Various Forms of Contractual Acceptance - Essay Example

Letter of Advice Our Ref: 12 September Client Client Address Dear Client: REF: VARIOUS FORMS OF CONTRACTUAL ACCEPTANCE a) Introduction Thank you for giving us the opportunity to give you an advice concerning various forms of acceptance. Here we give a legal advice on the key issues of acceptance as applied in the contractual law of Australia. This includes definition and forms of acceptance followed by an analysis that contains the advice based on the definition and forms of acceptance. The letter will also make use of case laws to explain clearly about acceptance as an essential element of a contract. b) Definition of Acceptance Acceptance can be defined as the process of showing willingness to abide by the terms of an offer. In most cases, acceptance must be absolute and unconditional – all the terms of the offer should be accepted without setting any conditions or changing the terms of the offer. However, the person being given an offer may require that the terms of the contract be changed or the offeror fulfill some conditions before acceptance of the offer (Abdul, 2011). Acceptance completes the process of forming a contract and allows both parties to be bound by the contract. Once an acceptance has been made, none of the parties can withdraw from it without incurring a liability to the other party. In that case, acceptance comes has its own unique elements that makes it different from other elements of a contract. c) Forms of Acceptance Acceptance in a contract takes different forms depending on the way they are communicated and the terms of agreement involved in the contract. When an offer is made, ways of communicating the acceptance and any terms involved are stated. In that case, acceptance in a contract can be in the form implications, set conditions or expressed acceptance. These forms of acceptance must always be very clear and should not be with any kind of ambiguity neither should it be unequivocal. As it is seen in the case of Malago Pty Ltd v AW Ellis Engineering Pty Ltd [2012] NSWCA 227, there was ambiguity in the expression on the area whose ownership was to be transferred; that is ‘Gross Marine berth income.’ This was then one of the issues that appellant of the case argued that it rendered the agreement void. The court of appeal however, resolved the issue based on the circumstances that led to the agreement after it after construition of that expression. Therefore, the company should ensure that acceptance is always clear without ambiguity. i. Conditional acceptance Conditional form of a contract is the type of acceptance made under conditions set to the offeror by the party to whom an offer has been made as terms that must be made for the other party to accept the offer (Michael et al, 2009). This acceptance therefore takes place as a counteroffer which means that before a contract is made, the person who communicated an offer must accept with the terms before a response of acceptance is officially communicated by the other party to the contract. For that case, this form of acceptance is referred to as qualified acceptance because it needs to qualify on the terms set for the acceptance. According to Abdul (2011), it can also be that the person that is given an order may set a condition that he/she will not agree to be bound in any legal by their agreement unless a legally valid document is prepared and the two parties signs them in that case, the courts of law cannot bind any of the two parties to their agreement until they put their signatures on the formal document that will then bind them to a contract. Consider the case of Masters V Cameron (1954) 91 CLR 353. Masters and Cameron agreed that Masters was to pay 10% deposit and the final payment was to be made after a formal contract was signed. There was need therefore, to know if the memorandum between the two parties was in a position of being enforceable. The court then ruled that the two parties did not want to be bound by their first agreement and instead prefer a formal document to be signed before. This then implies conditional acceptance which the court agreed with it. In that case, Masters did not breach any contract by refusing to continue with the purchase. The company should therefore, be aware of such situations to avoid issues that may later arise due to preliminary agreements that cannot be enforced by a court of law. ii. Express acceptance Another form of acceptance is express acceptance. This form of acceptance is an acceptance that is made by the offeree is done clearly right away after the offer is made (Matoušek et al, 1999). When the offeror and the other party meet to talk about the offer the response from the offeree to accept the offer is later communicated via any other medium of communication directly to the oferror without any condition at all. For example, when person A gives a contractual offeree to person B, the person receiving the offeror will definitely need some time to go and analyze the offer and review its terms to see if he/she can accept or decline that offer within the lapse period allowed before acceptance or decline of the offer (James, 2011). If person B decides to accept the offer, he/she will then communicate to person A about his/her acceptance either directly; verbally or in written form. In that case, there are no conditions for the offeror to fulfill before person A accepts the offer. In the case of Entores Ltd v Miles Far East Corporation, Entores sent an offer via telex to Miles Far East Corporation which was then replied via telex. This was an express acceptance. Even though Miles did not fulfill the contract, the court ruled that the acceptance was sent right away to Entores and therefore a contract existed. iii. Implied acceptance Implied acceptance is the form of contractual acceptance that is communicated directly to the offeror not through any verbal or written form but through behavior or actions of the person who received the offer (Abdul, 2011). For example in the case Brogden v Metropolitan Railway Company[1893] 1 QB 256, the offer made by Brogden was directly filed after Brogden signed the documents. Metropolitan’s agents did not consider looking at them but instead assumed that Brogden had signed them and the contract had been formed. For example in the case of Brogden v Metropolitan Railway Company, the fact that Brogden continued to supply coal to Metropolitan Company means that he accepted the offer. When issues arised later, Brogden was held liable for breach of contract as the court pronounced that the acceptance had been implied and therefore, a contract was formed. Therefore, the House of Lords ruled the case based on the implication of Brogden. This could therefore apply to many cases in the company for example signing contracts with new investors or partners into the company. d) Rules of acceptance Contractual acceptance has its own rules too. One of these rules is that acceptance reliance upon offer. This means that the offeree must have initially been informed about the offer and is fully aware of it. Someone cannot just accept an offer that he/ she was not aware of it before. The offeror must have communicated the offeror to that person before so that the offeree will have time to analyze the terms of that offer and communicate his/her acceptance to the offeror. James (2011) explains that another rule concerning acceptance is that the offeree must communicate acceptance within a certain predetermined time period or be communicated within a reasonable time. When the time period within which the acceptance was to be communicated lapses, the offer is terminated and no longer valid at all. For example, if the offeror predetermines that the acceptance must be communicated within two weeks from the time an offer is made, failure by the offeree to do so within the stated time allows the offeror to terminate the offer. Another rule of acceptance is that the official acceptance of an offer must be communicated only by the person who was given the offer through the method that the offeror prescribed before. For example, the offeror may prescribe that the offeree communicates acceptance through a telephone call. In that case only the offeree has the power to make a call to the offeror communicate his/her acceptance (James, 2011). If one person different who is not the offeree communicates the acceptance, then that acceptance is not legally valid at all and the offeree will not bound to any agreement at all. There is also an authorization under some circumstances that an agent is allowed to communicate acceptance on behalf of the offeree (Matoušek et al, 1999). The agent needs to get a duly signed authorization in order to communicate the acceptance. In the case of: Malaga V AW Ellis engineering Pty Ltd [2012] NSWCA 227, the appealing court indicated that Maritime Authority could sell their shares without getting involved in the partnership. The only thing which was required was the consent of the Maritime Authority. This can therefore apply to the company if incase it has a contractual issue concerning acceptance and general involvement in the transfer of company shares. If the method of communication was not set, then it will be determined by the type of offer itself (Matoušek et al, 1999). For example if the offer was made through negotiations by word of mouth or telephone, the acceptance from the offeree will be considered complete only when the offeror hears words directly from the offeree declaring his/ her acceptance orb from a telephone call communicating acceptance. There is also the postal rule of acceptance where the offeror may authorize the method of communicating the acceptance. In that case, the letter of acceptance can be posted to the offeror. Once the letter of acceptance is posted, acceptance is considered to be complete even if the letter does not reach its destination. The case of Entores Ltd v Miles Far East Corporation [1955] 2 QB 327 illustrates this well. When Entores sent an offer to Miles Far East Corporation via telex the Corporation sent a telex of acceptance. The fact that the contract was not fulfilled takes Miles Corporation into account because acceptance was communicated. The court therefore, ruled that the contract was indeed formed the moment the telex of acceptance was sent. This therefore be of concern if the company will need deal with such issues. This authorization can be made by the offeror expressly or impliedly (Antoniolli and Veneziano, 2005). This means that when the offeree posts the letter of acceptance, the acceptance is considered to be complete whether that posted letter reaches the offeror or not. This rule also covers the rule on electronic communication of a contract. 1) Express authorization. This refers to the case where the person making an offer expressly gives the offeree permission to give his/her acceptance through a post. For example, if a person makes an offer to the buy a piece of land in exchange of three horses and authorizes the offeree to post the letter of acceptance. If the offeree posts a letter of acceptance and the letter does not reach the offeror, the acceptance will be considered complete. 2) Implied authorization At times, the offeror may authorize the offeree to post a letter of acceptance but by implication. In this case, the offeror does not give direct authority verbally but implication especially through the method in which the order is made. For example, when a defendant writes and posts a letter of an offer to a company to buy shares. The way that offer was made definitely indicates that the company is to communicate the acceptance of that offer by post too. Also in this case of implied authorization, the acceptance will be considered complete after it is posted even if it does not reach the destination. 3) Electronic communication There are cases where the offeror does not communicate the authorization. The offeree may decide to send an electronic mail to the offeror. As long as the letter of acceptance is received by the offeror, the acceptance from the offeree will then be complete. e) Conclusion It is therefore, clear that there is need to consider many factors when dealing with contractual acceptance in the company. The different forms of contractual acceptance ant their legalities should always be well understood to avoid any issues or misunderstandings arising among partners later after signing legal a contract. I therefore, hope that this legal advice concerning contractual acceptance will be useful in any legal matters regarding contracts in this partnership. In case of any other clarification you can always consult me. Yours faithfully Juan Margos. References Abdul Jalil. 2011. “Clarification of Rules of Acceptance in Making Business Contracts” 2011. Journal of Politics and Law. Vol. 4, no.1, pp. 109. Antoniolli, L., & Veneziano, A. 2005. Principles of European contract law and Italian law. The Hague, Kluwer Law International. Brogden v Metropolitan Railway Company[1893] 1 QB 256. Entores Ltd v Miles Far East Corporation [1955] 2 QB 327. James Allsop. 2011. “Good Faith and Australian Contract Law: A Practical Issue and a Question of Theory and Principle.” The Australian Law Journal. Vol. 85, no. 6, pp. 341. Malago Pty Ltd v AW Ellis Engineering Pty Ltd [2012] NSWCA 227. Masters V Cameron (1954) 91 CLR 353. Matoušek, V., Mautner, P., Ocelikova, J., & Sojka, P. 1999. Text, Speech and Dialogue. Berlin, Springer. Michael Parkin, Dean Kuo, and John Brooke. 2009. “A Framework and Protocols for Service Contract Agreements Based on International Contract Law”. International Journal of Web Services Research. Vol. 6 no.3, pp.1. Read More