In the series of blogs about “contracting can be learned”, I would like to start with a basic question:
How is an agreement concluded?
Offer and acceptance
In this blog, I will primarily be focusing on the subject of ‘offer and acceptance’ (Party A believes that an agreement has been concluded and demands it be observed, while Party B denies this). Because of issues like these, a lot of litigation takes place and as a result it is very relevant to the corporate world. In later blogs, I will be discussing other related topics such as the power of representation, working with reservations and conditions (e. g. suspensive) and premature termination of negotiations.
Article 6:217 of the Dutch Civil Code (BW) states that a contract is concluded if it is offered and accepted. Verbal offers and acceptances are also binding (unless the law prescribes otherwise), but this is not advisable for practical purposes of proof.
In a perfect world, after the negotiations have been completed, Party A will present a (draft) agreement to Party B, and Party B will subsequently accept the offer. As a result: the agreement is concluded, the concept will become final and it can be signed by both parties.
This is often the case, but not always. Things regularly go wrong if the offer (in the above example: the draft contract) is partially accepted or if the text of the acceptance is not in line with the offer. If this is the case, is it fair to say that the offer has been accepted?
An example:
Party A presents a draft lease agreement. Party B responds in an email that it agrees with the contents, except for two of the three incentives (e.g. rent discount), the duration and the proposed size of the advertising billboard at the entrance.
Essentials
So, how do you deal with this? Has an agreement been concluded or not? The decisive factor in assessing whether the agreement has been concluded is (and I’m focusing on the broad outlines here) to see whether the part that was not accepted forms an essential part of the offer (the well-known “essentials”). In the given circumstances, is it possible for that party to consider it to be an essential element of the agreement? If so, then the acceptance of the offer deviates from the offer and no agreement will have been reached. If not, an agreement will have been reached – also known as a trunk contract. If we apply this to the case at hand, you can imagine that the matter of the incentives is more essential than the size of the billboard.
Therefore, in cases like this, it is wise to take the following into consideration. The prerequisite for the agreement is not that there should be agreement on all points, but that there should be agreement on the so-called essential matters. If this is the case, then the determining requirement of article 6:227 of the Dutch Civil Code has been met and an agreement has been concluded, and can be enforced. The fact that there may be many other relevant points, or matters that need to be further investigated or clarified, does not change anything here.
What is essential?
However, the tricky thing with cases like this is that it is never entirely clear what should be considered to be essential. The case law states that this varies from case to case, and that the intention and behaviour of the parties involved, the degree of professionalism, the expectations raised by both parties and in fact all circumstances can play a significant role. For each case, it is necessary to consider what parties may consider essential, and this is often where lawyers come in and offer advice.
Tip:
If there are certain topics that you believe are important, you must make sure you include them in the agreement under the relevant subject heading.
Questions?
If you have any questions or are involved in a conflict concerning a contract, please feel free to contact me. I will be happy to answer any questions you may have.
