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Acceptance of a contract

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27/03/2015

Where commercial parties are negotiating contract terms, the supplier will frequently send out with its terms words which say “Accepted” and then a place for the buyer to sign with a request to return the signed copy. In a recent case before the High Court, [1] the buyer did not sign on the dotted line but did purchase cotton, as envisaged in the contract documentation.

The buyer argued that there was no binding contract, part of case being that the draft contract contained a method of communicating acceptance of the seller’s offer and, as that method of communicating acceptance had not been used, there was no valid acceptance of the seller’s offer and thus no contract had been formed.

The High Court rejected this argument:

  • the fact that a draft contract envisaged a signature and left a space for one did not mean that signature was the only way the contract could be accepted. There was, in the Court’s words, no “prescription” that the contract could only be binding on signature. Quoting earlier authority, the Court said that: “The signatures are evidence and no doubt the best evidence of what had been agreed, but they are not themselves conditions of the agreement”
  • in any event, even if the seller had prescribed a way of communicating acceptance, that method was for the seller’s benefit and it could be waived and, on the facts, it had unequivocally been waived.

This case is a reminder that conduct is capable of constituting acceptance of an offer and of giving rise to a binding contract. The most obvious example is where a buyer places an order or a seller delivers goods. However, conduct will only amount to acceptance of an offer if it is clear that the party did the act in question with the intention of accepting the offer. This may not always be obvious. A signature may not be a condition for a contract to be formed but, as this case demonstrates, it is the best evidence of it.

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[1] A Ltd v B Ltd [2015] EWHC 147 (Comm)