Firm Offer

Definition

A firm offer refers to a contractual proposal where the seller commits to keep the offer to sell goods open and binding for a specific period. This means the seller cannot revoke the offer during this time frame, providing the buyer a guaranteed opportunity to accept and execute the purchase under the stated terms.

For example, an “offer firm for 24 hours” legally binds the seller to honor the offer if the buyer accepts within the stipulated 24 hours. If the buyer proposes a lower bid or any counter the offer within this period, the firm offer becomes invalid and the seller is no longer obligated.

Examples

Scenario 1: Real Estate - A real estate developer issues a firm offer to sell a commercial property for $500,000, valid for 15 days. Within this 15-day window, a potential buyer can accept the offer and proceed with the transaction. Any attempts to negotiate a lower price or modifications within the period invalidates the firm offer.
Scenario 2: Retail Goods - A retailer offers 1,000 units of electronics at a discounted bulk price, binding the offer for 7 days. If a buyer accepts within these 7 days, the retailer must honor the terms even if demand increases or alternative buyers propose higher offers during that period.
Scenario 3: Automobile Sale - An automobile dealer promises a car at a specific price, stating the offer remains firm for 48 hours. As long as the buyer agrees within these 48 hours, the dealer is required to sell the vehicle under those terms despite any changes in situational demand.

Frequently Asked Questions

What distinguishes a firm offer from a general quotation?

A firm offer is legally binding for a specified period, meaning the seller must honor the offer if accepted within this time frame. A general quotation, however, does not commit the seller and is often subject to negotiations and changes without being legally binding.

Can a firm offer be revoked?

No, a firm offer cannot be revoked during the specified period. The offeror is obligated to keep the offer open and unchanged based on the terms defined in the offer until the period expires.

What happens if the buyer makes a counteroffer during the period the offer is firm?

If the buyer proposes any counteroffer or renegotiates the terms within the firm offer period, it typically results in the offer becoming invalid or void. This negates the initial binding agreement.

Can a firm offer apply to services as well as goods?

While commonly associated with goods, firm offers can sometimes apply to services, depending on the contractual agreement and the nature of the service offering.

Is a written document always required to establish a firm offer?

A written document is preferable for clarity and enforceability, but a firm offer can also be established verbally, depending on jurisdiction and the nature of the agreement. Written documentation, however, provides clear evidence of terms and time frames.

Quotation: A non-binding statement of the price or terms for goods or services, which may later be negotiated. It does not obligate the seller until formally accepted by the buyer.
Counteroffer: A new offer made in response to an original offer, typically with different terms, which effectively rejects the original offer.
Contract: A legally binding agreement between two or more parties detailing obligations, terms, and conditions.
Binding Agreement: A contract or any form of agreement that is legally enforceable in court.

Online References

Suggested Books for Further Studies

“Contracts: Cases and Commentaries” by John P. Dawson, William Burnett Harvey and Stanley D. Henderson A comprehensive look at the principles of contract law, including nuanced interpretations of firm offers.
“The Law of Sales Under the Uniform Commercial Code” by William D. Hawkland Insightful commentary on sales contracts under UCC, which governs firm offers.
“Contract Law: An Introduction to the English Law of Contract for Lawyers and Business People” by Nils Jansen An accessible guide which includes relevant details on firm offers.

Accounting Basics: “Firm Offer” Fundamentals Quiz

### What is a firm offer? - [ ] An offer that is always negotiable. - [x] An offer to sell goods that remains in force for a stated period. - [ ] An offer that both buyer and seller can alter anytime. - [ ] An offer without any validity period. > **Explanation:** A firm offer is an offer to sell goods that remains in effect for a specific period. The seller is obligated to sell the goods if the buyer accepts within that time frame. ### What invalidates a firm offer? - [x] A counteroffer or lower bid by the buyer. - [ ] A delay in payment. - [ ] Lack of interest from other buyers. - [ ] Change in market conditions. > **Explanation:** A firm offer becomes invalid when the buyer makes a counteroffer or lower bid within the time frame, releasing the seller from their obligation. ### Who typically provides a firm offer? - [ ] Insurance companies. - [ ] Buyers in a marketplace. - [x] Sellers of goods or services. - [ ] Financial advisors. > **Explanation:** Sellers of goods or services are the ones who generally provide a firm offer to buyers. ### Can a firm offer be revoked before the stated period ends? - [ ] Yes, it can be revoked anytime. - [x] No, it cannot be revoked before the period ends. - [ ] Only if both parties agree. - [ ] Only if market conditions change. > **Explanation:** A firm offer cannot be revoked before the stated period ends. The seller is bound to keep the offer open for the entire duration. ### How does a firm offer benefit the buyer? - [ ] Allows for price negotiations. - [x] Provides a guaranteed period to accept the offer. - [ ] Ensures immediate delivery. - [ ] Minimizes tax liability. > **Explanation:** A firm offer benefits the buyer by providing a guaranteed period during which they can accept the offer without risk of the terms changing. ### In which scenario does a firm offer lose its validity? - [ ] If market prices increase. - [x] If the buyer makes a lower bid during the period. - [ ] If the seller encounters financial difficulties. - [ ] If the firm offer is not in writing. > **Explanation:** A firm offer loses its validity if the buyer makes a lower bid or counteroffer during the specified period, which effectively terminates the original offer. ### What is the primary difference between a firm offer and a quotation? - [ ] A quotation binds the seller and buyer. - [x] A firm offer is binding for a specific period, while a quotation is not. - [ ] A quotation is valid for a longer period. - [ ] A firm offer cannot be accepted by the buyer. > **Explanation:** A firm offer binds the seller for a specific period, whereas a quotation merely indicates a potential selling price and terms without binding either party. ### In contract law, what ensures the enforceability of a firm offer? - [ ] A verbal agreement. - [x] A written agreement specifying the offer period. - [ ] The market demand. - [ ] The buyer's financial standing. > **Explanation:** In contract law, a firm offer is enforceable typically through a written agreement that specifies the offer period and terms which provides clear documentation. ### Why is clarity important in defining a firm offer? - [ ] To adjust prices easily. - [ ] To allow frequent revisions. - [ ] To reduce paperwork. - [x] To ensure enforceability and mutual understanding. > **Explanation:** Clarity is essential in defining a firm offer to ensure its enforceability and that both parties mutually understand the terms and period, preventing disputes. ### Who benefits more from a firm offer in volatile markets? - [ ] The seller. - [x] The buyer. - [ ] Unrelated third parties. - [ ] Financial institutions. > **Explanation:** In volatile markets, the buyer benefits more from a firm offer as it provides a stable and unchanging price and terms, protecting against market fluctuations.

Thank you for exploring the concept of firm offers with us! We hope this detailed explanation and the quizzes enhance your understanding of commercial contract terms.