6.4 The Acceptance

To result in a legally binding contract, an offer must be accepted by the offeree. Just as the law helps define and shape an offer and its duration, so too does the law govern the nature and manner of acceptance. The Restatement defines acceptance of an offer as “a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.”  In showing that there is an assent to an offer, the acceptance will reflect back the intention and terms of the offer, either by the making of a mutual promise or by performance or partial performance of a requested action. If there is doubt about whether the offer requests a return promise or a return act, the Restatement, Section 32, provides that the offeree may accept with either a promise or performance. The UCC also adopts this view; under Section 2-206(1)(a), “an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances” unless the offer unambiguously requires a certain mode of acceptance.

The person to whom a promise is directed is ordinarily the person whom the offeror contemplates will make a return promise or perform the act requested. As such, in the typical case, the offeror directs the offer to the offeree, and that party is then in the position to accept the offer, or decide not to accept. Under the common law, whoever is invited to furnish consideration to the offeror is the offeree, and only an offeree may accept an offer. Yet in some situations, a promise can be made to one person who is not expected to do anything in return. In this case, consideration necessary to weld the offer and acceptance into a legal contract can be given by a third party. A common example is sale to a minor. George promises to sell his automobile to Bartley, age seventeen, if Bartley’s father will promise to pay $3,500 to George. Bartley is the promisee (the person to whom the promise is made) but not the offeree; Bartley cannot legally accept George’s offer. Only Bartley’s father, who is called on to pay for the car, can accept, by making the promise requested. And notice what might seem obvious: a promise to perform as requested in the offer is itself a binding acceptance.

When Is Acceptance Effective?

As noted previously, an offer, a revocation of the offer, and a rejection of the offer are not effective until received. However, the same rules will not apply when evaluating whether an acceptance is effective. When communications are instantaneous, such as in a face-to-face negotiation, the precise moment of acceptance is not in question. So, too, would be negotiations taking place over telephone or other means of communicating in real time such as Facetime, or Zoom. But disagreements can arise in contracts that are negotiated via means that are not in real time, such as via email.

Stipulations as to Acceptance

One common situation arises when the offeror stipulates the mode of acceptance (e.g., return mail, fax, or carrier pigeon). If the offeree uses the stipulated mode, then the acceptance is deemed effective when it is sent. Even though the offeror has no knowledge of the acceptance at that moment, the contract has been formed. Moreover, according to the Restatement, if the offeror says that the offer can be accepted only by the specified mode, that mode must be used or any acceptance by an alternative mode is invalid.

If the offeror specifies no particular mode, then acceptance is effective when transmitted, as long as the offeree uses a reasonable method of acceptance. It is implied that the offeree can use the same means used by the offeror or a means of communication customary to the industry.

The “Mailbox Rule”

The use of the postal service is customary, so acceptances are considered effective when mailed, regardless of the method used to transmit the offer. In other words, under the mailbox rule, an acceptance is generally effective and binding on the parties at the moment it is sent or deposited in a mailbox.

The mailbox rule may seem to create particular difficulties for people in business. As the acceptance is effective when sent, the offeror is unaware of the acceptance. The offeror will eventually become aware of the acceptance when it is ultimately received, but that will be after the agreement is formed. It is even possible that the letter notifying the offeror of an acceptance is lost and never arrives. Despite this concern, the law recognizes that in contracts negotiated through correspondence, this burden will always fall to one of the parties. So, if the rule were that the acceptance is not effective until received by the offeror, then the offeree would not be able to rely on the existence of an agreement. As between the two, it seems fairer to place the burden on the offeror, since he or she alone has the power to fix the moment of effectiveness. All the offeror need do is specify in the offer that acceptance is not effective until received.

The mailbox rule eliminates an additional burden of acknowledging the acceptance in order for the agreement to become effective. But note that the offeree must use a mode of acceptance that is reasonable—acceptance is deemed effective only when received.

Acceptance “Outruns” Rejection

When the offeree sends a rejection first and then later transmits a superseding acceptance, the “effective when received” rule also applies. Suppose a seller offers a buyer two cords of firewood and says the offer will remain open for a week. On the third day, the buyer writes the seller, rejecting the offer. The following evening, the buyer rethinks his firewood needs, and on the morning of the fifth day, he sends an e-mail accepting the seller’s terms. The previously mailed letter arrives the following day. Since the letter rejecting the offer had not yet been received, the offer had not been rejected. For there to be a valid contract, the e-mailed acceptance must arrive before the mailed rejection. If the e-mail were hung up in cyberspace, through no fault of the buyer, so that the letter arrived first, the seller would be correct in assuming the offer was terminated—even if the e-mail arrived a minute later. In short, where “the acceptance outruns the rejection” the acceptance is effective.

Figure 9.1 – Summary of Rules for Timing of Offer and Acceptance

Electronic Communications

Electronic communications are increasingly common. Many contracts are negotiated by e-mail, accepted and “signed” electronically. Generally speaking, this does not change the rules. The Uniform Electronic Transactions Act (UETA) was promulgated (i.e., disseminated for states to adopt) in 1999. It is one of a number of uniform acts, like the Uniform Commercial Code. As of June 2010, forty-seven states and the U.S. Virgin Islands had adopted the statute. The introduction to the act provides that “the purpose of the UETA is to remove barriers to electronic commerce by validating and effectuating electronic records and signatures.” In general, the UETA provides the following:

• A record or signature may not be denied legal effect or enforceability solely because it is in electronic form
• A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation
• If a law requires a record to be in writing, an electronic record satisfies the law
• If a law requires a signature, an electronic signature satisfies the law

The UETA, though, doesn’t address all the problems with electronic contracting. Clicking on a computer screen may constitute a valid acceptance of a contractual offer, but only if the offer is clearly communicated. In Specht v. Netscape Communications Corp., customers who had downloaded a free online computer program complained that it effectively invaded their privacy by inserting into their machines “cookies”; they wanted to sue, but the defendant said they were bound to arbitration. They had clicked on the Download button, but hidden below it were the licensing terms, including the arbitration clause. The federal court of appeals held that there was no valid acceptance. The court said, “We agree with the district court that a reasonably prudent Internet user in circumstances such as these would not have known or learned of the existence of the license terms before responding to defendants’ invitation to download the free software, and that defendants therefore did not provide reasonable notice of the license terms. In consequence, the plaintiffs’ bare act of downloading the software did not unambiguously manifest assent to the arbitration provision contained in the license terms.”

If a faxed document is sent but for some reason not received or not noticed, the emerging law is that the mailbox rule does not apply. A court would examine the circumstances with care to determine the reason for the nonreceipt or for the offeror’s failure to notice its receipt. A person has to have fair notice that his or her offer has been accepted, and modern communication makes the old-fashioned mailbox rule—that acceptance is effective upon dispatch—problematic. 

Silence is Not Acceptance

Ordinarily, for there to be a contract, the offeree must make some positive manifestation of assent to the offeror’s terms. The law does not impose on the offeree a duty to speak. Therefore, an offeror cannot usually word his offer in such a way that the offeree’s failure to respond can be construed as an acceptance.

Exceptions

The Restatement recognizes three situations in which silence can operate as an acceptance. The first occurs when the offeree takes a benefit from the offeror and avails himself of services proffered by the offeror, even though he could have rejected them and had reason to know that the offeror offered them expecting compensation. The second situation occurs when the offer states that the offeree may accept without responding and the offeree, remaining silent, intends to accept. The intention of the offeree is key. The third situation is that of previous dealings, in which only if the offeree intends not to accept is it reasonable to expect him to say so. To illustrate these three exceptions, suppose Emma subscribes to a cloud-based software service, and her subscription is up for renewal. If Emma continues to use the software and benefits from it after the renewal without objecting to the fee or canceling the renewal, she has accepted taking the benefit. If the original terms of use and agreement between the parties explicitly state, “Your subscription will be automatically renewed after one year unless you notify us within 30 days that you wish to cancel,” and Emma receives a notice about the renewal but doesn’t respond or cancel her subscription within the specified timeframe, this is acceptance as allowed in the offer. Finally, if Emma has been using this software for several years, and every year the software company sends her a renewal notice with similar terms, and she has never canceled her subscription in the past, the software company would base Emma’s acceptance on the history of their previous dealings.

Video on Acceptance

This video explains acceptance of unilateral and bilateral contracts.

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