When Is a Deal Actually a Deal?

Most people assume a contract requires a formal document, signatures in triplicate and a solicitor in the room. In reality, contracts are formed constantly — over the phone, by email, at auction, and sometimes without a single word being exchanged. The question of precisely when a legally binding agreement comes into existence is one of the most consequential in commercial and property law, and it is one that courts continue to grapple with.

Understanding the answer protects you — whether you are a business owner negotiating terms with a supplier, a developer exchanging contracts on a site, or a consumer who clicked "I accept" without reading a word.

The Architecture of a Contract

For a contract to be enforceable under Victorian law, several elements must be present: an intention to create legal relations, an offer, an acceptance, and consideration. Each is a discrete legal concept, and the absence of any one of them is fatal to the agreement. We address each in this series. Here, we focus on offer and acceptance — the threshold through which all contracts must pass.

What Constitutes an Offer

An offer is a statement of terms accompanied by a readiness to be bound the moment the other party says yes. It is not an expression of interest, a price indication or an advertisement. This distinction matters enormously in practice.

When a vendor lists a property for sale at a stated price, that listing is not an offer — it is an invitation to treat. The prospective buyer makes the offer; the vendor retains the right to accept or reject it. The same principle applies to goods displayed in a shop, items listed on a website, or services advertised in a brochure. The law does not force a seller to contract with every person who turns up prepared to pay the asking price.

There is, however, an important exception. Where an advertisement is sufficiently precise in its terms and clearly communicates a readiness to be bound, it may itself constitute an offer — one capable of acceptance by any member of the public who fulfils the stated conditions. No case illustrates this more vividly than Carlill v Carbolic Smoke Ball Co.

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256

A manufacturer advertised that it would pay £100 to any person who contracted influenza after using its product as directed, and deposited £1,000 with a bank to demonstrate sincerity. Mrs Carlill used the product and contracted influenza. The company refused to pay, arguing that an advertisement could not constitute a binding offer capable of acceptance by the world at large. The Court of Appeal disagreed. The advertisement was sufficiently definite, the deposit demonstrated genuine intent to be bound, and Mrs Carlill had accepted by performing the specified act. The company was liable.

The enduring lesson of Carlill is not merely historical curiosity. It remains directly applicable in Victoria today. Promotional campaigns, reward programs, cashback guarantees and public commitments made in trade and commerce are all susceptible to the same analysis. A representation that is clear enough, and backed by sufficient indicia of seriousness, may bind the party making it.

Acceptance and the Moment of Formation

Acceptance is the unqualified assent to the terms of an offer, communicated in a manner sufficient to bring it to the offeror's attention. Both elements matter. An acceptance that introduces new terms is not an acceptance at all — it is a counter-offer, which extinguishes the original offer and places the parties back at the negotiating table.

This principle has real consequences in commercial negotiations conducted across multiple drafts and email chains. Each time a party responds with amended terms, the prior offer falls away. If negotiations break down, neither party can then attempt to "accept" an earlier iteration of the deal.

Timing is equally significant. As a general rule, acceptance is effective only when it is received by the offeror. A contract is formed at the place and time of receipt, not at the moment the accepting party forms the intention to accept, writes a message, or presses send.

The Postal Rule — and Its Limits

An important exception to the receipt rule is the postal acceptance rule, which provides that where the parties contemplate that acceptance might be communicated by post, the contract is formed at the moment the letter of acceptance is posted — not when it arrives. The offeror bears the risk of non-delivery.

Courts have consistently declined to extend this rule to instantaneous or near-instantaneous communications. Emails, text messages and electronic acceptances are generally governed by the receipt rule. Whether acceptance of an online contract is effective upon clicking "agree," upon server receipt, or upon some other event depends on the terms of the offer itself — which is precisely why those terms deserve careful attention before any button is pressed.

Revocation — and the Unilateral Contract Problem

An offer can be withdrawn at any time before acceptance, provided revocation is communicated to the offeree. The revocation need not come from the offeror directly — communication from any reliable source is sufficient to terminate the offer.

Unilateral contracts — where one party promises something in exchange for the other party performing a specific act — raise a particular difficulty. If a party has already commenced performance of the act required for acceptance, can the offeror simply withdraw? Victorian courts, following the approach in cases such as Veivers v Cordingley, have held that once the offeree has commenced performance in a manner that demonstrates a clear intention to accept, the offer becomes irrevocable. To hold otherwise would allow a party to extract the benefit of another's efforts and then escape the obligation to pay for them — a result equity will not countenance.

What This Means in Practice

These principles are not abstract. They arise in business negotiations, property transactions, service agreements and everyday commercial dealings. A few practical observations worth carrying forward:

Written offers should state clearly whether they are open for acceptance, for how long, and by what means. Silence on these points creates uncertainty that benefits no one. Where negotiations involve multiple amended drafts, parties should be deliberate about which version of the terms they are ultimately accepting. And where a party has acted in reliance on an apparent agreement — particularly where expenditure has been incurred — the factual circumstances may give rise to rights even in the absence of a formally concluded contract.

That last point sits at the heart of promissory estoppel, a doctrine we examine in the next article in this series.

Key Principle

A contract is formed at the moment a valid acceptance is communicated in response to a valid offer. Whether that threshold has been crossed is always a question of fact — assessed objectively by reference to what a reasonable person in the position of the parties would have understood.

This article is intended for general informational purposes only and does not constitute legal advice. The law relating to contract formation is fact-specific and jurisdiction-dependent. If you have a matter concerning a disputed agreement or contractual obligation, you should seek advice from a qualified Victorian solicitor. CMH Lawyers practises in property law, commercial law, litigation and dispute resolution.