An agreement isn’t valid until someone else agrees to it!
A contract is needed to enforce the terms of an agreement between two or more parties, and to compel the other party to uphold their end of the bargain.
In general, for a contract to be considered legally binding, four key elements should be present:
- A clear agreement between all the relevant parties reflecting what is offered, and a clear acceptance of the offer;
- Consideration – i.e. something of value that is given in exchange for a promise;
- An intention to create legal relations – i.e. both sides are willing to be legally bound to an agreement;
- All parties must have had the capacity to enter into the contract, and must have freely consented to the contract.
Before you begin drafting a binding contract that creates legal obligations between the parties, you have to first establish the existence of an agreement between all the parties. Specifically, the offeree has to clearly accept the offer made by the offeror.
How do you determine acceptance of an offer or contract?
Generally speaking, an offer can be thought of as someone expressing a willingness to enter into a contract with you on specific terms. Acceptance of that offer renders the terms binding on both you and the other party.
An acceptance of an offer is considered valid and effective if it is unconditional and unequalified, and explicitly communicated, via either written or verbal means, to the offeror.
#1 – Acceptance must be unconditional and unqualified
In order to be valid, acceptance of an offer has to be an acceptance of the same terms offered by the offeror. There should not be any variations, conditions or qualifications to the purported acceptance.
If you attempt to vary the terms of the original offer in making an acceptance, your “acceptance” will be considered a counter-offer and not a valid acceptance of the original offer. The original offeror (the person who first offered you an agreement) may then elect to accept or reject your counter-offer.
Therefore, in the following scenario, there would not have been a valid acceptance of the offer:
- The offeror offers to sell a product with its own standard terms.
- The offeree appears to accept the deal, and suggests a slightly different set of terms.
The suggestion of the different terms constitutes a counter-offer, which will be considered a rejection of the original offer. The original offer cannot be restored or accepted unless all parties agree to do so. Therefore, if there are additional conditions attached to the response to an offer (E.g. “I’ll do it for an additional sum of money”), that response will not be considered an acceptance of the offer.
#2 – Acceptance must be communicated to the offeror
If the offeree agrees to the terms of the offer but does not communicate his or her acceptance, there is no valid acceptance. This is to avoid any uncertainty as to whether a contract was forced onto an unwilling party. Therefore, acceptance should be communicated and expressed through some form of positive action on the offeree’s part, for example via an enthusiastic verbal agreement, or the immediate signing of the contract.
An exception to this is the postal acceptance rule, which applies in scenarios where postal acceptance is an accepted form of acceptance between the parties. The postal acceptance rule provides that acceptance occurs when the letter of acceptance is posted, instead of when the letter is received by the offeror.
Frequently Asked Questions
Question 1: Do auto-generated responses constitute valid acceptance?
Yes, if it is unconditional, unqualified and explicitly communicated. Examples of auto-generated responses include the automatic email responses received after the placement of online orders.
The fact that there was no natural person reviewing or intervening in each action carried out by the automated message system or the resulting contract is in itself an insufficient reason to invalidate a contract formed by the interaction of an automated message system and a natural person, or between automated message systems. Therefore, an offeree cannot claim that acceptance was invalid merely because the response generated by its automated message system was automatic and not initiated by any natural person on behalf of the offeree.[1]
Question 2: Does silence constitute an offer?
No, silence by the offeree cannot be considered as acceptance of the offer. This is due to the principle that acceptance must be in the form of a final, concrete, and unqualified communication of the offeree’s intent to accept the contract in accordance with its precise terms.
The following scenario illustrates how silence will not be considered as acceptance of an offer:
- Customer A sends a WhatsApp message to Durian Seller B asking to purchase $1,000 worth of top quality durians for an event on a particular date.
- Customer A writes: “I know you’re a busy person with your popular durian online delivery service. So, I’m ok if you do not reply to me. I will still assume that you will deliver my durians on the date.”
- Durian Seller B sees the message, and is mentally prepared to sell the durians. But he forgets to reply to the message, and on top of that, his employee forgets the order, so the durians are not delivered.
In this situation, the Courts will not find that Durian Seller B had accepted the contract. Even though he might have mentally accepted the contract, that acceptance was not conveyed to Customer A. Therefore, Customer A cannot bring a claim against the durian seller for failing to deliver the durians.
However, if the durian seller has a note on his website explicitly stating: “If I do not reply to you, please be assured that I have taken note of your order, and you can look forward to your durians on your requested date!” Then it may be considered that he intended for his silence to be treated as acceptance of the contract.
If we take the same hypothetical situation, but taking into account of the durian seller’s note, if the durian seller does not reply the customer, then Customer A can be considered as having the reasonable expectation that Durian Seller B had agreed to the sale and accepted that an enforceable contract has been made between the two parties. In this scenario, if the durian seller then fails to deliver the durians on the specified date, then the customer may bring a claim against him.
Question 3: Can conduct constitute acceptance?
Yes, conduct may constitute acceptance. To use the same durian seller hypothetical as example: “The seller acknowledges the message from the customer but does not reply.”, he then proceeds to deliver the durians on time and in a satisfactory condition. In such a scenario, the seller’s act of delivering the durians on time and in a satisfactory condition may be deemed to be an acceptance of the offer by conduct. Therefore, the customer is obligated to uphold his end of the deal by making prompt payment in full.
Question 4: I have changed my mind about an offer that I have made, is it too late to withdraw the offer?
You may revoke an offer as long as the other party has not yet indicated their acceptance of the offer. However, it must be communicated clearly and immediately to the offeree.
[1] Section 15 of the ETA: http://s.aln.sg/2BULO3B
Need legal advice on your contracts?
If you have a legal question about contracts, you can get a Quick Consult with Jia Ying or other lawyers. With Quick Consult, you can check out in minutes and for a transparent, flat fee of S$49, the lawyers will call you back on the phone within 1-2 days to answer your questions and give you legal advice.
This article is written by Chow Jia Ying from Summit Law Corporation and edited by Tang Chee Seng from Asia Law Network.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to a practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.
Continue reading:
- Contract Essentials for a Business in Singapore
- 5 Tips when Considering Dispute Resolution Clauses
- The Employment Act in Singapore Simplified – What You Need to Know as an Employer
