How do you outbid someone?

When increasing Year 1 Salary, receive this message,

Error: A minor league contract will default to 1 year for the player's minimum required salary. No bonuses are acceptable.

Does it have to be a major league contract to outbid someone?

Level 1 - offer Minor League contract. If you're outbid, the leading bid has either offered a Minors w/Spring Training Invite, or has a thinner depth chart.
Level 2 - offer Minors w/STI. If you're still outbid, it's because the leader has a thinner depth chart.
Level 3 - offer Major League contract.
Note that at this point, the player may likely, unless he's asking for a Major League contract, turn it down. Something like "holy jeez I'm not sure I'm worth that much money just yet!" I've only ever had one player accept a Major League contract without asking for one.

Thanks, I did not know that about the depth chart.