August 15, 2013
(Editor’s note: Over the next ten weeks, we’ll be covering some of the most prominent legal concepts taught in law school to help students faced with these topics, whether for the first time or as part of a review, better comprehend them.)
My last post described the first half of contract formation, the offer.
In this post, I will cover acceptance, the other half.
Acceptance is actually only one of four possible responses to an offer, but it is the only one that, completed appropriately, will result in the formation of a contract.
The requirements for a proper acceptance look similar to those of the offer.
First, obvious though it may seem, an offer can only be accepted by the offer’s recipient (the offeree).
Next, like the offer, the acceptance must be communicated, and communicated properly.
By “properly,” I mean that the offer must be communicated in a timely manner and using the means specified by the offer.
“Timely” here means that the acceptance must be communicated within the time limits set out by the offer. If no time limit is given, then a reasonable amount of time is used instead. What is “reasonable” varies depending on the situation.
The “means” of communication are also important to proper acceptance.
If the offer states that the acceptance is to be done by fax, then the acceptance must be communicated using a method that is no less effective than the method specified (email would likely also suffice). Conversely, if the offer is explicit that only a certain form of communication is suitable to communicate the acceptance, then only that form specified may be used.
There are, however, certain instances in which this communication requirement is waived – that is, acceptance is completed by the offeree’s silence.
The first occurs when the offeree has agreed in advance that silence is acceptable. For instance, if the offeree tells the offeror that, “if you don’t hear from me by next Tuesday, consider your offer accepted.”
Another instance is when it has been established by the offeror and offeree’s previous dealings that silence can be acceptance.
There is an additional issue to be aware of when discussing the communication of acceptance: the mailbox rule.
This rule holds that acceptance is effectively communicated when, if sent by U.S. mail, the letter is posted (handed to a postal worker or dropped in a mailbox).
The rule gets a bit confusing when rejections of offers are involved: under the mailbox rule, a rejection is effective not when it is mailed, but when it is received by the offeror.
What happens if an offeree mails the acceptance of an offer, and then later changes her mind and mails a rejection?
The rule states that whichever is received first by the offeror is valid.
To make things even more confusing, this last point only applies when the rejection is mail after the acceptance is also mailed.
If an offeree mails an acceptance, and then changes her mind and calls the offeror to inform him of her rejection of his offer, it’s too late. The contract was formed when the offeree mailed the acceptance, and the only way to revoke it would be to somehow get a rejection to reach the offeror via mail before the acceptance.
An acceptance doesn’t have to be conveyed by verbal communication (or a lack thereof); it can also be communicated by actions. For example:
Buyer offers to purchase 100 widgets from Seller for $1 per unit. Seller ships the 100 widgets and bills Buyer $100.
Seller has validly accepted Buyer’s offer by shipping the widgets, even though Seller did not explicitly tell Buyer that he accepted her offer.
Seller also fulfilled the next requirement for making a valid acceptance: the offeree must assent to the exact terms of the offer.
Of course, there were few terms laid out by the offer in the above example (item, price, and quantity); most contracts include quite a few more provisions.
Nevertheless, the requirement remains, no matter how many terms are in the original offer. This requirement is known as the “mirror image rule:” the acceptance must be a “mirror image” of the original offer.
If an offeree does change the original terms of the offer, however, the “acceptance” with these revisions is actually a counteroffer.
A counteroffer is an outright rejection of the original offer coupled with the tendering of a new offer – making the original offeree the new offeror, and vice versa.
Making a counteroffer usually means that the original offer is no longer valid (since the offeree rejected the offer by making the counteroffer), and the original offeree no longer has the option of accepting it.
An important point to note here is that, under the Uniform Commercial Code (UCC), the mirror image rule doesn’t really operate in the same way (there are actually several rules that come into play when discussing the UCC on this point, so I’m not going to get into it more than this right now).
Finally, even if all of the requirements mentioned so far are met, acceptance can only be valid if it is done so with the intent to incur a legal obligation.
Just as with the offer, if the acceptance uses any language to suggest that the offeree is not committing to be legally bound to a contract, no contract is formed. For example, if the offeree tells the offeror that, “I accept your offer, but I’ll let you know if I can really do it,” the acceptance was not proper and no contract was formed.
And that’s the basics of the acceptance of an offer.
If you have any additional questions about acceptance or any other part of contract formation, feel free to post them in a comment below!