Can a San Diego Business Really Accept an Offer by Silence?
As we have recently discussed here, the basics of contract formation are offer, acceptance, and consideration which creates a meeting of the minds. Generally speaking, “acceptance” is saying or writing or acting in some way that expresses agreement to the terms of the offer.
But, is it really possible to accept an offer by being silent? Under some circumstances, yes.
What is Acceptance by Silence?
As a general rule, silence or inaction does not constitute acceptance of an offer. (1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 198.)
There are exceptions, and, under California law, silence and/or inaction can be deemed a form of acceptance. California Civil Jury Instruction 310 states as follows:
“Contract Formation—Acceptance by Silence
Ordinarily, if a party does not say or do anything in response to another party’s offer, then he or she has not accepted the offer. However, if [name of plaintiff] proves that both [he/she/it] and [name of defendant] understood silence or inaction to mean that [name of defendant] had accepted [name of plaintiff]’s offer, then there was an acceptance.”
What are the Exceptions to Acceptance by Silence?
There are two exceptions where silence or inaction will be deemed acceptance:
- Where the offeree retained or obtained the benefit offered
- Where there is a prior course of dealings between parties making it reasonable to construe silence as acceptance
Case Example of Acceptance by Silence
The case of Golden Eagle Insurance Co. v. Foremost Insurance Co., 20 Cal.App.4th 1372 (1993) is a good example showing both exceptions. In Golden Eagle, the contract at issue was the renewal of an insurance policy. The previous policy was expiring and a renewal notice was sent along with a renewal policy sheet and an invoice. The insured, a certain Mr. Berkovich, did nothing for two months and then complained that the renewal premium was too high.
However, the court deemed Mr. Berkovich to have accepted the renewal policy. The court noted that Mr. Berkovich could have rejected the renewal policy without any material inconvenience or expense – that is, he could have made a phone call. But, instead, he retained the renewal certificate for nearly two months. As such, he benefitted from having insurance for those two months. The court further noted that Mr. Berkovich did not purchase other insurance during this period.
This was sufficient for the court to hold that Mr. Berkovich had accepted the renewal policy. This codified in California law. See Cal. Civ. Code § 1589 which states that “[a] voluntary acceptance of the benefit of a transaction is equivalent to a consent to all obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.”
The court also went on to discuss course of dealings. In the case of Mr. Berkovich, the renewal offer did not come from “out of the blue.” There was an existing relationship between Mr. Berkovich and his insurance company. As such, it was reasonable for the insurance company to believe Mr. Berkovich had accepted the renewal policy even though Mr. Berkovich was silent for nearly two months. Taken together, Mr. Berkovich was held bound by the renewal insurance policy.
Contact San Diego Corporate Law
Contracts may seem “easy,” but there are many complex and confusing rules about contract formation, contract performance and legal liability for breach of contract. Furthermore, if you are selling goods, then statutory provisions of the Uniform Commercial Code may apply to questions of contract formation. If you are selling goods internationally, then international treaties might be implicated. Every business needs experienced business attorneys to provide legal advice concerning business contracts. If you have contracts that need to be drafted or reviewed or if you need help understanding your options and what might be best for your unique circumstances, contact attorney Michael Leonard of San Diego Corporate Law. To schedule a consultation, email or call (858) 483-9200.