Accepting a legally binding offer

Once a legally binding offer is made by party A and accepted by party B, a legally binding agreement is formed.

Providing all the other elements necessary for contract formation are present, a contract is formed. 

There are specific rules related to acceptance. If acceptance does not meet these rules, there is no agreement and consequently, no contract is formed.

What is acceptance?

Acceptance is an unconditional agreement to all the terms of an offer.  This unconditional agreement or acceptance can be made orally, in writing or by conduct.

Acceptance and Communication

Acceptance usually takes effect when it is communicated to the offeror.

To learn more about what the rules on acceptance are, watch this video.

Exceptions to the rules on acceptance and communication

One of the exceptions to the rule on acceptance and communication derives from the postal rule.

What is the postal rule?

The postal rule applies to non-instantaneous modes of communication. These include the post and telegram Cowan v O’Connor (1888).

The rule is that acceptance takes place when the offeree sends their acceptance, not when it is received by the offeror.

The rule is an exception to the rule on communication because it means that acceptance can be made without it being communicated to the offeree.

The rule was developed in Adams v Lindsell (1818). To learn more about the postal rule and the facts of Adams v Lindsell (1818), watch the video below.