Acceptance in Business Contracts - Assignment Example

?Acceptance in Business Contracts Table of Contents Introduction 3 Acceptance as an Essential Element of a Valid Contract 3 Standard Form Contracts 5Communication of Acceptance 7 Acceptance must be Given a Reasonable Time 8 Conclusion 8 9 References 10 Introduction A contract is a legal agreement signed by two or more parties, each of whom intends to be benefited against several legal obligations. In simple words, a contract can be explained as the exchange of legal obligations and promises, shared between the two or more parties engaged in a contract (Marsh Parlin Law, 2012). In business, contracts are considered to be quite vital as to preserve transparency in business dealings and also to bind the parties engaged in a legal contract to perform their responsibilities with efficiency. There are various elements to a business contract, which mainly involves an offer, an acceptance, a free mutual consent, a legal purpose, competent offeror(s) and offeree(s) and consideration of a value engaged in the contract to benefit the purpose of the contract (Marsh Parlin Law, 2012). The discussion henceforth will be focused on elaborating the element of acceptance in a business contract. Accordingly, the important factors of making a valid acceptance will also be explained in this paper. Due significance will also be rendered towards cases where the validity of an acceptance made in a contract were examined. Acceptance as an Essential Element of a Valid Contract Prior to discussing the significance of acceptance in a business contract, it is worth defining an offeror and an offeree. As per the English Contract Law, there must be at least two parties in an agreement, i.e. the party making the offer and the other accepting the offer. The party or parties engaged in making the offer are referred as offeror(s); while, the party or parties giving their mutual consent to the agreement is termed as offeree(s) or acceptor(s) (McGraw-Hill, 2013). It is in this context that even if the agreement is made on the basis of a valid offer, in case the acceptance is made under external pressure and is found to lack free consent from the offeree(s), the contract is quite likely to be termed as void. Therefore, it can be affirmed that it is essential to have a valid offer and a valid acceptance to make a contract legally approved. Absence of either of the elements shall result in a void contract. From a generalised perspective, acceptance can be referred as the act of free affirmation or acceptance made by the offeree(s) in lieu to the proposal given by the offeror(s). In other words, it is the manifestation of the full concern made by the offeree to be bound by the terms of the offer made. It is in this context that acceptance can be made through various forms, i.e. either through verbal agreement with documented acceptance of the offer, or through implied and non-verbal forms, making signs to convey the acceptance of the offer. In the case of a verbal acceptance, the offeree tends to depict his confirmation through a signature or through explicit verbal mode. Such mode of acceptance can be illustratively explained with reference to Brogden v Metropolitan Railway (1877) 2 App. Cas. 666. In this case, however, no signature or direct acceptance was made by the offeree (Brogden) to confirm the contractual conditions stated by the offeror (Metropolitan Railway). Correspondingly, no arguments were also made by the offeree in this context, deciphering their non-acceptance to the contract. Rather, the offeree continued abiding by the contractual terms, even though the contract did not have an explicitly communicated form of acceptance. When the case was reviewed in the court, the judgment delivered was of the view that the contract was a valid business agreement, as the offeree has deciphered acceptance by not making any counter arguments to the written contract forwarded by Metropolitan Railway (e-Lawresources, n.d.). In another case of Day Morris Associates v Voyce and another, a similar mode of acceptance can be identified to be considered as valid, where no explicit words were used by the offeree to accept the contract, but the judgment was of the view that the contract was readily accepted by the offeree through conduct (Lexisweb, 2003). Therefore, direct conduct of the contractual agreements can also be deemed as a legal acceptance in formal business contracts. But, when concerning informal business contracts, acceptance can also be made through implied forms. For example, at an auction where A is the highest bidder, the auctioneer accepts the offer by striking the hammer on the table. This can be illustrated as an instance of implied acceptance. It is worth mentioning in this context that by disagreeing the contractual terms proposed by the offeror(s), an offeree enjoys the complete right to bring a counter offer. However, such counter offers must be segregated from the terms and provisions to making a valid acceptance. In other words, a counter offer by no means shall be deemed as a valid acceptance. For example, in the case Hyde v Wrench (1840) 49 ER 132, the offeror quoted a particular price to the offeree in lieu of the services asked for; however, disagreeing to the quoted price, the offeree made a counter-offer to the offeror. Thus, the court of law conveyed the decision that no valid contract was made in the case as the later quotation of price, sent by the offeree in reply to the offer, was actually a counter-offer, but not a valid acceptance (e-Lawresources, n.d.). As a matter of fact, the acceptance of an offer is considered as one of the most significant factors of a legal and successful contract. Contextually, in order to legally satisfy the contract, the acceptance must abide by several conditions as explained below. Standard Form Contracts In business, contracts are often observed to raise complexities and confusions owing to the legal jargons used in the document. It is in this context that the offeror(s) should pay due attention toward decoding and explaining the contractual terms explicitly to the offeree(s), prior to the acceptance is made. In other words, to obtain a valid acceptance, the offeror(s) must ensure that the agreement is free from any hidden clause which might inhibit the benefits promised to the offeree(s), or increase their legal obligations through the contract. The implementation of the standard terms and conditions are therefore aimed towards assisting individuals to remove the compliance regarding several statutory obligations (MacMillan & Stone, 2012). In relation to the case of Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 40, it was identified that the engaged companies were into a contract for a machine purchase. In the primary offer made by the offeror (Butler Machine Tool Co Ltd), a particular price was quoted for the selling of the machine along with a written document stating about the various standard terms practiced by Butler when performing sales services. However, disagreeing to the quoted price, the offeree (Ex-Cell-O Corporation Ltd), stating their standard terms for purchase, made a counter offer to Butler. Accordingly, the offeror (turned offeree) i.e. Butler duly signed the counter offer and depicted a valid acceptance. However, in the later period, Butler charged an extra amount to Ex-Cell-O which was not mentioned in the accepted contract, which was finally treated under the ‘battle of the forms’. The concept of ‘battle of the forms’ principally refers to business contracts where the parties engaged often seek to mention their standard terms explicitly to the offeree, especially when making counter-offers, and the offeror is to sign to decipher their acceptance to the contract. . In the referred case, it was identified that Ex-Cell-O Corporation had included an acknowledgement strip that was signed and accepted by Butler. Also, the signed document, indicating the acceptance of Butler concerning the standard terms mentioned by Ex-Cell-O, did not any clause to permit additional charges at the end of the delivery. Hence, the acceptance to the contract was deemed to oblige Butler legally to follow the standard terms mentioned by Ex-Cell-O (Concentrate Business Law, n.d.). Communication of Acceptance In business dealings, effective communication is strongly required for the acceptance of the offer by the offeree. However, when concerning the implied acceptance of a contract, certain confusions and dilemmas can be witnessed thereon. It is worth mentioning in this context that even though in implied form, silence of the offeree should not be considered as an acceptance. It is thus necessary that either by conduct or by verbal communication, the offeree must decipher acceptance (MacMillan & Stone, 2012). According to the case of Felthouse v. Bindley, (1862) 11 C. B. (N. S.) 869, the implications of communication to acceptance can be explained. In this case, it was identified that Felthouse had made an offer to purchase his nephew’s horse for ?30. However, in return, his nephew remained silent, making no communication of his acceptance either through written or verbal mode or through conduct. On the other hand, he told his auctioneer not to sell that particular horse, as it was already sold to his uncle. This indicates that Bindley, Felthouse’s nephew had considered the offer, but because he made no communication of his acceptance, the contract became void (Law Teacher, 2012). Nevertheless, certain exemptions can be identified in the communication obligation of the offeree(s) to a business contract. For instance, is the terms mentioned in the offer mentioned no requirement of communicating acceptance, i.e. when the offeror(s) waives the necessity of communicating the acceptance, the contract may be deemed valid even with the absence of a communicated acceptance [Carlill v Carbolic Smoke Ball Co.]. Again, it has often been observed that acceptance from the offeree(s) is communicated through postal means. It is in this context that dictating the judgments for the cases Household Fire Insurance v Grant (1879) and Adams v Lindsell (1818), the court of law affirmed that acceptance forwarded through postal mode will only be considered valid after its arrival to the intended person. Acceptance must be Given a Reasonable Time Another under lying principle of a valid acceptance is to render adequate time to the offeree(s) to communicate their acceptance. That is, if any particular time limit is specified in the contract, the acceptance must be communicated within the time. However, in exceptional cases, if the duration of the contract is not specified clearly, it must be follow a reasonable time (MacMillan & Stone, 2012). According to the case of Ramsgate Victoria Hotel Co. v. Montefiore, (1886) L. R. 1 Ex. 109, it was identified that on June 8, Montefiore had offered to purchase the shares of the Ramsgate Victoria Hotel Co.. But, the acceptance to the offer was received by Montefiore from Ramsgate after a long period of 6 months. Consequentially, the contract was considered as void in the court of law owing to the lapse of the reasonable period required to convey the acceptance of the contract (Concentrate Business Law, n.d.). Conclusion It can be evidently inferred from the above discussion that acceptance in a business contract, play a vital role to make the agreement valid. Accordingly, there are various provisions or obligations imposed and rights made available to the offeree(s), which must be followed in order to make a valid acceptance. The obligation of the offeree, when accepting the offer, includes making proper communication. Similarly, the offeree also enjoys the rights of making a counter offer and obtaining a reasonable time for communicating the acceptance. It is worth mentioning in this context that both the legal provisions of offer and acceptance share few common elements as per the English Contract Law. For instance, the offer as well as acceptance should be absolute, and should be made on the grounds of unconditional terms. To state precisely, where on one hand, offeree(s) (i.e. party or parties making acceptance to the contract) must restrain from forcing offeror(s) to bring the contract; on the other hand, offeror(s) must also strictly avoid pressurizing offeree(s) to make the acceptance. Hence, the contract must be made through mutual consents from both the parties. Another element of a valid acceptance is that the acceptance of a contract must be based on a legal relationship. In this context, it can be apparently observed that the elements of a legal acceptance depend on various characteristics of a valid contract. Stating precisely, an acceptance can be termed as valid when it satisfies all the requirements of a valid contract. That is, the acceptance must dictate a legally binding relation of the parties engaged in the contract. It must also exhibit a lawful consideration as per the capacity of the parties engaged in this agreement. References Concentrate Business Law, No Date. Offer. Essential Features of a Contract. [Online] Available at: http://fds.oup.com/www.oup.com/pdf/13/9780199579464.pdf [Accessed July 28, 2013]. e-Lawresources. No Date. Brogden v Metropolitan Railway (1877) 2 App. Cas. 666. Home. [Online] Available at: http://www.e-lawresources.co.uk/Brogden-v-Metropolitan-Railway.php [Accessed July 28, 2013]. e-Lawresources, No Date. Hyde v Wrench (1840) 49 ER 132 Chancery Division (Decided by Lord Langdale MR). Home. [Online] Available at: http://www.e-lawresources.co.uk/Hyde-v-Wrench.php [Accessed July 28, 2013]. Law Teacher, 2012. Acceptance. Cases on Formation of a contract. [Online] Available at: http://www.lawteacher.net/PDF/Agreement%20Cases.pdf [Accessed July 28, 2013]. Legislation, No Date. Unfair Contract Terms Act 1977. Home. [Online] Available at: http://www.legislation.gov.uk/ukpga/1977/50 [Accessed July 28, 2013]. Lexisweb, 2003. Day Morris Associates v Voyce and another. Cases [Online] Available at: http://www.legislation.gov.uk/ukpga/1977/50 [Accessed July 28, 2013]. Marsh Parlin Law, 2012. Contract Law. Practice Areas. [Online] Available at: http://www.marshparlinlaw.com/contract-law.html [Accessed July 28, 2013]. McGraw-Hill, 2013. The Elements of a Valid Contract. Formation of a Valid Contract. [Online] Available at: http://highered.mcgraw-hill.com/sites/dl/free/0070961379/580512/Willes_2Ce_03.pdf [Accessed July 28, 2013]. MacMillan, C. & Stone, R., 2012. Elements of the Law of Contract. University of London International Programmes, pp. 1-245. Read More