In what circumstances will a contract result when a written offer document states that it is not binding until signed by the offeree and the offeree does not sign but nevertheless performs in the manner contemplated by its terms?
A party’s consent to a contract is by the acceptance of an offer.
That acceptance can be by the conduct of the offeree so long as that conduct, objectively interpreted, is intended to constitute acceptance.
Acceptance can be of an offer on the terms set out in a draft agreement drawn up between the parties but never signed.
If a party has a right to sign a contract before being bound, it is open to it by clear and unequivocal words or conduct to waive that requirement and to conclude the contract without insisting on it’s signature.
If signature is the prescribed mode of acceptance an offeror will be bound by the contract if the offeree waives that requirement and acquiesces in a different mode of acceptance.
It follows that where the requirement to accept a contract by signature is intended for the benefit of the offeree, and the offeree accepts in some other way, that should be treated as effective unless it can be shown that the failure to sign has prejudiced the offeror.
A draft agreement can have contractual force, although the parties do not comply with a requirement that to be binding it must be signed, if all the terms have essentially been agreed and their subsequent conduct indicates this. Though a court may be hard to persuade of this.
The later conduct of the parties is admissible to prove the existence of a contract, and it’s terms, although not as an aid to it’s interpretation.
In the Court of Appeal case of Reveille Independent Llc v Anotech International (UK) Ltd [2016] the provision that the contract would not be binding on Reveille, unless it signed, was obviously for it’s benefit. It was almost certainly Reveille’s standard form contract.
In not signing, Reveille as offeree was waiving a prescribed method of acceptance, set out for it’s benefit. That was effective so long as there was no prejudice to Anotech as offeror.
The only prejudice Anotech could point to was the commercial uncertainty as to whether it was bound by the contract. That was miniscule when Anotech was receiving all the benefit of Reveille’s performance of the contract’s terms.
In fact, viewed objectively Anotech could not have thought that it was prejudiced when from the outset it actively facilitated performance by Reveille of what Reveille was doing under contract in integrating products into the recording of a famous TV show and licensing Anotech to use the programmme’s brand in marketing its cookware products.
In short, Reveille waived the clause that there would be no binding contract in the absence of it’s signature on the contract, and this did not prejudice Anotech.
Reveille accepted the terms of the contract by conduct, leading to a binding contract.
Subsequent conduct by both sides had confirmed the existence of that contract.
Reveille’s failure to sign the contract just meant uncertainty as to the exact date the contract was formed.
However, Reveille had performed all it’s obligations as set out in the contract with Anotech’s participation and to Anotech’s benefit.
This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.
Original article: Contract: party had effectively waived the requirement for it’s signature.