Be Sure to Accept an Offer in the Manner Proscribed by the Offeror

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Many businesses use standard form contracts which may or may not be negotiable by a potential business partner. It is not unusual for such a contract to include a provision like the following:

In order to accept this Contract, you must have an authorized representative execute it where indicated and return the signed original to the Company within 10 days of the date appearing on the first page hereof.

Because, as noted in a recent blog post, a series of emails can form a binding agreement, and in another blog post, it was discussed that an email could satisfy the signature requirement of the statute of frauds, one would expect that an email to the Company, stating: “We have your contract, and we agree to its terms” would create a binding contract (assuming, of course, that such an email was sent within 10 days of the date of the contract). In Host v. Gray, however, a Massachusetts Superior Court Judge ruled that an email purporting to accept an offer was insufficient because the offer stated that it should be “signed … and returned ….”

In Host, the plaintiff tendered an offer to purchase defendant’s real estate on the Massachusetts Association of Realtors’ Contract to Purchase Real Estate form. That form plainly stated that the offer should be accepted by signing the document and returning it by 4:00 p.m. on October 25, 2010, “otherwise this Offer shall be deemed rejected ….” Instead of signing the Buyer’s offer, however, the Seller’s real estate broker sent an email to the Buyer stating that the Seller was conditionally “accepting the offer” and agreeing to work out the various additional conditions. After the efforts to work out those conditions failed, and the Seller refused to move forward with the transaction, the Buyer sued, claiming that the offer form constituted a binding contract because the Buyer had accepted it through his broker’s email. The Seller disputed that any contract had been formed, and the Superior Court agreed, saying:

The plaintiff [Buyer] made a clear and unambiguous offer [and] … specified the precise manner in which defendant [Seller] was to accept, i.e. the seller “shall” sign the Offer in order to accept, otherwise the Offer “shall be deemed rejected.” The specified method of acceptance required that the defendant, or her agent, execute the plaintiff’s Offer to Purchase where indicated, by the extended deadline of 5:00 p.m. on October 25, 2010, if the acceptance were to be effective. It is undisputed that neither the defendant nor her agent ever signed the Offer to Purchase. The plaintiff was entitled to specify the manner of acceptance, but once doing so, he is then bound by that requirement. When the defendant failed [to] accept in the requisite manner prior to the deadline, the offer, by its own terms, was deemed rejected and no contract was thereafter formed. Accordingly, the Response did not function as an acceptance of the offer. [Emphasis added.]

While the Superior Court also found that the Seller’s purported conditional acceptance would not have been legally sufficient to form a contract even if it had been accompanied by a signature on the document and returned in a timely manner, the fact remains that the Court ruled that a contract will not be formed if the acceptance of an offer is not in a pre-specified form. As such, in-house counsel should be sure to advise their companies’ business people that when they want to enter into a contract, it is best if each party formalistically “accept” the terms of a contract in whatever way the document mandates. Failing to do so could give either party, or both, a way to void what appears to be a binding agreement.

Topics:  Contract Drafting, Contract Formation, Offers

Published In: General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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