First: on the past war against Toffee, he was such a trouble that they were desperate enough make some of the council members think a treaty, in other words, surrender, was the best way to end that.
Second: the situation was that bad, but Moon refused to surrender and then she come with a last spell which defeated Toffee, which gave her the name of Moon the undaunted.
Third: Toffee offered a peace treaty. That was because he was a gentleman and/or he didn’t want a massacre if he could avoid it? Also, that way he could have ended the war without more deaths on his side, so, a good leader should do that, not only for being honorable to his enemies, but to avoid unnecessary deaths too. He was a good leader, probably a great one, not to say probably a good person too.
Fourth: after all the fight all over the ages and all the hatred, Toffee was willing to have mercy on his enemies. But Moon didn’t want peace with them; surrender wasn’t an option for her, quite possibly because Toffee already killed her mother. She wanted revenge, but could she do if they were winning? She made a deal with the Queen of Darkness.
Fifth: as the queen, the kind of responsible queen that Moon hasn’t stopped telling Star to be, Moon should have signed the peace treaty and not used the Darkest Spell, since the Butterfly Royal Family denies Eclipsa and maybe think that using her magic is like a taboo. And Moon said no to all that because she wanted Toffee to die. They managed to make it look like she was a proud queen and who cares about her people so she would do anything to win, but it seems like it was just for selfish reasons.
Sixth: Toffee possibly knew thatEclipsa’s magic is a taboo for the Butterfly Family, so he didn’t expect Moon to use that since her beloved mother ordered her not to. That would explain his expression of shock in the tapestry. But also, he was willing to have mercy, even when all he just wanted was a better life for his people and was going to fight for it. He showed kindness, and Moon sent the worse and most painful death in a spell to him and his monster army if she reached them with it. Toffee ended probably with no army, since he was suppose to be famous but not a single monster from Ludo’s army recognised him, and with a wound which couldn’t heal ever and it’s probably hurting him ALL THE TIME, all that because of ONE SINGLE death and he knew it. That’s maybe enough to make him the deadly merciless psychopath we know.
By the way, did he offer the treaty just to Moon, or he offered it to her mother too? If it was just the first case, it was because he expected Moon to be more reasonable for some reason? Did he just see her as a little girl who wouldn’t fight the until the end or he thought he could get to reason with her? Yes, I saying this last thing because I ship MoonToffee, I’m trash.