What's a Contract: Offers
This is the first of a three part series identifying the three components of a contract—(1) Offer, (2) Acceptance, and (3) Consideration.
What is an Offer
An offer is a promise of something in exchange for something else. An offer is neither an offer to negotiate or invitation to deal nor an advertisement. Thus, if someone is making you an offer, it must (i) be clear, (ii) have definite terms, and (iii) be objectively capable of acceptance. Note on point (iii), objective means that a reasonable person would think the offer to be an offer—it has nothing to do with the subjective intent of either party.
Example—Goods
An Offer to Negotiate or Invitation to Deal—“Come on down to Joe’s auto-mall, we’ve got the best deals in town”
Here, the terms are not definite because it’s not clear what “the best deals in town” means. In fact, the law calls this speech “puffery,” and views it as meaningless. However, the intent is clear “if you come on down to Joe’s automall, you might find a great deal on a car.”
Unfortunately, that’s just not an exciting statement.
An Advertisement—“Come on down to Joe’s auto-mall, where you can find compacts for as low as $8,999 and trucks for as low as $12,999.”
Although this seems to have definite terms, this is just an advertisement for two reasons:
The terms are not definite regarding which compact is $8,999 or which truck is $12,999, and
It’s not objectively clear that Joe is attempting to make an offer that can be accepted and turned into a contract.
So, you can’t just show up to the dealership, exclaim “I accept!”, and, boom, get a compact for $8,999 or a truck for $12,999.
As an aside, if the dealer never had any compact for $8,999 or lower or any truck for $12,999, the dealer will be engaged in false advertising, but the dealer still will not have made a valid offer.
An Offer—“Come on down to Joe’s auto-mall, for a limited time only, if you’ve got good credit, you can drive off in a new full size sedan for zero down today.”
Here someone might point out that “good credit” is unclear. Who decides what is “good credit.” However, because of credit reporting agencies and the ubiquity of the term “good credit”, there is an objective standard to measure that. Further, this offer is still clear despite requiring certain implications: “have good credit, (implicit) buy a car, pay no money as a down payment (implicit) if you finance.” This is because it’s unreasonable to assume an offer without those terms—it would be an offer for a free car if you have good credit.
Thus, there are clear and definite terms, and it’s reasonable to assume that Joe meant to make this offer to encourage car buyers.
It’s too ambiguous to give support to a would-be buyer with a credit score of 650. However, if a would-be buyer has a credit score of 800, and Joe does not offer them no money down, then Joe has done a bait and switch—which is an abuse of the concept of an “offer.”
Example—Services Found by Website
An Offer to Negotiate or Invitation to Deal—“Get started with our software subscription service today starting at $39 per month*…*call for enterprise pricing.”
While the legal differences are slight, there is actually an offer to negotiate and advertisement in here. First, the advertisement is for non-enterprise customers. Because this is a software service (unlike a good), there must be at least one priced option at $39 per month. This a because while the auto-mall can claim it no longer has the $8,999 car, the software service has no excuse.
The asterisk and what it refers to is simply an offer to negotiate. If you are a would-be enterprise customer, and you call asking for $39 per month, they have no obligation to honor that price. In fact, they could say “enterprises are $1,000 per month.” While that is nowhere close to $39, there is still no problem because the advertisement was for non-enterprises, while enterprises were only solicited to call.
An Advertisement—”Sign up for your free trial software today. $39 per paid subscription.”
Here, there is an offer and an advertisement. The offer is that if you sign up, you’ll get a free trial of the software. The advertisement is $39 per month for paid subscriptions.
However, if you do the free trial, but, in the meantime, the company raises the price to $49 per month, you do not have a right to say “but, Company, you promised me $39 per month.” The Company only promised a free trial and if you paid at that time, $39 per month.
An Offer—"If you subscribe to our software today, get a free available domain for one year.”
This is an offer. If you subscribe to their software, and want an available domain that happens to cost $100, and they turn around saying “we only meant for domains up to $60 per year,” you can compel them to purchase the $100 domain for you.