Probably the place “intent to accept” is most likely to arise is in communicating acceptance. It is common law that the acceptance of a bilateral contract must be “communicated” to the offeror or his agents to be effective. Communication brings up means and timing issues. What does it take to “communicate” acceptance and when is that acceptance effective? These are big questions because the offeror has the right to revoke an offer at any time prior to acceptance.
Most courts, including Oregon courts, hold that acceptance is effectively communicated when it is put out of the possession of the offeree. At common law, this concept was known as the mail box rule. In the famous 1818 English case of Adams v. Lindsell, a common law court ruled that acceptance mailed (placed in a public mailbox) prior to receipt of revocation was effective even if the revocation was received before the offeror received the acceptance.
Mailboxes, other than as an application of the rule, don’t really have much to do with communicating acceptance anymore. The more general rule is that if an offer is accepted by a medium that is reasonable in the circumstances (mail, fax, telegraph, etc.), it is effective when it is put out of the possession of the offeree. This often comes as something of a shock to real estate licensees because real estate rules and form contracts focus on the date and time the acceptance is signed rather than when acceptance is communicated.
The focus on signing has lead to considerable grief in Oregon real estate. Two scenarios are common. In one, the seller gets a better offer from buyer #2 after countering buyer #1 and tries to revoke the counter, only to find out buyer #1 has already “signed.” In the second popular scenario, the fact that the buyer or seller has “signed” or “accepted” is communicated by one agent talking to another agent on the phone. In both these situations contract formation is very much in doubt.
Communication of acceptance requires putting the acceptance out of the possession of the offeree. In the first scenario, the signed acceptance is still in the buyer’s possession. Signing is not enough. The signed document must be “communicated” or “dispatched;” that is, placed out of the seller’s possession and into the buyer’s (assuming no counter offers). How is that done? Typically, nowadays, an accepted written offer is placed out of the seller’s possession into the buyer’s when it is faxed to the buyer’s agent. The date and time on the fax will be an excellent record of when acceptance took place.
It is easy to see why the law requires communication of acceptance if you think about the seller revocation/buyer acceptance scenario. The seller’s agent calls up the buyer’s agent and says “the seller revokes.” The buyer’s agent calls the buyer and says “hey, you better have signed that counter offer because the seller is trying to revoke.” The buyer, being no dummy, says “no sweat, I signed it an hour ago.” Allowing this kind of process would seriously undermine the goal of supporting voluntary contracts. Hence the rule that acceptance is not effective until communicated.
The second scenario where one agent tells the other agent on the phone that their client has “signed” or “accepted” raises questions about how acceptance can be communicated. The general rule is that acceptance can be communicated by “any means reasonable in the circumstances.” What is reasonable in the circumstances usually depends on things like how these parties have communicated previously, how communications are usually handled in the business or industry involved, the time given for acceptance and so on.
In the case of real estate contracts, the means of communication is often set by the offer itself. In Oregon, most real estate contracts contain a term stating the offer (or counter offer) can be accepted “only in writing.” It is black-letter common law that when the place, time or medium of acceptance is prescribed by the offer, no contract is formed unless the terms of the offer are followed. It follows that when the offer states that acceptance can be accomplished “only in writing,” a verbal exchange between agents isn’t going to meet the terms of the offer.
Once you understand “acceptance,” you can see that there is no occasion for an agent to ever say to someone that an offer has been “accepted.” Until communicated in writing, there is no acceptance. Once the acceptance in writing is communicated, there is no need to tell someone it is accepted – they already know. It would be very wise for agents to remove “my client has accepted” from their vocabulary. It would be even wiser for agents to explain to clients that if they want their acceptance to be effective, they need to have a way to communicate it to the seller as soon as they sign it.
All this is not to say a court will never enforce a verbal acceptance in a real estate transaction. Formation of a contract is ultimately a matter of intent, not bright-line legal rules. Limitations on the means of acceptance can be waived by conduct. The Statute of Frauds can be avoided in special cases based on past performance or detrimental reliance. Click here for a discussion of Statute of Frauds issues. In short, communicating acceptance verbally is always risky and never predictable.
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