Business, Legal & Accounting Glossary
In English Law, for an agreement (see: Contract) to be valid, there must be mutuality: an offer and a corresponding acceptance’. The acceptance must be effected by communication to the offerer, either verbally or in writing and or in some cases, by conduct. Under certain circumstances, silence can be accepted as a means of communication.
A valid acceptance must agree in all particulars with the Offer; otherwise, it is a counter-offer, not an acceptance at all. In particular, if the offer states terms for acceptance (e.g., that it be in writing) then the acceptor must comply for the contract to be valid. For example, in Neale v Merrit an offer stipulated full payment on acceptance; the acceptor purported to accept and enclosed part payment and a promise to pay the rest in instalments. This was not deeded a true acceptance, and the contract was declared void.
It has been held that where the offeror is prepared to bear the risks of non-communication, acceptance can be effective by the offeree’s acting as though the contract were accepted.
Postal Rule: It is permissible for a written acceptance to be made by post, and the usual ruling is that acceptance occurs at the moment of posting, not of receipt, which can lead to anomalies.
Instantaneous communication: If communication is “instantaneous” (e.g., telephone, telex), then acceptance does not occur when the communication is made, but only when it is received. Of course, these events are legally contemporaneous, but it is possible for communication to fail during acceptance, and generally, no-one should have to be bound by an acceptance that he has not heard. However, there are no universal rules that may be applied to all these cases, each case must be analyzed on the basis of who should bear the risk of ineffective communication.
Silence as a means of communication: If an offer is accepted `subject to contract’, this is merely an indication that the parties intend to contract formally at some later stage. This is usually used in sales of land and property, to allow the parties to signal their strong intention to contract, but not to be formally bound. An agreement `subject to contract’ is not binding on anyone, and neither party need proceed to a formal contract. On the other hand, a contract containing vague terms about provisionality may still be held by courts to be binding, so the precise form of words should be used.
In a contract for the sale of goods, Title to the goods passes from the seller to the buyer in the manner set out in the contract. If the contract contains no such provision, then the title is usually deemed to pass at the moment the offer is accepted.
Finally, an acceptance of an offer cannot usually occur in ignorance (see: Acceptance In Ignorance), which may be contention in Unilateral contract.
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This glossary post was last updated: 4th April, 2020 | 1 Views.