Contracts in Brief: The key elements – Part 2: Acceptance and the Consequences

As stated in Part 1, the formation of a contract will start with an offer from one party, however, it must then follow that there is an acceptance (as a standard rule). The crucial element of the acceptance is that the point at which one party has accepted the terms of the contract, it is at this stage that the contract became legally binding.

The issues arise when an offer is presented to the party and then it appears that acceptance had followed but the terms are not clear. The time at which is the offer was accepted is then important to assess the terms at that time.

The way in which an offer has been accepted can vary depending on the nature of the situation. In some instances, it is the conduct of one party that constitutes acceptance even though this has not been clearly communicated. The standard method would be expressed in response to an offer which would then make the contract enforceable. Conduct would usually be if a supplier was offered x for goods and it then accepted simply by delivering them and requests payment. As you can see, an offer can be made on both sides.

Next and certainly something that most of us have attempted over time is when an offer is made but the terms of the offer are not accepted so a cheeky counter-offer is made. This would then mean that the offer is rejected, and no contract is formed. But then the party makes the counter-offer, which usually would mean a variation in a price for example. This counter-offer, if the terms are accepted, would then together bind the contract. Note that an issue will usually arise when this counter-offer was actually not an offer but simply a request for further information. The contract in this scenario is not complete.

The two standard types of communication of the acceptance being made is either through the reception rule which when the acceptance has been received by the party making the offer and is instantaneous. Examples of this would be when the parties are communicating via telephone. The second method is a method which has been thrown around a few times in conversation, but some do not usually understand its meaning fully or what the legal application and issues are with this. It is the postal rule and although that is straight forward to understand, it can cause some issues.

The postal rule applies when delayed forms of acceptance are apparent and would usually means that the acceptance is deemed as being effective when the party has posted the letter, even though the person offering has not received this yet. Issues are understandably arising when the party offering then offers to another party and then receive the letter of acceptance after the third party has also accepted. An easy remedy to avoid this would be for the person offering specifies the method of communicating acceptance and deadline for this.

Finally, it is very important for readers to be aware that once acceptance is in place, the terms are set and notwithstanding other contractual issues, you cannot then go back to the party offering and say you are not happy with the terms and wish to amend the contractual agreement. Also, it is important to note that there are some forms of behaviour which can form a contract by acceptance such as performance, so it is again necessary to be mindful of actions to avoid agreeing to a contract which is binding. It goes without saying as well that performance for construction workers is behaviour which constitutes acceptance so a signed contract with the terms clearly outlined should always be favourable before commencing work.

If you require further understanding on this, or have a dispute which you need assistance with, please do not hesitate to contact us and arrange a call to discuss or email your query and we will advise at no charge to you unless work is required.

In the next part 3, I shall consider consideration which is the promise of something in exchange for something. It is that thing such as payment itself which is the consideration and is another key element of the formation of a contract.

share this Article

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
Share on email

Recent Articles