Contract Formation: What is an Offer?
- teachlawhub
- Nov 21
- 5 min read
Updated: 6 days ago
Understanding what counts as an offer is one of the foundations of forming a contract. If there is no valid offer, there cannot be a valid acceptance and therefore no contract.
What is an Offer?
An offer is a clear statement that someone is willing to make a contract on specific terms, as soon as the other person accepts. The person making the offer is the offeror, and the person receiving it is the offeree.
There are two main types of offers.
Bilateral offers are made to a specific person or group. Example: Your neighbour says, “I’ll pay you £20 to wash my car.” If you agree, a contract is formed.
Unilateral offers are made to the world and are accepted by performing a task. Example: A poster saying, “£100 reward for finding my lost dog.”
Carlil v Carbolic Smoke Ball Co (1893) The company advertised £100 for anyone who used the smoke ball properly and still got flu, claiming they’d set aside £1,000 to show sincerity. Mrs Carlill used it correctly, caught flu, and the company refused to pay. The court held the advert was a unilateral offer, accepted by performance. Using the smoke ball as instructed created a binding contract.
How Offers Can Be Made
Offers can be written, spoken, or implied through conduct. What matters is that they are clear and communicated. Offers may stay open indefinitely or for a set period, depending on what the offeror decides.
Taylor v Laird (1856)
A ship captain tried to claim wages for work the shipowners did not know he was doing. The court held that an offer must be communicated before it can be accepted.
Example: If someone offers to sell you their bike but never tells you the price or terms, you cannot accept the offer because it was never properly communicated.
Invitation to Treat (Not an Offer)
An invitation to treat is not an offer. Instead, it invites others to make an offer. This is an important distinction for exams.
Examples:
Goods on shelves or in shop windows - In retail (in-store and online) product listings/prices are usually invitations to treat, meaning customers make the offer when they place an order, and the retailer can accept or reject it. This protects retailers from pricing mistakes, for example when Argos accidentally listed TVs for £2.99 rather than their actual price of £299.99 and cancelled the orders because no contract existed at the listing stage.
Fisher v Bell (1961) A shopkeeper displayed a flick knife in his shop window with a price tag. He was prosecuted for “offering” the knife for sale contrary to legislation banning the sale of offensive weapons. The court held that placing goods in a shop window is legally an invitation to treat, not an offer. Since no offer had been made, the shopkeeper had not committed the offence.
Advertisements - Most advertisements are generally treated as invitations to treat, meaning they are intended to invite customers to make an offer rather than creating a binding contract themselves.
Partridge v Crittenden (1968)
The defendant placed an advert in a magazine offering wild birds for sale, which was illegal under the Protection of Birds Act. The court held that the advert was an invitation to treat, not an offer, so the defendant was not guilty of “offering” the birds for sale.
However, there is an important exception: reward advertisements that promise a specific reward for performing a specific act can constitute unilateral offers, which are legally binding once the act is performed - like in Carlil v Carbolic Smoke Ball Co (1893)
Auctions - Bidders make the offer. The auctioneer does not make an offer themselves; instead, they act as a facilitator. A legally binding contract is formed only when the auctioneer accepts the highest bid, which is usually indicated by the fall of the hammer.
Vending machines - The machine makes an offer. You accept by inserting money. When you press a button on a vending machine, you are accepting the machine’s offer to sell you the product for the displayed price.
How Offers End (Termination of an Offer)
Offers do not last forever. Here are the main ways an offer can end.
Counter-Offer - If the offeree changes the terms of the original offer, the original offer ends. For Example: Someone offers to sell you a guitar for £200. You reply, “I’ll give you £150.” The original offer is no longer available.
Hyde v Wrench (1840) Wrench offered to sell his farm for £1,000. Hyde made a counter-offer of £950, which Wrench rejected, and later tried to accept the original £1,000 offer. The court held that a counter-offer destroys the original offer, so no contract was formed when Hyde attempted to accept the initial terms.
Revocation (Withdrawal) - The offeror can withdraw an offer at any time before acceptance, but the withdrawal must be communicated. Byrne v Van Tienhoven (1880) The offeror posted a withdrawal of offer letter, but it arrived after acceptance had already taken place. It was held that revocation must be communicated to be valid.
Revocation can also come from a reliable third party.
Dickinson v Dodds (1876) Dodds offered to sell property to Dickinson. Before acceptance, a reliable third party informed Dickinson that the property had been sold. The court held the revocation was valid, establishing that an offer can be revoked if the offeree receives clear, trustworthy information from a third party.
Unilateral offers must be revoked before performance begins. For example: If a poster offers £50 for returning a lost wallet, the offeror cannot revoke the offer once you have begun searching.
Errington v Errington and Woods (1952)
A father promised to transfer a house if his son and daughter-in-law paid the mortgage. Once they began making payments, the court held the unilateral offer could not be revoked, meaning the promise remained enforceable while performance was in progress.
Lapse of Time - If an offer contains a time limit, it ends when that time expires. If no time limit is given, the offer ends after a reasonable period. For example: “I’ll sell you my phone for £100. This offer ends tonight.” After tonight, the offer is no longer valid. Ramsgate Victoria Hotel v Montefiore (1866) An offer to buy shares was made in June, but the acceptance was attempted in November. The court held that the offer had lapsed due to the passage of time, as it was no longer reasonable to keep the offer open.
Death - If either the offeror or offeree dies, the offer usually ends, especially if the contract involves personal performance. For example: If someone offers to paint your house but dies before you accept, the offer ends.
Bradbury v Morgan (1862)
Involved a situation where the offeror died before the offeree could accept the offer. The court held that the offer terminated upon the death of the offeror, particularly because the contract required personal performance, so no binding contract could be formed.
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