negotiation rather than present commitment. By contrast, a communication that sets definite terms and indicates that acceptance alone will create an obligation is more likely to be treated as an offer.
Communication to the Offeree
A person cannot ordinarily accept an offer of which the person is unaware. The offer must therefore be communicated to the intended offeree or class of offerees. This principle is especially relevant to rewards, unilateral contracts, and public announcements.
Advertisements and Quotations
Advertisements and price quotations are often invitations for customers to make offers rather than offers themselves because inventory, credit, approval, or other details remain open. But a sufficiently specific advertisement that leaves nothing material for further negotiation can sometimes operate as an offer.
Conclusion
A sound offer analysis asks whether a reasonable recipient would understand that the speaker was presently committing to specified terms and inviting acceptance that would complete the bargain. That distinction between commitment and negotiation is one of the foundations of contract formation.