When you offer a contract to someone, you would typically expect the receiving party to sign the same agreement and send it back to your business. However, situations can arise where you receive a different document that contains the other party’s acceptance. This article will help you to understand what a letter of acceptance is and whether it is sufficient to bind the other side to the terms of your contract.
What is a Letter of Acceptance?
In a letter of acceptance, the recipient of the contract will indicate that they accept the contract. It will usually be quite short and will outline the following:
- the date of acceptance;
- parties involved in the contract;
- the agreed term of the contract;
- the price agreed;
- what contract document or attachments form the substance of your agreement; and
- other particulars such as contact details.
When Are They Used?
Businesses can use a letter of acceptance to accept all kinds of contracts. For a contract to be binding, a key element is that there is a clear offer that another party accepts. While you do not always need to use a letter of acceptance to legally accept an offer, they are common for simple contracts for goods or services.
Continue reading this article below the formIs It Binding?
It is always ideal to have a fully signed, properly executed contract. So, is a letter of acceptance sufficient to replace that?
For a contract to be legally binding and enforceable in court:
- one party must offer terms and the other must accept them (known as an agreement);
- the parties must exchange something of value, such as money (known as consideration);
- the parties must intend to be legally bound by the terms of the agreement (known as intention).
If you properly draft a letter of acceptance, the agreement between the parties is apparent. Further, the intention to be legally bound is clear from one party making an offer and the other party accepting it. The letter of acceptance must have clear wording that the other side wishes to enter the contract and reference it specifically. If this is not clear, you may not have a binding agreement.
Does the Form of Acceptance Matter?
The general rule is that a contract is not complete until one party communicates to the other that they accept the offer. Simply posting a letter of acceptance to the offering party may not be sufficient. An exception is if you can infer that the offering party contemplated and intended that the offer might be accepted through a letter of acceptance.
Indeed, some uncertainty could arise with a letter of acceptance However, a remedy to this uncertainty is the fact that a binding contract may form through the actions of the other party. Suppose you offer a contract to the other side so that you can perform services for them and receive a vaguely worded letter of acceptance in return. After this, they pay the deposit for your services. This is known as “acceptance by conduct”. Likewise, even though the letter of acceptance might be vague, a court may consider the other party’s actions as sufficient evidence that they accept your offer.
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Key Takeaways
There are many ways to ensure that your contract is validly accepted. The clearest, and often most preferable, is a signature on the contract document itself. However, some may choose to respond by sending a letter of acceptance. If you have all of the elements and information as to what they are accepting and how things will progress, you can rest easy knowing that you have a binding agreement.
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Frequently Asked Questions
You will need to show all the elements of a contract to a court. If the other party claims there is no contract, you may want to consider estoppel. This prevents a person from arguing something inconsistent with their actions or promises, such as where they have paid you or started performing services for you but then claim there is no valid contract.
A party can accept an offer through their conduct. For example, while they might not specifically say they accept, they might begin to carry out the contract’s terms anyway. Likewise, a party can also verbally accept a contract. For example, a simple “Let’s do it” in response to your offer of terms could be a form of acceptance. Further, courts have recognised silent acceptance. This may occur where you have a pre-existing relationship with the other side and offer another contract on the same terms as in the past. Their silence may be construed as acceptance of this new contract.
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