In A Ltd v B Ltd (2015), the High Court held that the signature block of a draft contract cannot implicitly create a prescribed mode of acceptance. The signature block of the contract stated "accepted [A Ltd]" with space for the buyer to sign below. However, the fact that an agreement envisages a signature is not a prescription that signatures are the only way that the agreement can become binding.  The High Court further held that in any event, a prescribed mode of acceptance can only be for the benefit of the offeror, not the offeree.

Background

The case was based on a dispute over whether company A (the "Buyer") had entered into two contracts in 2011 to buy cotton from company B (the "Seller").  The Seller had sent the Buyer two draft written contracts which the Seller had signed and which had space for the Buyer's signature under the words "accepted [A Limited]".  The Buyer did not sign the contracts or return them to the Seller.  

However, subsequently the Buyer, on twelve separate occasions, sent the Seller "price fixation instructions" under the terms set out in the contracts, and on each of these occasions the Seller emailed the Buyer back a "fixation confirmation".  Furthermore, the Buyer made requests to the Seller to vary the contractual terms.  These requests were not granted by the Seller who instead made counter-proposals based on further purchases of cotton.           

It was the Seller's case that the Buyer's price fixation instructions amounted to acceptance of the draft contractual terms and gave rise to binding contracts.  It was the Buyer's case that the contracts specified a method of acceptance, and there was therefore no valid acceptance of the Seller's offers and no binding contract was formed.

Decision

Phillips J cited Maple Leaf Macro Volatility Master Fund v Rouvroy(2010) and held that the fact that a draft contract envisages a signature, and leaves space for one, does not mean that a signature is a "prescription".  The Buyer argued that this case did not apply on the facts.  It was submitted that as the draft contract had the word "accepted" above the space to sign, and there was a reference to the contracts being signed and returned, this made it clear that receipt of a signed copy was a condition of the agreement becoming binding. Phillips J did not agree, finding that the additional words did not introduce prescription or conditionality.

Further, the court held that it is the offeror who cannot be bound by an agreement which does not accord with a prescribed mode of acceptance, and the offeror is free to waive the prescription. A prescribed mode of acceptance is for the benefit of the offeror only; it is not for the benefit of the offeree.  Phillips J therefore held that the Buyer's operation of the price fixation mechanism was an unequivocal acceptance of the Seller's contract terms, and that even if there was a prescribed mode of acceptance, the Seller waived that requirement by confirming the price fixations.

Finally, Phillips J held that if the Buyer's price fixation instructions were not treated as acceptance of the Seller's terms, the Seller would be entitled to treat the price fixation instructions as a counter-offer, which the Seller accepted with the price fixation confirmations.