Contract Law

B. THE TIME FOR ACCEPTANCE EXPIRES

§§ 146–148 of the German BGB read as follows:

§ 146 An offer expires if a refusal is made to the offeror, or if no acceptance is made to this person in good time in accordance with § 147 to 149.

§ 147 (1) An offer made to a person who is present may only be accepted immediately. This also applies to an offer made by one person to another using a telephone or another technical facility. (2) An offer made to a person who is absent may be accepted only until the time when the offeror may expect to receive the answer under ordinary circumstances.

§ 148 If the offeror has determined a period of time for the acceptance of an offer, the acceptance may only take place within this period.

These provisions reflect what any jurisdiction would accept (see also Art. 2:206 PECL). The offer lapses if the time that the offeror has set for acceptance expires.

If no time has been fixed, acceptance must take place within a reasonable time.

long this iswill depend on the circumstances of the case. As the German Code implies, an answer can beexpected in the very same conversation if the offer was made face-to-face or in any other type ofreal time (instantaneous) communication (such as telephone, Skype and online chat). If the offer ismade inter absentes (for example by post, email or WhatsApp), much depends on the speed of themeans of communication and on the subject matter. If the price of the product is susceptible tomarket fluctuation (as in case of shares on the stock market), a reasonable period may even be amatter of seconds.

What are the requirements that the acceptance must meet?

The contract is concluded when the offer is accepted. This acceptance will usually take place inwriting or orally. It does not have to meet any specific requirements as long as it makes clear to theofferor that the offeree unconditionally agrees with the terms of the offer. If it does not, it is at besta counteroffer that

‘kills’ the original offer.

Art. 2:204 PECL reflects this: (1) Any form of statement or conduct by the offeree is an acceptance if it indicates assent to the offer. (2) Silence or inactivity does not in itself amount to acceptance.

It is not uncommon that the offer specifies the method of acceptance. This means that it indicates, for example, in what form the acceptance must be sent and to whom it must be addressed.

This raises the important practical question what happens if a disobedient offeree simply sends an e-mail containing his acceptance. Does this mean that the contract is not concluded? The answer naturally depends on how the offer should be interpreted. Normally, the offeree will have to comply with the specified method of acceptance. But if the only reason why the offeror prescribed a certain use of another method that achieves the same method is to ensure a speedy reaction, the offeree’s purpose also forms a valid acceptance.

An important question is whether

silence can count as acceptance of the offer. Article 2:204 (2)PECL reflects the view of any jurisdiction that silence 'in itself' does not suffice. The law is generally suspicious of such surprise tactics. This is also why so-called inertia selling is prohibited by the EU Directive on Consumer rights.

Despite the law's general aversion to considering silence as an acceptance of an offer, it is not impossible. Most examples deal with commercial relationships. Thus, in a case decided by the French Cour de Cassation in 1988, the parties had agreed that the buyer could exercise an option to buy an amusement park attraction from the seller by proposing a price and that the seller would then reply within 14 days. After the offeree had exercised the option by offering €15,000, he did not hear anything from the seller. The court found that the silence amounted to acceptance. It is clear that, in cases like this, silence never comes alone: it is usually accompanied by a whole

range of surrounding circumstances such as previous negotiations between the parties, a long-standing business relationship and thereby a course of business that parties are used to, the need for a speedy reply, etc. The French Another example is the commercial practice of so-called confirmatory notes. If parties have been in negotiations and are almost ready to enter into a contract, one of them is likely to send a 'confirmation' of what they orally agreed upon, summarizing the main points and possibly adding its general conditions. Another phenomenon that is not uncommon in practice is that the offeree does not formally accept the offer, but acts as if it has accepted it. Sometimes, we do not even realize that there is such acceptance by conduct: only an eccentric would tell a taxi driver that he accepts his offer when opening the door of the car. What is the time of conclusion of the contract? Theobvious answer is 'upon acceptance of the offer', but the truth is that one can have different views of when exactly the acceptance has to take effect. There is no need to think about this if the contract is concluded while both parties are present (as in a shop), or make use of an instantaneous means of communication such as the telephone or FaceTime). But this is different if time passes between the various moments necessary to form the acceptance. Consider the following example: On 1 May, Brad offers for sale to Amélie the Golden Bear he won at last year's Berlin film festival. On 2 May, Amélie saves in her 'drafts' folder a draft e-mail in which she accepts Brad's offer. On 3 May at 23.58, she sends the message to Brad, who receives it and reads Amélie's in his mailbox on 4 May at 00.03. On 5 May, Brad checks his e-mail acceptance. In this example there are four possible moments at which the acceptance takes effect: (a) the momentthe offeror on notice that the offeree has accepted the offer and allows the offeror to take any necessary actions based on this acceptance. In contrast, the externalization theory focuses on the moment the acceptance is written. However, this theory is not practical as it is difficult to determine when exactly a message is considered "written" in today's digital age. Similarly, the actual notice theory looks at the moment the offeror reads the message. Again, this theory is not feasible as it relies on the subjective knowledge of the offeror, which can be difficult to prove. On the other hand, the expedition theory emphasizes the moment the message is sent or posted. This theory is widely adopted as it provides a clear and objective point in time when the acceptance is deemed to have been communicated. Similarly, the receipt theory focuses on the moment the message is received by the offeror. This theory is also commonly used as it provides a tangible event that can be easily proven. In conclusion, both the expedition theory and the receipt theory are the most viable options for determining when a contract is concluded. These theories provide clear and objective criteria for establishing the moment of acceptance, ensuring certainty and fairness in contractual relationships.

The risk of the message getting lost before arrival in the hands of the sender (which seems right because he has chosen the medium and route of communication), while the risk of the message not being read after arrival lies with the recipient.

The outlier in Europe is English law. English law makes a sharp distinction between instantaneous and non-instantaneous communication. In the former case, if parties sit opposite each other or speak to each other over the phone, the receipt theory is applied.

In case of non-instantaneous communication, such as sending a letter by regular post, English law does not accept the receipt theory. Instead, it adopts the expedition theory, usually referred to in England as the postal rule or mailbox rule. The postal rule entails that the acceptance becomes effective at the moment of posting and not when it is received by the offeror. This means that in the above example the contract is formed on 3 May. It is good to consider the implications of this view.

The postal rule implies that the contract is formed even in cases where the letter containing the acceptance never arrives at its destination, for example because it gets lost in the post. Contrary to the receipt theory, the postal rule thus favors the offeree by putting the risk of a late or lost acceptance on the party that made the offer. The historical reason for this is that the rule was formulated in a time when the post was not too reliable and it was easier to prove that one posted a letter than it is to prove that it was received by the other party.

Second, the practical effect of the postal rule is that it limits the possibility of revocation by the offeror. It was seen above that under English law revocation is always allowed before acceptance. If the acceptance has already taken effect when it is posted, the effective time left to revoke the offer is restricted.

The practical relevance of the now almost 200 years old postal rule is sometimes questioned. In today's world less and

less communication takes place by regular mail, and even where it doespostal services tend to be more reliable than they were in the nineteenth century. However, thepostal rule is still applied and has even found new applications with the rise of modern technology.Telemessaging (which has replaced the use of telegrams), e-mail and texting through mobile phonesare also likely to qualify as non-instantaneous forms of communication and are therefore governedby the postal rule.

5. LEGAL CAPACITY OF THE PARTIES

It was seen that a party can only be bound to a contract if it has expressed its (apparent) intention toenter into a legal relationship with somebody else. This assumes that people have control over whatthey intend and are able to assess what is in their best interest. Luckily the great majority of peopleindeed have legal capacity (the ability of a natural person to enter into a valid legal transaction), butthis is not true for everyone. In the eye of the law some people lack the

children's section of the bookstore. However, when a 15-year old tries to purchase a copy of a book from the adult section, eyebrows are raised and questions are asked. Society has deemed certain books as inappropriate for younger readers due to their content, themes, or language. This distinction between children's books and adult books is not arbitrary. It is based on the understanding that children have different levels of maturity and understanding compared to adults. Children's books are written and designed to be age-appropriate, with content that is suitable for their cognitive and emotional development. They often contain simpler language, colorful illustrations, and stories that teach valuable lessons or entertain young readers. On the other hand, adult books tackle more complex and mature subjects. They may contain explicit language, violence, or sexual content that is not suitable for children. These books are intended for readers who have the emotional and intellectual capacity to comprehend and engage with these themes. By placing books into different sections, bookstores are able to cater to the diverse needs and preferences of their customers. Parents can feel confident that their children are browsing through books that are suitable for their age, while adults can explore a wider range of literature that aligns with their interests and maturity level. It is important to respect these distinctions and adhere to the guidelines set by society. While it may be tempting for a 15-year old to want to read books from the adult section, it is crucial to understand that these books may contain content that is not appropriate for their age group. It is always advisable to choose books that are suitable for one's age and level of maturity. In conclusion, the separation of children's books and adult books in bookstores is a necessary and valid practice. It ensures that readers of all ages can find books that are appropriate for their level of maturity and understanding. Let us embrace this distinction and continue to foster a love for reading in readers of all ages.