Chapter 16: Acceptances
Hannah Dumey, Claire Myers, and Andrew Hansen
Put simply, a contract is a set of promises based on a voluntary agreement, which is
made up of an offer and an acceptance of that offer. The offer is the critical first step in the
contract formation process and it includes the circumstances under which a proposal will be
made. In technical terms, the acceptance is a response that indicates approval of the terms of the
offer. The acceptance is, consequently, the important second step because it ‘seals the deal’ and
forms the contract.
I. So…What specifically is an Acceptance?
A court will look at three critical steps to determine if an offeree accepted an offer and
therefore created a contract.
1. The offeree intended to enter the contract – the offeree was not forced or entered the
contract by mistake.
2. The offeree accepted on the terms proposed by the offeror.
3. The offeree communicated his / her acceptance to the offeror.
Chapter 16: Acceptances
Page 1
The three conditions seem fairly simple, but, of course, court cases are never really that easy.
The following is a more in-depth look at the intention to accept, intention and acceptance on
the offeror’s terms, and communication of acceptance.
A. Intention to Accept
1. Only the offeree (or someone acting on behalf of the offeree) can accept.
2. Courts are looking for a present intent to contract on the part of the offeree. Present
intent to contract clarifies that the offeree is not joking, being evasive, etc.
o Based on an objective theory of contracts, an offeree, in the cases of acceptances,
will be judged by an objective standard – what his words, actions, and the
circumstances suggest about his intent.
o The courts often ask the question, “How would a reasonable person respond in
this situation?”
3. The difference from offers is that the offeree must evaluate and agree to the terms of
the offer.
4. The offeror may specify what behavior is required to bind the offeree to the contract,
and if this is done, the offeree must comply with all the specified terms.
B. Intent and Acceptance on the Offeror’s Terms
1. Mirror Image Rule: The mirror image rule was based out of common law. The
mirror image rule implies exactly what it sounds like – the offeree cannot change or
add new terms in the offer.
2. Acceptances vs. Counteroffers:
Ask: Did
the
offeree
seriously
intend to
accept?

In an inquiry regarding terms, a rejection is not implied if the offeree asks about
the terms.

In a grumbling acceptance, a rejection is not implied if the offeree accepts the
terms while complaining about them.

Neither an inquiry regarding terms or a grumbling acceptance count as
counteroffers; however, it is difficult to tell the difference between the three.
Chapter 16: Acceptances
Page 2

The question must be asked, “Did the offeree intend to seriously accept the
offer?”
3. Contracts involving the sale of goods: The UCC section 2-207 contains an
exception for contract for goods that allows small differences between the offer and
acceptance (for example, the method of shipping).
C. Communication of Acceptance
1. In a bilateral contract, both sides are promising. In an acceptance, the offeree
promises to do what is requested by the offeror and communicates that to the offeror.
2. In a unilateral contract, the offeree accepts the offer by simply doing what is
requested in the offer. Usually, it is assumed the offeror knows that the acceptance
happens unless the offer requires communication.
3. The offeror can demand that an acceptance be done or received by a certain time.
The offeror may also demand that an acceptance be done by a certain method, though
most courts today will allow any method that is reasonable.
II. When and How is Acceptance Communicated?
A. Instantaneous Forms
1. When two parties are dealing in ways of communication that are instantaneous
(face-to-face, telephone), as soon as the offer says “I accept” or words to the same
effect, a contract is created.
B. Noninstantaneous Forms
1. Some modes of communication are not instantaneous such as mail, fax, and
email. This can create timing problems for both the offeror and offeree. Because
of the many problems that arise, the Ellefson case helps demonstrate the Mailbox
Rule.
a. Mailbox Rule
The Mailbox Rule is one of the most important, and confusing, rules
dealing with acceptances. Normally, all acceptances take effect when
received. Under the Mailbox Rule, properly addressed and dispatched
Chapter 16: Acceptances
Page 3
acceptances (through fax, email, or mail) take effect when sent. Even if
the acceptance is lost and never received by the offeror, it still takes effect
when sent. Because of this rule, most offerors are more prone to
distinguishing when an acceptance must be received by.
b. Exceptions to the Mailbox Rule
a. If the offer requires acceptance to be received at a certain time.
Mailbox
Rule
b. If the acceptance was sent after a rejection – under these
exceptions, they take effect when received.
c. If the offeror does not allow the use of the Mailbox Rule because
the offeror is the master and creator of the contract.
c. Example:
Q: What is the difference between the two statements?
a. “You must accept the offer by April 1st.”
b. “I must receive your acceptance by April 1st.”
A: The application of the Mailbox Rule.
a. The first statement allows the use of the mailbox rule. If the
acceptance is sent on or before April 1st, a contract is created.
b. The mailbox rule does not apply because even if the acceptance is
sent on or before April 1st, the offeror must RECEIVE it by April
1st.
Rejection, revocations, and acceptance take effect when
received. However, under the Mailbox Rule, a properly
addressed acceptance through mail, fax, or email take
effect went sent.
Chapter 16: Acceptances
Page 4
2. Contracts for goods and contracts for services are not always treated the same
way. For example, contracts for goods are governed by the UCC, or Universal
Commercial Code, in most states, and contracts for services are usually governed
by common law. Because of these differences, the application of the mailbox rule
varies slightly between traditional common law and modern common law/the
UCC.
ELLEFSON CASE
Debate: There was a dispute between David Ellefson and Megadeth Inc., a company Ellefson
believed had defrauded him. Ellefson brought suit against Megadeth and negotiations started to
try to settle the disagreement. Ellefson’s attorney received a statement from Megadeth stating,
“that Dave Mustaine (part of the Megadeth company) has instructed us to pull the offer to
Ellefson off the table and to terminate this deal as of 5 PM PST on Friday 5/14/04, if we do not
have a signed agreement in hand.” Ellefson’s lawyers worked diligently to finish the contract
between the two parties. At 5:16 PM on May 14th, Ellefson’s lawyers emailed Megadeth’s
lawyers saying, “Dave Ellefson told me he signed and faxed the signature page to you.” Ellefson
did sign and fax a complete, signed agreement, but there was no evidence the fax was sent prior
to the 5:00 PM deadline. On May 24th, Megadeth’s lawyer wrote Ellefson’s lawyer stating that
Ellefson “withdraws from these negotiations and withdraws all proposals”. Ellefson filed suit
against Megadeth.
Decision: The motion granted in favor of the Megadeth defendants because there was no
evidence that Ellefson sent his original and completed fax before the 5:00 PM deadline.
According to the judge, because there was no evidence the fax was sent on time, Ellefson did not
Chapter 16: Acceptances
Page 5
comply with the terms of the contract and by faxing his completed, signed agreement, he actually
presented a counteroffer to Megadeth, who could then choose to accept his offer or reject it.
C. Authorized Modes of Acceptance (Traditional Common Law of
Contracts)
The traditional common law says that under the mailbox rule acceptances are effective
when they are sent by the means authorized. An authorized mode of communication is
either invited or suggested by the offeror. A stipulated mode of communication is when
the offeror states explicitly how the offeree must accept (“You must accept by fax”) and
the offeree must follow these terms and accept the designated way. Also, the manner of
communication used by the offeror in making the offer would be authorized. An
improperly sent acceptance of one that was sent with a non-authorized mode of
communication is effective when received. If the non-authorized method is too slow, it
might not count at all.
D. Reasonable Modes of Acceptance (Modern Common Law and the
UCC)
The UCC and most states today say that an offer can be accepted by any reasonable
means of communication, and an acceptance that is properly sent within a reasonable
period is effective upon being sent (even if the offer requires a different method of
acceptance). Reasonable is defined by the circumstances in which the offer is made (i.e.
speed and reliability of the means used by the offeree). If an acceptance is made in an
unreasonable way under the circumstances, the UCC rejects the traditional rule that the
acceptance takes effect when received. It states that an acceptance sent by
unreasonable means is effective when sent IF it is received within the time that an
acceptance by a reasonable means would have arrived.
On Ebay, an
online auction
site, offerees
place their
own bid on
E. Acceptance in Auctions
items. The
offeree with
Auctions happen in everyday life – anything from traditional auctions to services such as
the highest
bid “wins” the Ebay. Because of all the possible ways to auction, they have been differentiated into two
broad categories: auctions with reserve and auctions without reserve.
item. The
offeror cannot
1. Auctions with reserve: All auctions are assumed to be this type unless
deny the
otherwise stated. Here, the bidder is the offeror and the auctioneer is the offeree,
offeree
16: Acceptances
Page 6
ownershipChapter
of
the item.
therefore, the auctioneer can accept or of has the right to reject an offer that is not
high enough. (traditional auctions)
2. Auctions without reserve: In this type of auction, the auctioneer is the offeror
and cannot reject the highest bid. The highest bidder is the offeree and is the
party that accepts. (some Ebay actions)
III. Problems with Acceptances
A. Unilateral Contracts
1. As stated before, a unilateral contract is accepted and entered into when the
offeree performs the requested act. Unilateral contracts cannot be revoked by the
offeror once the offeree has begun and completed substantial performance of the
act.
a. Example: If Joe puts out a reward out for his cat, Princess Sophie, he
cannot revoke the offer if he sees that Jim has accepted the offer and is
bringing Princess Sophie up the street. Even though Joe may realize that
he actually hates his cat, he still must pay the reward to Jim (provided that
Jim knew about the reward).
B. Bilateral Contracts
1. A bilateral contract is accepted and entered into when an offeree makes the
promise requested by the offeror. Acceptance can also be implied by actions (if
the action amounts to a promise).
a. Example: If Joseph, a horse breeder, leaves 5 horses with Smith, an
animal salesman, and says, “Look after my horses. If you would like, it is
$1000 per horse.” If Smith sells the horses, it is implied that he accepts
Joseph’s offer.
C. Silence as Acceptance
1. The general rule that applies to using silence as an offer is that if an offeree is
silent, without anything more, he/she does not accept. Also, it is generally held
that it is unfair for the offeror to expect silence to count as acceptance.
2. The circumstances of a case can sometimes impose a duty on the offeree to
express rejection. If the parties have agreed in advance that silence can count as
Chapter 16: Acceptances
Page 7
acceptance, then it can. Some book and cd clubs send out a “selection of the
month” and if the member does not respond, they get the selection. But these are
the rules of the club agreed to up front.
3. Sometimes facts can indicate that silence is acceptance.
a. Example: If Shock Electric offers to do all the electricity wires in a new
building for Maple Contractor’s and Maple does not respond but allows
Shock Electric to do the work, there is an implied contract between the
two.
D. Acceptance When a Writing is Anticipated
If a dispute arises before a contract is put in writing…
1. If the two parties made it clear during negotiations that they intend to put an
acceptance in writing, then a contract is not formed until both parties have signed
the written acceptance.
2. Without an expression of intent, the courts would look at what a reasonable
person would decide about whether a signed, written contract is required.
E. Acceptance of Ambiguous Offers
Sometime an offer is not clear about whether it is bilateral or unilateral. In these cases,
the offer can be accepted by any reasonable means according to the circucmstances.
1. Acceptance by Shipment
Special Case:
Acceptance by
Shipment
The UCC says that an order requesting immediate shipment of goods may be
accepted either by promise to ship or by just shipping. The Code also states that
prompt shipment of either conforming goods (what the order requested) or
nonconforming goods (something other than what was requested) counts as an
acceptance of the order, and no contract is created if the seller notifies the buyer
within a reasonable period of time that the shipment of nonconforming goods is
intended as an accommodation for the unavailable conforming goods.
Chapter 16: Acceptances
Page 8
IV. Who Can Accept an Offer?
Only the original offeree can accept (or someone acting for the offeree). The offer is personal to
the offeree. If a third party tries to accept, it is not an acceptance but a completely new offer.
Example:
Q: If Jones sends an email to Walter offering to sell his car and Anderson sees the email
and calls Jones to accept the offer, can Anderson accept?
A: Anderson cannot accept - only Walter can legally accept.
V. Review Questions:
Questions:
1. What are the three critical steps the courts look at to decide if a contract exists?
2. On March 1, Baker sends an offer to Able in the mail. On March 2, Able receives the
offer. On March 3, Baker sends a letter revoking offer. On March 4, Able sends a letter
of acceptance. On March 5, Able receives the revocation. On March 6, Baker receives
acceptance. In this example, is there a contract? Does the Mailbox Rule apply?
3. Lisa subscribes to Time Magazine. The publishing house of Time sends Lisa a letter
stating that she will receive Cosmo free of charge for three months as part of a
promotion. However, it states that if she does not send a letter back refusing subscription,
she will automatically be subscribed to Cosmo for a year and billed. Can the publishing
house use silence as acceptance in this case?
4. Is a non-authorized mode of communication allowed in acceptances?
5. Does a contract exist if an acceptance is received by any other method other than the
stipulated method?
6. Bill was offered a car for $1,000, but said that he would only buy the car if the owner
took $100 off. If the owner does that, and Bill buys the car, was it a new acceptance?
Answers:
1. Courts look at whether the offeree intended to accept, whether the offeree accepted all
the terms of the offer, and communicated that acceptance (if necessary).
Chapter 16: Acceptances
Page 9
2. There is a contract and the Mailbox Rule does apply. Because Able sent the
acceptance before receiving the revocation, a contract exists. Remember, acceptances
take effect when sent and rejections and revocations take effect when received.
3. Yes. Lisa is fully notified of the terms and is given amble time to cancel.
4. Yes. The acceptance goes into effect upon reception.
5. A contract can exist because even though the method used was not specified, most
states will still allow this method as long as it is still reasonable.
6. Yes. When Bill said that he would only buy the car if it was $900 and the owner
complied, there was, in effect, a counter offer and acceptance.
The End
Chapter 16: Acceptances
Page 10