Complications with “Acceptance” of an Offer

When is an Offer “accepted”, that’s a crucial question.

There are two steps with respect to acceptance of an Offer:

  1. Signing or executing the document, and
  2. Communicating to the other side that the Offer has been accepted.

The major problem that takes place frequently is that the Offeree will sign the Confirmation of Acceptance (COA ) immediately after step 1. That was the old “Confirmation of Execution” which went back about 10 years. No one cares about that. It doesn’t really matter and has no significance contractually for the parties.

So, we need step 2, to take place before the COA can be signed by the Offeree. Frequently, no one keeps track of that step (or, is even aware) that step 2 is necessary.

Who should sign the COA? The Offeree should sign, but frequently it is only the Agent who knows about step 2. In that case, it makes sense for the Agent to sign. The COA is evidentiary not contractual, so it need not be a party to the agreement. The problem here is that the Form says “Seller/Buyer” and that is thought to preclude the Agent.

The Offeror could also sign the COA, since above anything else, they are knowledgeable about the “time” that they heard that their Offer was accepted (step 2).

You appreciate that the COA is frequently signed by the person who has no knowledge and rarely, if ever, by the person who does have knowledge. The COA time may or may not be correct.

The contract is formed coincident with the exact time of step 2.

It is the correct and accurate time (step 2) which will start the clock running for the deposit within 24 hours. That means 23:59:59 hours. One second later, is the first moment that the deposit is late and the Buyer is in breach of contract.

There was a slight difficulty when the COA came out. There was no memo, so many people simply treated it as the same statement as the previous COE statement, namely, the last person to sign, will fill out the COA, and they would use the “time” associated with step 1, because they never, ever heard of step 2.

Step 2 naturally varies somewhat depending upon whether someone would be dealing in person or by email or by other means. In person, across the desk, acceptance is the transfer or handing over of the paperwork. While the Offeree still has the document in their possession, they haven’t parted with it, if this is a document which is to be delivered. They could still change their mind. Remember the reference “signed, sealed and delivered”. Step 1 is signed and sealed. Step 2 is delivered. This delivery step must take place within the irrevocable period, not afterwards. This delivery step might be: 1) physical delivery of the document (including software, ie. emails, pdfs etc.), or 2) notice of acceptance (with the actual document still being elsewhere).

For postal service, acceptance is the moment Canada Post leaves a note in the mailbox that there is a registered letter to be picked up. For emails, assuming that I’m with Rogers and you’re with Bell, the moment my email enters the Bell system and is available for you. If there are problems at the Bell end of things, that’s too bad. It’s your problem with your email and your internet service provider. Sometimes, there’s only a few seconds difference in time. But, it’s based on when you get it, not when I send it (system to system).

The contract formation specific time allows a Court to determine whether there is a contract, and also whether one of the parties is in breach. The very exact moment right down to the second can be very important.

Please be sure you properly understand “acceptance” and the completion of the documents.

Brian Madigan LL.B., Broker

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