An offer is a promise to be bound on certain terms if the other party accepts. Under Australian law, a clear offer and its acceptance can create an enforceable contract on the spot, even before anything is signed, which is why knowing what counts as an offer matters for any business that quotes, prices or sells.
This guide covers what a court looks for when deciding whether a statement is an offer, the line between an offer and an invitation to treat, how offers come to an end, and the mistakes that most often create contracts a business never meant to make.
What makes a statement an offer
An offer is an expression of willingness to contract on specified terms, made with the intention that it becomes binding as soon as the person it is addressed to accepts. The High Court set out the underlying test in Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424: a statement only counts as an offer if it is genuinely put forward as a promise in exchange for the other side's acceptance. A statement that is no more than an expression of intention, an announcement of policy, or a "we might" is not an offer, no matter how it is phrased.
For an offer to be valid, three things usually need to be present:
- Clear and certain terms: the essential terms, such as price, scope and timing, are definite enough to enforce.
- Intention to be bound: the statement reads as a genuine commitment, not an invitation to negotiate.
- Communication to the other party: the offer reaches the person it is addressed to, because you cannot accept an offer you do not know about.
Each of these deserves a closer look, because businesses get caught out on all three.
Clear and certain terms
The terms of an offer need to be definite enough for a court to enforce. For a commercial deal, the essential terms are usually the subject matter, the price and, where relevant, the timeframe. If those are left vague, the deal can fail for uncertainty even where both sides thought they had agreed.
Courts ask whether the essential or critical terms were actually agreed before finding that a contract exists. That was the issue in Nagy v Masters Dairy Ltd [1996] FCA 1096, where the court examined a letter stating that revised contracts were ready to sign and considered whether essential terms had been agreed at all. The practical lesson for a business is simple: a quote that names the scope, the price and the delivery time is far more likely to be treated as an offer than one that says "we can probably fit you in around $15,000".
Intention to be bound
Intention to create legal relations is judged objectively, looking at all the circumstances, rather than by what either party privately thought. The High Court made that clear in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, and it also rejected any assumption that certain types of relationship carry a presumption against intention.
In a commercial setting, the working assumption is that serious business statements are intended to be binding. Language that signals the opposite can change that. Words such as "subject to contract", "subject to availability" or "subject to final approval" tell a court that the parties were not yet committing, and that the document is an invitation to keep negotiating rather than an offer.
Communication to the other party
An offer only takes effect once it is communicated to the person it is addressed to. An acceptance cannot be given for an offer the offeree never knew about, and the High Court in Australian Woollen Mills required the act said to be the acceptance to be done in response to the offer itself. The acceptance has to be made in consideration of a promise the offeree actually received.
This matters in practice because of how offers travel. An email is communicated when it reaches the other party's inbox and is capable of being retrieved, which under s 14A of the Electronic Transactions Act 1999 (Cth) is presumed to be when it arrives at their electronic address. A price list sitting on your website, by contrast, has not been communicated to anyone in particular at all.
Offer or invitation to treat
Not everything that carries a price is an offer. Price lists, catalogues, advertisements and shop displays are generally invitations to treat: an invitation for customers to make offers of their own, which the business is free to accept or decline.
The classic authority is Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401, which held that goods displayed on a supermarket shelf are an invitation to treat, with the customer making the offer at the checkout and the shop accepting by taking payment. That is why a retailer is not obliged to sell a mispriced item, and why a restaurant can refuse a table.
Australian statute puts the same idea into words for the internet. Section 15B of the Electronic Transactions Act 1999 (Cth) provides that a proposal to form a contract made through electronic communications that is not addressed to specific parties and is generally accessible, such as a website, is an invitation to make offers unless it clearly indicates an intention to be bound in case of acceptance.
A detailed, unqualified quote addressed to a specific customer is different. It names the parties, fixes the price and scope, and leaves nothing open for negotiation, so it can be an offer. The general test is whether your message leaves you room to still say no. If you need to check stock, confirm scope or approve credit, you are probably inviting the customer to make you an offer, not making one yourself.
How an offer comes to an end
Even a genuine offer does not last forever. It ends in one of four ways:
- Revocation: an offer can generally be withdrawn at any time before it is accepted, and the withdrawal takes effect when it is communicated to the offeree. In Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd [1998] FCA 205, the Federal Court considered how far that applies where the offeror promised rewards to franchisees who met performance targets, and whether such an offer could be retracted once franchisees had started performing. The safe position for everyday business is that once acceptance has occurred you are bound, and until then a revocation is possible but only takes effect when the other party receives it.
- Lapse of time: an offer with an expiry date lapses at that date. Without one, it lapses after a reasonable time, which depends on the context. A quote for a one-off job is not open for years.
- Rejection: if the offeree rejects the offer, it is gone. A later attempt to accept is a fresh offer from them, which you are free to decline.
- Counteroffer: a reply that accepts on different terms, even slightly different terms, is not an acceptance. It is a counteroffer, and it destroys the original offer. This is a common trap in email chains and redlined documents.
A worked example: the quote that became a contract
Suppose you run a small joinery business. A builder emails to ask what it would cost to supply and install custom cabinetry for an apartment fit-out. You reply: "Supply and install of 14 kitchen units per the attached schedule for $86,000 including GST, completion by 30 June. Let me know and we'll get started."
That message is probably an offer. It is addressed to a specific person, it fixes the scope, the price and the completion date, and it reads as a commitment rather than an invitation to negotiate. If the builder replies "agreed, go ahead", you have an enforceable contract on those terms, even though no formal contract has been signed and no deposit has changed hands.
Now change one thing. Suppose instead you write: "Our preliminary quote is $86,000 including GST, subject to a final site inspection and our standard terms of trade, and subject to contract." That message keeps the deal in your control. It signals that you are not yet bound, that essential details remain to be confirmed, and that a binding contract will only arise at a defined later step, such as a signed order confirmation. The terms are the same price, but the legal character of the message is different.
The difference matters because the other side rarely pauses to ask whether you intended to be bound. If your message reads like an offer and they say yes, the law treats the deal as made.
Common misconceptions about offers
The following misconceptions cause most of the accidental contracts that reach a lawyer's desk:
- "A price list or advertisement is an offer": It is normally an invitation to treat, whether in a shop, a catalogue or on a website, as s 15B of the Electronic Transactions Act 1999 (Cth) confirms for electronic proposals. You are not obliged to sell at the advertised price if the listing is wrong or stock runs out.
- "Nothing binds us until the paperwork is signed": Emails and conduct can create binding contracts. Section 8 of the Electronic Transactions Act 1999 (Cth) says a transaction is not invalid merely because it took place by electronic communications, and Australian courts regularly find acceptance by conduct. In Kriketos v Livschitz [2009] NSWCA 96 the Court of Appeal examined the principles for inferring a contract from conduct and silence, and in Forte Sydney Construction Pty Ltd v N Moit & Sons (NSW) Pty Ltd [2022] NSWCA 186 it considered whether a party that commenced works had accepted a contract by conduct even though neither side had signed. Starting work, or accepting delivery, can amount to acceptance.
- "Silence is not acceptance, so saying nothing is safe": As a general rule silence alone is not acceptance, following the approach discussed in Kriketos v Livschitz. But saying nothing while the other side starts performing on your terms can still see a contract inferred from your conduct, particularly where you knew the terms and took the benefit of the work.
- "A 'yes, but' is acceptance": Accepting on different terms is a counteroffer, which terminates the original offer. If the other side changes a term in their reply, you do not have a deal until that change is agreed.
- "An offer stays open until I decide to withdraw it": An offer without an expiry date lapses after a reasonable time, and it can be revoked before acceptance. If you want a price to stay open, say so in writing with a clear expiry date.
When a lawyer should review your offers
The disputes that flow from offers are almost always about timing: was there a binding deal at the point the other side says there was? A commercial lawyer can help in three practical ways:
- A lawyer can review the documents your business sends out, such as quotes, proposals, order confirmations and website terms, and check whether they read as offers or invitations to treat. Small wording choices, such as "subject to our terms of trade" and a defined acceptance step, decide which side of the line you sit on.
- A lawyer can advise on a specific exchange that has already happened. If the other side says a deal was reached and you say it was not, the question is whether your message met the tests in Australian Woollen Mills and Ermogenous: certain terms, intention to be bound, and communication. A lawyer can assess the strength of your position before the dispute escalates.
- A lawyer can design an acceptance process so that the moment of contract formation is deliberate rather than accidental. That usually means stating in your documents when acceptance occurs, such as "a binding contract is formed when we issue a written order confirmation", attaching your terms to every quote, and keeping early negotiations marked "subject to contract".
Ask yourself before you hit send
The question that resolves most offer disputes is a simple one. Before you send any message that prices, scopes or promises work, ask yourself: if the other side replied "yes" to this message right now, would I be bound? If the answer is yes and you are not ready to commit, add the words that change it: "subject to contract", a validity date, or a defined acceptance step. If the answer is yes and you are ready, then make sure your terms of trade are attached, because a contract formed on your quote will otherwise be formed on the terms you actually wrote. Offers bind from the moment they are accepted, and that moment is yours to control or to lose.