What Is a Binding Offer?

A binding offer, according to Nolo, is any type of action that legally binds separate parties together under a contractual agreement. Contracts with offers take many forms, from simple to complex. For example, a simple binding offer is initiated by a cab driver who stops to pick up a passenger. The passenger accepts the offer of a ride and pays the driver, which creates a legally binding contract.

Nolo explains that another example of a binding offer is when business A makes an offer to purchase equipment from business B for a specific price. A contract is drawn up stating the terms of the sale. The contractual offer is one part of a legal contract but does not become legally binding in a court of law unless business B accepts the offer by signing the contract.

Nolo further posits that a binding offer sometimes remains open for a time to allow another party to make a decision on whether or not to accept. This is also known as an option agreement, which is a temporary way of keeping an offer on hold. Offers are sometimes conditional as when one party responds to an offer by requesting additional qualifications be met. Sometimes a counteroffer is presented as an alternative to an existing offer, which is legally considered a rejection of the original offer. Counteroffers are not legally binding unless the new offer is agreed upon.