We’ve all seen sales announcements telling us when the sale ends. They don’t say it, but we know the price goes up the next day, whether it’s a sofa or a 10-pack of renewal licenses to SalesForce.

An offer you make to someone else to enter into a contract can be accepted by the other person and then you have a binding contract - that’s what an “offer” is. A best practice is to put an expiration date in your offer so that it’s very clear how long the other person has to decide, just like announcing the end of a sale. 

There are three reasons to use this technique: legal, negotiation, and business.

First, legal: generally, an offer without an expiration date remains capable of being accepted “for a reasonable time.” You can’t know in advance exactly how long that will be. If they accept 10 days later, is that okay? 13? 22? That open period of time shifts the risk to you that something may happen that makes you not want to enter into the contract on the same terms. A specific expiration date helps you manage this risk.

Second, negotiation: an expiration date automatically creates a sense of scarcity, even subconsciously. Even though we know the store will open the next day, we know that price or terms may be different. People are more likely to accept an offer to avoid the risk of missing out on a good deal.  

Third, business: an expiration date moves the negotiation along more quickly. Asking for a response in 3 days puts the other side on notice that you’re expecting a quick answer, even if it’s a counteroffer. That’s almost always better than waiting 5 or 7 days for the same answer.

Consider adding a formal expiration date to your next offer or proposal: you can manage the amount of risk you’re taking, create a sense of scarcity to increase the chance of acceptance, and get a faster answer. That’s a win-win-win.