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Contracts are an important part of our daily business life. Contract law is one of the main branches of law, which requires high legal qualifications and expertise from the person who deals with it. Therefore, if you need legal assistance in drawing up commercial contracts, then you should not expose your business to unnecessary risks, but immediately turn to highly qualified specialists with experience in this field.

IQ Decision UK lawyers have prepared an article to introduce you to three of the four components of a legally binding contract under the principles of common law (Common Law).

The fourth part, such as consideration, we will consider in a separate article. To reach an agreement, a proposal made by one party is required, as well as the consent of the other party to accept this proposal.

In addition, in order to distinguish simple informal agreements from those that have legal force, the parties to the agreement must have a direct intention to enter into legal relations with each other. These are the essential components of a successful contract.

Contract Proposal

What does the offer mean? This is nothing more than an expression of the will of the subject about the readiness to conclude a contract on certain conditions. The subject making the proposal must assume obligations under this agreement. But only after the proposal is accepted by the recipient.

It is important here not to confuse two separate concepts: proposal and invitation to treat. Such an invitation shows a preliminary statement of readiness to accept the proposal itself.

An invitation to conclude a contract always precedes any offer. It is sometimes difficult to distinguish a simple sentence from an invitation, to a greater extent they depend on the intention of the party making the statement. Below are the following situations, which is nothing but a simple invitation to a transaction. 


By advertising, you can also mean ads, catalogs and price lists. However, despite the fact that advertising is usually an invitation to a transaction, under certain circumstances it can be considered as an offer. For example, when advertising is accompanied by a one-way offer.

If you are interested in help with the preparation of a commercial contract, we draw your attention to the fact that a unilateral offer occurs when one party promises to pay the other party a certain amount of money (or to do something), if that party does something in return, without expressing a promise for this action. A unilateral agreement leaves a unilateral offer, and it differs from a bilateral agreement in that the party to which the proposal is sent is not obligated to promise any action in return.

Self-service and shop windows. 

The presence of goods on the shelves of a self-service store or shop windows does not imply an offer. So, in the case of Fisher v Bell [1961] 1 QB 394, the store owner put a folding knife in the window. In accordance with the Offensive Weapons Act 1959, it is forbidden to offer for sale various types of offensive weapons, including folding knives. Based on the provisions of this act, a case was instituted against the owner. The lawsuit against the owner was rejected on the grounds that placing the knife on the storefront is nothing more than an invitation to a transaction, not an offer. However, an offer to sell this knife was banned.


As a rule, an auction is an invitation to a transaction. However, each bid is an offer to purchase a lot at a suggested price. Acceptance in this case is recognized as a hammer blow leading auction.

Invitation to tender. 

Since this is also an invitation to a transaction, a person inviting to participate in a tender is not required to accept any answers (proposals) to the tender. However, if the organizer of the tender declares that he will accept the offer for sale at the highest price of the product / service or delivery of the goods at the lowest price, then such a tender can be considered as an offer or invitation to offer with the obligation to accept the best offer.

Price statement

In the case when a party indicates the minimum price at which she would be ready to sell the thing, it is more an invitation to a transaction than an offer.

Report of the offer

In order for the offer to be recognized as valid, it must be communicated to its recipient. This means that no party is liable for a proposal that it has not received. This rule applies to both unilateral and bilateral offers.

Expiration of the offer

There are several ways to terminate offers. The most common are acceptance of the offer and its direct rejection. When the proposal is considered accepted, the contractual relationship between the parties is formed (in the event that the intention to conclude the contract and compensation are also present). In another case, the offer may be rejected or replaced with a counter offer.

Other ways to end an offer can be its cancellation, expiration of limitation, violation of the conditions and some other.


The acceptance is the final and unconditional agreement with the terms of the offer, it must exactly correspond to the proposal made. The key factor here is compliance with the terms of the offer.

Therefore, acceptance cannot change a sentence. However, there is a counter offer, which implies a response to the offer, but with new conditions or attempts to change existing conditions. Since the counter offer cancels the original offer, the offer or the addressee of the offer are swapped. The initial offer can either accept or reject the counter offer, as well as make another counter offer. Such a permutation of roles can continue until an agreement between the parties is concluded or terminated at all.

As a rule, an acceptance is not recognized as valid until it is conveyed to the provider. It is important to understand that silence does not constitute consent to accept the offer.

Protocol of Intent

 In order to reduce the burden on the courts in deciding whether the contract is enforceable or not in cases where there is no intention to conclude it, in theory there are categories of contracts such as social and household contracts, commercial contracts, and advertising.

Commercial contracts are the opposite of social agreements. So, if the parties decided to conclude a commercial agreement, then subsequently they will bear legal obligations among themselves. However, the contract may include a provision providing for the absence of obligations under this contract. Such contracts include gratuitous in nature contracts, including gratuitous payments.

Advertising. As a rule, advertising is not recognized as a legally binding contract. However, if it contains specific phrases that are a promise, for example, like “If you find a price lower than ours, we will sell you at a better price”, then it becomes legally binding. It is also important to understand that in such cases the final decision rests with the court.

If you intend to setup a business abroad, you are in trend, since it is becoming an increasingly popular demand year after year. If you would like to learn more about the details of the common law governing companies in the UK and in many other jurisdictions using extensive expertise of the IQ Decision UK lawyers.