Every business deal is a conversation, and at some point that conversation crosses a line. Before the line, either side can walk away or change the terms. After it, there is a contract, and walking away means breaching it. Offer and acceptance is the mechanism Australian law uses to locate that line.
Offer and acceptance is the most practical part of contract law. When two businesses negotiate, courts look for two things: a clear offer and an unqualified acceptance of it. If both exist, and the other ingredients of a contract are present, the deal is binding. This guide walks through how the mechanism operates stage by stage: who plays which role, what makes a valid offer, what counts as acceptance, and when the contract is actually formed. It also flags the places where Australian businesses most often get caught out, and where a lawyer can help.
The players and the other ingredients
Contract formation has two central roles. The offeror makes the offer: a clear promise to be bound on identified terms if the other side agrees. The offeree responds with acceptance: an unqualified agreement to all of those terms. If the offeree tries to change a term, that is not acceptance, it is a new offer of their own, discussed below.
The two roles create a natural tension. The offeror wants to control the terms and the timing of the deal. The offeree wants certainty about exactly what they are agreeing to. Where the two sides' standard documents conflict, a court is often asked to decide which version of the deal prevailed, and that is where disputes start.
Offer and acceptance does not work alone. A binding contract also needs intention to create legal relations, consideration (something of value moving between the parties), sufficiently certain terms, and parties with capacity to contract. A deal that looks complete on offer and acceptance can still fail on one of the others. And although a contract can be formed in writing, orally, in an email chain, or entirely by conduct, the mechanism for deciding whether it exists is the same.
Stage one: making a valid offer
An offer is a promise to be bound on specific terms if the other party accepts. The key word is bound. Courts look for a present intention to be bound, expressed in terms clear enough to accept without further negotiation.
"We will supply 1,000 units at $9.50 plus GST, delivery within 14 days, please confirm by email" is an offer. "We would love to work together" or "indicative pricing subject to change" is not. Statements of interest, exploration, or goodwill do not create offers because there is nothing definite to accept.
Invitations to treat
Many things that look like offers are legally only invitations for the other side to make an offer. Advertisements, price lists, shop and website displays, and most quotes fall into this category. Display a product at a price and a customer cannot force you to sell it at that price; the display invites the customer to offer to buy. The same logic applies online. In eBay International AG v Creative Festival Entertainment Pty Ltd (2006) 170 FCR 450, the Federal Court analysed a ticket sale through an online auction platform using the ordinary offer and acceptance framework, asking which step in the electronic process was the offer and which was the acceptance. An online listing, like a shop display, is generally the invitation; the customer's order or bid is the offer; and your confirmation is the acceptance.
The practical consequence is straightforward. If you want a quote or a price list to bind you, frame it as a firm commitment and include an expiry date. If you want the freedom to decline an order, keep your pricing as an invitation and confirm each order before supplying.
Offers to the world at large
Some offers are not directed at one person. A reward for the return of lost property is an offer to anyone who performs the required act. These are unilateral contracts, accepted by performance rather than by a promise. The High Court confirmed the boundaries in R v Clarke (1927) 40 CLR 227: a person who provided information and claimed a reward could not recover because they had acted without knowledge of the offer. To accept an offer to the world, you need to know the offer exists and act in reliance on it. The NSW Court of Appeal has applied the same reasoning to reward offers, recognising acceptance by conduct, in Cooke v Woolworths [1988] NSWCA 27.
How long does an offer stay open?
An offer does not stay open forever. It can lapse after a reasonable time or by its own expiry date, be rejected, be overtaken by a counter-offer, or be revoked by the offeror before acceptance. Revocation is only effective if it is communicated to the offeree and received before acceptance.
The exception is an option contract. In Goldsbrough, Mort & Co Ltd v Quinn (1910) 10 CLR 674, the High Court enforced an option under which the offeree paid for the right to accept within a fixed period. Where value has been given to keep an offer open, the offeror cannot withdraw it during the option period. If you need a firm commitment to keep a deal open while you arrange finance or approvals, an option is the mechanism to use.
Stage two: acceptance
Acceptance is the yes that finalises the deal, but it must be a particular kind of yes: unqualified, communicated, and given in the form the offer requires.
Acceptance must mirror the offer
Acceptance must agree to every term of the offer without change. Vary a single term, even a small one, and you have not accepted, you have made a counter-offer. A counter-offer destroys the original offer; the first offeror can no longer accept it, and the new offer is what remains on the table. This is why "we accept, but delivery must be Friday" starts a new round of negotiation rather than closing the deal. Only an unqualified acceptance of the last offer on the table creates the contract.
Follow the prescribed method
The offeror can specify how acceptance must be given: reply by email only, or sign and return by 5pm Friday. If the method is mandatory and you accept some other way, the offeror can generally insist on the prescribed method. If the wording reads as a suggestion, a reasonable alternative method may still be effective.
Communication, including the postal rule
The general rule is that acceptance must be communicated to the offeror to be effective, and silence does not amount to acceptance. A narrow exception can arise from a consistent course of dealing where silence is a reasonable way to accept, but this is uncommon and fact-specific.
There is a famous exception to the communication rule: the postal rule. Where the parties contemplate acceptance by post, acceptance can be effective when the letter is posted, not when it arrives. The High Court confirmed the rule is an established part of Australian law in Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93, but made clear it is an exception that will not be extended to modern methods of near-instant communication. Many offers now expressly exclude it by requiring receipt or electronic acceptance.
Electronic acceptance
Email, clickwrap tick boxes, e-signatures and online checkouts all produce binding acceptance, provided the acceptance is clear and the terms are reasonably available to the accepting party. Timing is dealt with by statute. Under s 14A of the Electronic Transactions Act 1999 (Cth), an electronic communication is taken to be received when it becomes capable of being retrieved at an electronic address the addressee has designated, and s 14B deems it received at the addressee's place of business. Each state and territory has a mirror law for state matters, and the parties can agree otherwise. In practice, an email saying "we agree to your terms" can form a binding contract the moment it reaches the other side's inbox, even if a formal document was planned.
Acceptance by conduct
Acceptance does not have to be spoken or written. Starting to perform under the offer can amount to acceptance, which is common in routine trade dealings: a customer sends a purchase order and the supplier ships the goods. Conduct can also accept a unilateral offer, as the reward cases show. The risk is when conduct and paperwork point different ways: if each side starts performing while their standard terms conflict, a court may have to reconstruct the deal from the parties' conduct.
Who can accept
Only the person or entity to whom the offer is made can accept it, or someone properly authorised on their behalf. A third party cannot walk in and accept a deal negotiated with someone else. Where a company is the accepting party, proper execution removes doubt: under s 127 of the Corporations Act 2001 (Cth), a company can execute a document without a common seal if it is signed by two directors, or a director and a company secretary, or, for a proprietary company with a sole director who is also the sole secretary, by that director.
Stage three: when the contract is actually binding
Intention to create legal relations
Commercial deals are presumed to be intended to bind, but the question is always objective. In Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, the High Court held that intention to create legal relations is determined from the whole of the circumstances, not by rigid presumptions. If both sides say the deal is "subject to contract" or "subject to board approval", that is usually a signal that no binding contract exists until the condition is satisfied or the formal document is signed.
The leading authority is Masters v Cameron (1954) 91 CLR 353, which identified the categories of case where a formal document is contemplated. Sometimes the parties are bound immediately with the document to follow. Sometimes they are bound immediately but performance waits on the document. And sometimes, typically where the language is "subject to contract", there is no binding contract until the document is executed. If you do not want to be bound until signing, say so explicitly and keep "subject to contract" in your correspondence.
Certainty of terms
An offer is only capable of acceptance if its essential terms are identifiable: what is being supplied, at what price, and on what timing. If key commercial points are left open, a court may find no contract was formed. An agreement to agree on a price later is generally too uncertain to enforce, as the NSW Court of Appeal held in Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1. The position is nuanced: the same court has held that a promise to negotiate in good faith can be enforceable where it is sufficiently certain, as in United Group Rail Services Ltd v Rail Corporation NSW (2009) 74 NSWLR 618. A bare agreement to agree on the essential terms remains a risk.
Consideration, deeds and writing
Simple contracts need consideration: something of value moving from each side. A deed does not, which is why guarantees and other one-sided commitments are often made by deed, and why option contracts, where consideration is paid to keep an offer open, can make an offer irrevocable for a period. A company can execute a deed under s 127 of the Corporations Act if the document is expressed to be executed as a deed.
Some contracts must also be in writing to be enforceable. Contracts for the sale or disposition of an interest in land, and many guarantees, are the main examples; the specific requirements sit in state and territory legislation and vary between jurisdictions. Even where writing is not strictly required, a written record of the final offer and the acceptance is the cheapest insurance you can buy, because a contract you cannot prove is a contract you cannot enforce.
Where it usually bites: email trails, early work and the battle of the forms
Three situations generate most disputes about whether a contract was formed:
- Email trails: An exchange where one side writes "we agree" to the other side's final terms can be a binding contract even if the formal document was never signed. If you are still negotiating, keep the language tentative and use "subject to contract". If you have agreed, follow up with a written confirmation capturing the terms before memories and inboxes drift.
- Starting work before signing: Conduct can amount to acceptance, so beginning performance can create the very contract you thought was still in negotiation. If you want to do preliminary work without committing, say so in writing first.
- Battle of the forms: Where each business tries to contract on its own standard terms, a purchase order and an invoice that contradict each other can leave the deal governed by whichever terms a court decides prevailed. The old "last shot" approach, where the last form sent won, has given way to a broader assessment. In Goodman v Cospak [2004] NSWSC 704, the NSW Supreme Court considered which of two conflicting sets of terms governed a supply contract and discussed the modern "global" approach, which looks at the whole of the parties' dealings to find their actual agreement. The practical lesson is simple: surface your terms prominently, require the other side to accept them expressly before work starts, and if the two sets of terms conflict, resolve it in writing rather than assuming your document wins.
Where a contract lawyer helps
Most of the mechanism is manageable day to day, but a lawyer adds value at identifiable points. When you set up your templates, a lawyer can review your offer documents and standard terms so the offer carries the terms you actually want, including expiry dates, prescribed methods of acceptance and the right to withdraw. When you negotiate, a lawyer can help you use "subject to contract" language correctly and advise on whether a particular exchange has already created a binding deal. When a dispute looms, a lawyer can reconstruct the offer and acceptance from the paper trail, advise on which standard terms prevailed, and tell you whether the contract exists before you spend money enforcing or defending it. Execution of documents by companies, deeds and options are also areas where getting the formalities wrong is expensive and easily avoided with advice.
Know the moment you lose control
Offer and acceptance rewards the party who is clear early. Once the other side's acceptance is communicated, the terms are locked: you cannot revoke, and you cannot improve your position on price, timing or liability unilaterally. Every protection you want, from payment terms to liability caps, has to be in the offer before acceptance, or agreed later by a proper variation. Reviewing your standard offer and your acceptance process with a lawyer before a dispute is a fraction of the cost of finding out afterwards that your terms lost. If you are unsure whether a particular exchange has formed a contract, get advice before you act on the assumption.