Key Takeaways

  • Communication of acceptance is essential to form a legally binding contract.
  • Acceptance must be clear, unqualified, and communicated to the offeror.
  • Methods of communication include oral, written, electronic, and by conduct.
  • The "postal rule" deems acceptance valid when mailed, even if delayed or lost.
  • Silence generally does not constitute acceptance unless specified by prior agreement or conduct.
  • Offers can lapse, be revoked, or expire if not accepted in time.

Communication of acceptance, in contract law, is one of the two main details of a binding agreement, an offer and an acceptance of the offer. To simplify the definition of a contract, it can be called an agreement that legally binds two or more parties. A contract can be verbal or written and is enforceable under the law. Contracts are a key part of the business world, and to be honored in the business community, it's important to make sure contracts are well-written and specific in terms. Many contracts are enacted each day in either written or verbal form.

Examples of Oral Contracts and Written Contracts

Some examples of oral, or verbal, contracts are placing an order for a cup of coffee at a restaurant and buying extra minutes for a prepaid mobile phone. Examples of written contracts include buying a new house and filling out the paperwork to buy a car. A contract becomes binding, or enforceable, as soon as an offer has been accepted by the person it's addressed to by the offeror.

A contract begins with an offer. The person making an offer is referred to as the offeror, while the person receiving the offer is the offeree. The offer itself is a proposal from the offeror to the offeree. The offer is then translated into an agreement or enforceable contract when it is accepted. The offer can take several forms:

  • A letter
  • A newspaper ad
  • A fax
  • An email message

The key point is that an offer must express the thing the person making the offer is prepared to commit to when making the deals.

Problems with Contracts

When it falls to the court to make a decision on a problematic contract, the court may consider how a reasonable person would see the situation rather than the intent of the involved parties. Common sense is the basis for this because it's expected that neither party would want to be held liable for damages by breaching his or her side of the agreement. A contract comes into existence, then, when an offer has been made and the second party has accepted it by either express or implied consent.

Verbal Acceptance of Contracts

Written offers don't have to be accepted in writing. Written offers can also be accepted verbally in most cases. The only time a verbal acceptance is not acceptable is when there are circumstances in play that let both parties to the deal know that the contract is expected to be accepted in writing.

Communication Methods in Acceptance

In contract law, acceptance must be communicated clearly and unequivocally to the offeror. This communication can occur through various channels, including:

  • Oral communication: Common in verbal agreements and everyday transactions.
  • Written communication: Essential for formal contracts, especially in business or legal contexts.
  • Electronic communication: Emails, online forms, or digital signatures are valid if both parties agree to this method.
  • Conduct: Acceptance can also be inferred from a party’s actions, such as beginning performance under the contract’s terms.

For acceptance to be valid, it must be effectively communicated unless a contract or circumstance allows an exception (such as conduct implying agreement).

Difference Between an Offer and an Invitation to Treat

An invitation to treat is different from an offer because it only shows a person's potential willingness to negotiate a contract. A property owner indicating the willingness to sell at a specific price is considered an example of an invitation to treat. Public auctions and items displayed on store shelves are also considered invitations to treat rather than offers.

Revoking an Offer

An offer can be revoked by the offeror until the moment it has been accepted by the offeree. To be officially revoked, the revocation of the offer has to be expressed to the offeree, but it can be expressed by someone other than the offeror. If the offer was for a sale item, after the offeree has been informed the item was sold to someone else, that is an implied communication that the offer has been revoked and it is now too late to accept it.

The Postal Rule in Contract Law

One notable exception to the standard communication requirement is the postal rule. Under this rule, an acceptance sent by post is considered effective once it is properly dispatched—even if the offeror never receives it. For the postal rule to apply:

  • The use of post must be a reasonable or agreed method of communication.
  • The acceptance must be correctly addressed and stamped.
  • The rule does not apply to revocations or electronic communications.

This rule reflects older commercial practices but still holds relevance in jurisdictions that recognize it.

The Mirror Image Rule

Under the mirror image rule, no changes are permitted. If you accept an offer, you have to accept it exactly as it was presented to you. You can't make any changes, because any modifications to the original offer make it a counter offer. A counter offer makes the original offer null. Note, however, that simply requesting more information isn't considered a counter offer. If an acceptance period was specified in the offer, it can't be accepted once the period has ended. Also, if the offer is rejected, it is considered killed and the offeree doesn't have the option to come back and accept it later.

Lapse of Offer and Termination of Acceptance Rights

Offers do not remain open indefinitely. Acceptance rights can be lost when:

  • A time limit expires: If the offer includes a deadline, it must be accepted within that period.
  • A reasonable time passes: In the absence of a deadline, what constitutes a “reasonable time” depends on the context.
  • The offeror dies or becomes incapacitated: Depending on jurisdiction, the offer may lapse.
  • Subject matter becomes unavailable: For example, if the item for sale is destroyed.

Failure to accept an offer within a valid timeframe typically results in the offer becoming void.

Silence as Acceptance

In most cases, silence does not amount to acceptance. An offeree generally must take affirmative steps to indicate agreement. However, there are exceptions:

  • Established course of dealings: If the parties have an ongoing business relationship, silence may reasonably be interpreted as acceptance.
  • Unilateral contracts: When performance constitutes acceptance (e.g., returning a lost pet for a reward).
  • Contractual terms specifying silence as acceptance: In some cases, contracts may specify that failure to respond within a certain timeframe constitutes agreement, but these must be reasonable and lawful.

Courts are cautious about inferring acceptance from silence, aiming to ensure mutual assent is clear.

Frequently Asked Questions

  1. What is communication of acceptance in contract law?
    It refers to the requirement that acceptance of an offer must be clearly communicated to the offeror to form a legally binding agreement.
  2. Can acceptance be communicated by email or text?
    Yes, electronic communication is valid if it is reasonable and agreed upon by both parties.
  3. What is the postal rule in contract law?
    The postal rule states that acceptance is effective when the letter is posted, not when it is received, under certain conditions.
  4. Is silence considered acceptance in contract law?
    Generally, no. Silence is not acceptance unless prior dealings or explicit terms of the contract indicate otherwise.
  5. When does an offer lapse or expire?
    An offer lapses if not accepted within a stated timeframe or after a reasonable period, or if the offeror dies or the subject matter is no longer available.

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