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Contract Law - Types of acceptance for bilateral offers
This section discusses ways to communicate acceptance based on the offeror's requirements.
Bilateral offers have a different legal standing than unilateral offers
To constitute a legally binding contract, a bilateral offer must be accepted and conveyed to the offeror (the reception rule applies).
Key term: receipt rule
The regulation states that an offeror must receive an acceptance for it to be valid. Communication is necessary for acceptance, as silence does not constitute acceptance.
If an offeror informs an offeree that they will presume their offer has been accepted if they do not hear from them, this is not legally binding. If the offeree does not respond to the offeror's communication, the contract cannot be legally binding.
There are two key aspects to consider while determining the form of acceptance: If the offeror specifies a specific mode of acceptance, such as in person, it must be notified accordingly. If the offeror does not specify a specific form for acceptance, the offeree may use any other form as long as it is not significantly slower. If the offeror requires phone acceptance, a physical visit may be an acceptable option, as long as it is not significantly delayed.
The postal acceptance rule , is an exception to the norm that a bilateral contract must be communicated to be effective.
Postal acceptance rule
If the offeror and offeree's interaction indicates that the post may be used to signal acceptance, the postal acceptance rule applies. The postal acceptance rule states that an offeree's acceptance becomes legally binding as soon as it is posted. Even if the offeror never receives the acceptance, they are still obligated by the contract formed when it was posted. To apply this important rule, the letter of acceptance must be properly addressed and despatched through a post office or Royal Mail letterbox. Letters delivered by hand or courier are not subject to the postal acceptance rules.
Parties can omit the postal acceptance rule by establishing an alternate method of communication and noting that the acceptance cannot be transmitted via post
modes of communication
Instantaneous media
The receipt rule applies to all communication methods, including phone calls and faxes. This means that the offeror must get an acceptance before communicating it. Typically, the offeree is responsible for confirming that the offeror has accepted the offer. Acceptances by phone are handled as if they were made in person. If the offeror does not hear or understand the acceptance, it is not considered communicated. If an offeror does not get or receives an unreadable fax acceptance, they must request a re-send from the offeree.
Instant media sent during office hours
If an acceptance is communicated to a business during office hours, it is considered communicated when it is received via fax.
Immediate media delivery outside of business hours
If an acceptance is sent outside of 'regular business hours', it will be considered received the next working day.
Acceptance via email
Generally speaking, the receipt rule applies.
Acceptance through website
If the parties are not businesses, the order and acknowledgement of receipt are considered received once they are accessible to the intended recipients.
Bank sends a loan offer to Olga via mailing. Bank informs Olga that she must accept the loan in writing by 5 PM on Friday. Olga responds by sending a letter to Bank by Royal Mail before 5 PM on Friday. Does Olga’s response constitute a legally binding contract with Bank? Olga has not signed a legally binding contract with Bank. The offer specifies that the bank must obtain written acceptance by 5 PM. This replaces the postal acceptance rule. Bank must receive Olga’s acceptance by Friday at 5 PM to form a legally enforceable contract.
This section discusses ways to communicate acceptance based on the offeror's requirements.
Bilateral offers have a different legal standing than unilateral offers
To constitute a legally binding contract, a bilateral offer must be accepted and conveyed to the offeror (the reception rule applies).
Key term: receipt rule
The regulation states that an offeror must receive an acceptance for it to be valid. Communication is necessary for acceptance, as silence does not constitute acceptance.
If an offeror informs an offeree that they will presume their offer has been accepted if they do not hear from them, this is not legally binding. If the offeree does not respond to the offeror's communication, the contract cannot be legally binding.
There are two key aspects to consider while determining the form of acceptance: If the offeror specifies a specific mode of acceptance, such as in person, it must be notified accordingly. If the offeror does not specify a specific form for acceptance, the offeree may use any other form as long as it is not significantly slower. If the offeror requires phone acceptance, a physical visit may be an acceptable option, as long as it is not significantly delayed.
The postal acceptance rule , is an exception to the norm that a bilateral contract must be communicated to be effective.
Postal acceptance rule
If the offeror and offeree's interaction indicates that the post may be used to signal acceptance, the postal acceptance rule applies. The postal acceptance rule states that an offeree's acceptance becomes legally binding as soon as it is posted. Even if the offeror never receives the acceptance, they are still obligated by the contract formed when it was posted. To apply this important rule, the letter of acceptance must be properly addressed and despatched through a post office or Royal Mail letterbox. Letters delivered by hand or courier are not subject to the postal acceptance rules.
Parties can omit the postal acceptance rule by establishing an alternate method of communication and noting that the acceptance cannot be transmitted via post
modes of communication
Instantaneous media
The receipt rule applies to all communication methods, including phone calls and faxes. This means that the offeror must get an acceptance before communicating it. Typically, the offeree is responsible for confirming that the offeror has accepted the offer. Acceptances by phone are handled as if they were made in person. If the offeror does not hear or understand the acceptance, it is not considered communicated. If an offeror does not get or receives an unreadable fax acceptance, they must request a re-send from the offeree.
Instant media sent during office hours
If an acceptance is communicated to a business during office hours, it is considered communicated when it is received via fax.
Immediate media delivery outside of business hours
If an acceptance is sent outside of 'regular business hours', it will be considered received the next working day.
Acceptance via email
Generally speaking, the receipt rule applies.
Acceptance through website
If the parties are not businesses, the order and acknowledgement of receipt are considered received once they are accessible to the intended recipients.
Bank sends a loan offer to Olga via mailing. Bank informs Olga that she must accept the loan in writing by 5 PM on Friday. Olga responds by sending a letter to Bank by Royal Mail before 5 PM on Friday. Does Olga’s response constitute a legally binding contract with Bank? Olga has not signed a legally binding contract with Bank. The offer specifies that the bank must obtain written acceptance by 5 PM. This replaces the postal acceptance rule. Bank must receive Olga’s acceptance by Friday at 5 PM to form a legally enforceable contract.
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