Contract Acceptance Requires a Pen and a Phone

Contract Acceptance Requires a Pen and a Phone

When we are considering the acceptance of an Offer, there are two steps:

  1. Signing the document, and
  2. Communicating with the other side.

You can’t just sign the document and keep it secret. That’s not going to be binding upon the other side, you have to let them know. This means “phoning them”. If they are right there in your presence, then just tell them or hand them a copy of the signed document.

It is that final step which constitutes “delivery”. Otherwise, you still have an Offer, and that’s all you have, until the irrevocable period expires, and you are sitting with an expired Offer.

Time is important. If you have until 8:00 pm to accept an Offer, you can’t accept it at 8:01 pm. That’s one minute too late. You had until 8:00 pm.

The two steps noted above must BOTH be completed by 8:00 pm, not just one of them.

In real estate contracts in Ontario, there was a statement “Confirmation of Execution”. That meant the time that the Offeree signed. That was clear and that time was known by the last person to sign.

The difficulty, however, was that the time of execution really had no meaning. Who cares! What does it matter?

The important “time” was actual acceptance. This is the start of the contract period. This starts the calculation of time running, in hours, in days and so on. Consequently, the Confirmation of Acceptance replaced the previous Confirmation of Execution.

Deposits, are frequently specified to be required “upon acceptance”. The extended definition means “within 24 hours”, which is actually 23:59:59 hours, and not 24 hours, which would be one second too late.

Conditions which start running for a few days are also calculated from the time of acceptance. That means you really need to know precisely when the contract actually started.

So, we are back to “acceptance” and the second part of the acceptance process, namely, communication.

Remember the statement: “signed, sealed and delivered”. In many important contracts, there is a three step process:

  1. signing (execution),
  2. sealing (confirmation that one expects to be contractually bound), and
  3. delivery (communication to the other side).

The final step is required.

The standard form OREA Agreement of Purchase and Sale now includes a Confirmation of Acceptance. It is to be signed by the Buyer or the Seller, that is, one of the parties to the transaction.

The difficulty in many situations, is that it does not match actual practice. In most cases, both parties have agents. They are in charge of “communication”, in many situations, the Offeree wouldn’t know or be privy to the communication part.

There is an exception. Bob is John’s agent. John signs at 7:45 pm. That’s execution. Bob then calls Wilma the other agent and advises her that John has signed. That conversation takes place at 7:55 pm. Bob, then turns to John and requests that John insert the proper time for acceptance being 7:55 pm.

You will appreciate that in many cases, particularly with the digital execution of documents, emails and faxes that Bob and John will be in two different places. John won’t know the actual “time” of acceptance. The potential error is that John will insert the “execution” time, rather than the “acceptance” time.

The difference could be minutes or hours, or even possibly a day or two. This all goes to the starting time for the contract. So, one has to be careful.

It is also noteworthy that often it is the agent who truly knows the acceptance time. In our example, if Bob was at his office and John was at home, then, Bob should be the one who signs the “Confirmation of Acceptance”. He is the authorized agent, and he has the best knowledge about the phone call.

So, remember that for acceptance you require a pen and a phone!

Brian Madigan LL.B., Broker

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