Acceptance by Conduct Contract Law
It means that a party can be found by the court to be in agreement with a contract based on his or her actions, even if the contract has not been signed.3 min read
2. What Is an Offer?
3. What Is Acceptance?
4. Case Example
Updated October 21, 2020:
Acceptance by conduct contract law means that a party can be found by the court to be in agreement with a contract based on his or her actions, even if the contract has not been signed.
What Is a Contract?
When at least two parties voluntarily enter an agreement with one another, this constitutes a contract. This document is legally binding when:
- One party makes an offer accepted by other parties (agreement).
- At least one of the parties has been given consideration (something of value) from one of the other parties.
- All parties intend it to be legally binding.
- All parties have legal ability to consent to the contract.
- The terms and conditions are followed.
A contract may be legally void if its terms are ambiguous and thus cannot be enforced, refer to future agreements that have not yet occurred, or are incomplete.
What Is an Offer?
In contract law, an offer is a promise to provide something specific if the other party agrees to do something specific in return. This is different from an invitation to deal, in which one party requests an offer from another party.
Statements of possible contract terms and requests for information are also not considered offers. Providing information in response to a request is not the same as entering a contract.
Offers that are not accepted by a stated deadline, revoked, for which requirements are not met, rejected, or responded to with a counter-offer are considered expired. In the case of a counter-offer, the offer must be accepted for a contract to exist.
What Is Acceptance?
Either words or conduct constitutes acceptance of an offer if it occurs in accordance with and in response to the specific terms of the offer. If the parties begin doing business together that reflects the terms and conditions established, a contract exists even if the offer was not accepted in writing. This is the case only if both parties are aware of the offer, however.
Types of acceptance include:
- Conditional acceptance, also called qualified acceptance, is when an individual who received an offer agrees on the condition that a specific event occurs or changes in the terms are made. Conditional acceptance is considered a counter-offer and must be accepted by the party that made the first offer before a contract exists.
- Express acceptance is when clear, explicit agreement is made in response to an offer.
- Implied acceptance occurs when the parties act in a way that indicates their agreement with the contract terms. It also occurs when a product or service is purchased; payment for the item in question is considered implied acceptance.
In the 2015 case of Reveille Independent LLC vs. Anotech International, the television company sued the UK cookware company for breach of contract. Reveille claimed that it had licensed intellectual property (IP) rights to Anotech and agreed to promote their products on their TV show Master Chef, in exchange for an agreed-upon sum.
The case hinged upon a signed deal memo that was marked with "brand conflict with Gordon Ramsay to be concluded and other minor amendments." This document was not signed by both parties and stated within that it would thus not be legally binding.
Negotiations between the party broke down, so this memo was never replaced with an officially signed agreement. Reveille then notified the defendant that the memo constituted a contract and sued for breach of contract for failure to pay.
In response, the defendant claimed that because the deal memo was not signed, no legally binding contract was in effect. They noted that the contract was subject to a condition precedent as indicated on the original deal memo.
The court determined that the memo constituted a binding contract for the reason of contract acceptance by conduct. In effect, the condition precedent was waived by the defendant's actions. The court further noted that the defendant had completed the services in concert with the written contract terms. The defendant also paid submitted invoices from the plaintiff, which was another factor establishing acceptance by conduct. The court found that the condition precedent was not valid because both parties knew it could not be met.
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