Accepting a Contract
We enter into and accepting a contract all the time, when buying something such as a car, taking out a credit agreement or signing up to a membership or subscription for example. When contracts are created, there are three basic elements;
- The parties involved in the contract must have reached an agreement (through making an offer and then acceptance of this offer)
- The parties who are involved must have intention to be legally bound to the terms of the contract
- The parties must have provided ‘valuable consideration’
There are also other issues such as express and implied terms, undue influence and duress but those are beyond the scope of this guide.
Offer and Acceptance
When there is an offer on the table, there are four things that should be taken into consideration:
- What the offer is
- The difference between an invitation to treat and an offer
- What would be classed as an acceptance of the offer
- Under what circumstances can the offer be terminated
When the contract is formed, we have ‘accepted’ some kind of offer. Acceptance is a crucial part of the contract and when this takes place it must be both binding and final for all parties.
For there to be an acceptance, there must first be an offer and for the acceptance to be valid, the person(s) entering into the contract must accept the offer in its entirety which may include associated terms and conditions. This is why it is so important to be absolutely clear on what the offer is, the conditions attached to it and the implications of acceptance before you agree to anything. If there is a term or something you are unsure of it is crucial that you do not accept the offer or make the agreement, otherwise it would be very difficult to exercise your rights if it transpired that you weren’t really happy with the offer you had agreed to.
If you do not accept the offer and the associated terms it is vital that you reject the agreement and you do not enter into the contract.
However, the situation becomes a little more complex if the acceptance involves new terms which have been incorporated along the way, perhaps as a result of negotiations for example. There may be other instances where terms in a contract have been amended or replaced.
A business or individual cannot simply amend terms and class this as acceptance. The person entering into the contract would need to make a counter offer to the original contract. When a counter offer is made, this rejects the original contract and the terms contained within it in favour of a new contract and associated conditions.
It is very important that any counter offer is clearly differentiated and stated as such, rather than just an inquiry about one of the terms contained within the offer. An inquiry or question about an offer does not reject the original. Once the inquiry or question has been adequately resolved or answered, the original offer can be accepted as normal.
An offer can be accepted in many different ways but primarily it is through someone’s conduct, whether spoken or written. It is preferable that anything you agree to is in writing so you can see exactly what the contract is and the terms that you are agreeing to. Silence cannot be construed to mean an acceptance of an offer.
In law you may have come across a term called the postal rule. As a general rule, any acceptance of an offer must be clearly communicated and received to be valid. However, the postal rule can be applied when an acceptance is sent through the post. Postal rules cannot be applied for fax or email communications.
Further, it is not necessarily required that the communications are read by the recipient for the acceptance to come into force. Once the acceptance has been received, it is effective from that date.
Termination of the Offer
At any time before the offer is accepted, an offer can be withdrawn. Once the offer and its associated terms and conditions have been accepted and agreed, the offer cannot be withdrawn. Sometimes you may find that an offer is open for a limited time such as 7, 14 or even 28 days. These rules will still apply and the person making the offer can withdraw it at any time up to the final day of the offer period.
When an offer is withdrawn, it must be clearly communicated to the interested parties. The postal rule does not apply in this situation.
Battle of the Forms
When an offer is made, a business or individual may send their branded forms to the recipient to complete, sign and return which will constitute acceptance of the offer.
However, a battle of the forms will arise when the recipient will respond to the offer using their own forms, perhaps inferring that they will enter into the contract under their terms. Usually, the person who sends the final letter with their terms included is the party whose terms will form part of the legally binding contract.
Every time a new form (and associated terms) are sent between the parties, this will act as a counter offer and any previously agreed terms will be cancelled.
A contract cannot be formed if the parties involved have their own ideas about what the contract should contain and the purpose of the contract. If the nature of the contract cannot be clearly defined and established, the contract cannot be created. If one party knows that the other party is mistaken about the terms of a contract, these terms cannot be enforced.
In some instances, contracts are entered into under fraudulent terms where one party enters into a contract not knowing the true identity of the other party. This could for example happen when someone assumes the identity of another to enter into a contract to purchase something.
Contract law is a complex and multifaceted area of law. Whenever you enter into a contract it is always important that you fully understand not only the offer, but the associated terms and conditions and if you are unsure of anything, seek advice before agreeing to anything.
About the Author
This article was written by a member of the Expert Answers team and posted by Lloyd Barrett, Admin & Customer Services Manager for online advice service Expert Answers. Expert Answers provides legal advice to users in the UK who post a question on their secure platform.