Acceptance of an Offer:
Assuming there is an offer and the offeree’s power of acceptance is still available, the next issue is whether or not the offer has been properly accepted.
Three major issues are raised in connection with this question and they are
- what kind of acceptance is required,
- when can silence operate as an acceptance, and
- what is the effect of an acceptance that deviates from the terms of the offer.
Type of Acceptance Required
The type of acceptance required to conclude a bargain will depend on the offer. As we said earlier, an offer that exchanges a promise for a promise is a bi-lateral contract. The general rule is that any offer that requires acceptance by a promise can only be accepted by a promise. See
Picasso promises to pay Michelangelo $500 if Michelangelo promises to paint Picasso’s house. Michelangelo does not say anything in response but, the next day, he begins painting the house. While Michelangelo is in the middle of painting the house, Picasso retracts his offer. Michelangelo sues Picasso. In this case, Michelangelo will lose. Picasso’s offer was for a bi-lateral contract. In other words, Picasso offered Michelangelo a promise for a promise. Therefore, the only way that Michelangelo could validly accept Picasso’s offer was by promising to paint the house. The fact that he actually began painting the house does not make his acceptance valid and therefore, Picasso was still free to retract the offer.
There is one possible exception to this rule and that is if performance is completed before the initial offer is retracted. For example:
Picasso promises to pay Michelangelo $500 if Michelangelo promises to paint Picasso’s house. Michelangelo does not respond, but, the next day, he begins painting the house. Two days later, Michelangelo finishes the job and then Picasso retracts the offer. If Picasso refuses to pay Michelangelo for his work and Michelangelo sues, he will win, because, although Picasso offered a promise for a promise and Michelangelo did not accept with a promise, full performance in a situation like this will constitute valid acceptance and a contract will be formed.
Please note that while an offer for a bi-lateral contract must be accepted with a promise, the promise itself does not have to be verbal. For example, if Picasso promises Michelangelo $500 if Michelangelo promises to paint Picasso’s house and Michelangelo nods his head “yes” his action will be considered a valid acceptance.
Furthermore, if Michelangelo were to immediately pick up a brush and begin painting the house while Picasso was looking, this action will be considered a promise as well. Under these circumstances, the immediate beginning of performance within view of the promissor is equivalent to an affirmative non-verbal acceptance.
Usually, acceptance of an offer must be communicated to the offeror. In other words, if the offeree intends to accept the offer, he has to let the offeror know that. However, there are situations where the offeror expressly waives the communication requirement, so the offeree can accept an offer without informing the offeror of the acceptance. For example:
On March 1st, General Motors makes a written offer to the Big Apple Limousine Service to sell Big Apple fifty Cadillac sedans for $10,000 per car. The offer states that General Motors will consider the offer to be accepted if and when the Chief Executive Officer of Big Apple approves of the offer. On March 5th, the C.E.O. of Big Apple receives the offer and approves it. On March 7th, General Motors contacts Big Apple and tries to retract the offer. In this case, General Motors will not be able to retract the offer because the offer became a valid contract on March 5th, when the C.E.O. approved the offer. Therefore, although the C.E.O. did not contact General Motors as to his acceptance, a valid contract has been formed. See
International Filter Co., v. Conroe Gin, Light & Ice Co., 277 S.W. 631 (Tex. 1925).
Just as the general rule says that bi-lateral contracts can only be accepted with promises, the general rule also says that unilateral offers can only be accepted with actual performance. For example:
Michelangelo promises to pay Picasso $500 if Picasso paints Michelangelo’s beach house. Picasso promises to paint the house. Two days later, before Picasso has started painting, Michelangelo retracts the offer. In this case, the retraction is valid because Picasso did not start performance. The fact that Picasso promised to paint the house is irrelevant because Michelangelo’s offer was for a unilateral contract that could only be accepted by performance. Thus, Picasso’s promise was an invalid acceptance and Michelangelo was free to revoke the initial offer.
Although the general rule states that a contract is completed with completion of performance, the offeror is not obligated under the contract until the offeree notifies him that performance is complete. For example:
Michelangelo promises Picasso $500 if Picasso paints Michelangelo’s house within the next two weeks. Picasso paints the house and, on the day that he finishes, he informs Michelangelo that his performance is complete. It is only after Picasso tells Michelangelo that he has finished the job that Michelangelo is obligated to pay Picasso under the contract.
Please note that the offeree must inform the offeror of the completed performance within a reasonable time after performance is completed. If the offeror is notified after a reasonable period of time has passed, his obligation under the contract will be waived. For example:
Michelangelo promises to give Picasso $500 if Picasso paints Michelangelo’s house within the next two weeks. Picasso paints the house but forgets to tell Michelangelo that he has finished. Six months later, Picasso informs Michelangelo that he has finished the job. At this point, Michelangelo is no longer obligated to pay Picasso because Picasso did not inform Michelangelo of the completed performance within a reasonable period of time. See
Bishop v. Eaton, 37 N.E. 665 (Mass. 1894).
If the offeree tries to inform the offeror but somehow fails, the offeror will still be obligated under the contract. So, for example, if Michelangelo writes Picasso a letter informing Picasso that his house has been painted but the letter gets lost in the mail, Picasso will still be obligated to pay Michelangelo whenever he finds out that performance has been completed.
Please note that the offeree will not have to inform the offeror of the completed performance if 1) the offeror waives the notice requirement, 2) if the performance actually does come to the offeror’s attention within a reasonable amount of time, or 3) if under usual circumstances, the performance would have come to the offeror's attention within a reasonable amount of time. For example:
Michelangelo offers to pay Picasso $500 if Picasso paints Michelangelo’s beach house. Picasso paints the house but forgets to tell Michelangelo that performance has been completed. Michelangelo spends every second weekend at the beach house and, on his next trip, he notices that the house has been painted. In this situation, Michelangelo is obligated to pay Picasso even though Picasso did not notify him that performance had been completed. See
Midland National Bank v. Security Elevator Co., 200 N.W. 851 (Minn. 1924).
The general rule is that performance by someone who has no knowledge of the offer does not form a binding contract. For example:
Brian posts signs around his neighborhood advertising a $50 reward to anyone who finds and returns his lost cat, Fudgie. Jacob is walking down the street when he sees Fudgie wandering around. Jacob picks Fudgie up, sees Brian’s name and address etched into the cat’s collar and returns the cat to Brian. Jacob is not aware that Brian had offered a reward for Fudgie’s return. In this instance, Brian is not obligated to pay Jacob the $50. See
Broadnax v. Ledbetter, 99 S.W. 1111 (Tex. 1907).
However, where a person does know about the offer but is motivated to perform by something other than the offer, the general rule is that a contract is formed anyway. For example:
Brian posts signs around his neighborhood advertising a $50 reward to anyone who finds and returns his lost cat, Fudgie. Jacob is walking down the street when he sees Fudgie wandering around. Jacob is aware of the reward offer but he returns Fudgie to Brian because he feels it is the right thing to do. Despite the fact that Jacob is motivated by something other than the reward, Brian is still obligated to pay Jacob the reward once Jacob returns the cat. See
Klockner v. Green 254 A.2d 782 (N.J. 1969).
Where an offer is ambiguous so that it is unclear whether acceptance is required by a promise or an act, the general rule is that acceptance by either a promise or an act is valid.
Similarly, where contracts for the sale of goods are concerned, the U.C.C. says that, unless an offer unambiguously requires a certain kind of acceptance, any kind of acceptance that is reasonable under the circumstances will be considered valid. See
According to the U.C.C., where a buyer makes an offer to buy goods for “prompt or current shipment”, the order is interpreted as allowing acceptance either by a promise to ship the goods or by actually shipping the goods. Further, the seller’s shipment of goods will be considered a valid acceptance even if the goods are “nonconforming” (i.e., different from the goods described by the buyer in his offer). In such a situation, the shipment would be considered both an acceptance of the buyer’s offer and a breach of the contract the buyer and the seller now have. For example:
Anderson’s Auto Body Shop offers to buy two thousand black widgets from the Boston Widget Corp for $1 per widget. Boston Widgets receives the order and immediately ships Anderson two thousand green widgets. The green widgets are nonconforming because they are not what Anderson described in its offer. This being the case, Boston Widgets’ shipment is both an acceptance of Anderson’s offer and a breach of the contract that was formed by the acceptance.
However, if the seller ships nonconforming goods to the buyer but sends along a notice that the goods shipped are only an “accommodation” to the buyer, there is no breach and the shipment is considered a counteroffer. For example: