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Is Silence Acceptable in Commercial Negotiations?

Is Silence Acceptable in Commercial Negotiations?

Generally, silence is not acceptable. However, there are a few exceptions that apply to this rule. Read on to find out more.

11th June 2021
Reading Time: 3 minutes

During commercial negotiations, silence can be acceptable. However, silence can also amount to misrepresentation. It is important to know when and how to use silence in commercial negotiations, as there is a fine line between it being acceptable and misleading.

The General Rule: Not acceptable

Generally, silence is not a form of acceptance in commercial negotiations. This means that failing to reply to an offer is not generally acceptance of that offer. This is because acceptance of an offer or commercial negotiation needs to be communicated to the other party. This communication can happen verbally, in writing or through conduct. Even conduct, such as handshakes, can constitute acceptance of a commercial negotiation.

The Exception: It can be acceptable

Silence can equal acceptance if one party indicates acceptance of the offer through other means.

(1) Acceptance through conduct:

Acceptance through conduct is probably the most common form of silent acceptance. The parties are still silent in accepting the contract or negotiation, orally or writing. However, if one or both parties begin to act on the agreement by performing their duties and obligations, this may equal acceptance through conduct.

For example
A has hired B, a builder. B has written a building contract for A to sign. A receives the contract but refuses to signed it. B begins to build A’s house. Half way through the construction process B asks A to sign the contract again. A says “I don’t sign contracts”. Even though the contract has not been signed, A has already accepted B’s contract through allowing B to carry out building work. Therefore, A’s conduct is enough to prove acceptance through conduct. For more information, see here.

(2) Silence can be acceptance if both parties to the negotiation had a pre-existing relationship before the current negotiation:

This means that there must be past dealings between the two parties that show that it is customary for the parties to treat silence as acceptance. However, this can be difficult to prove.

The Risk: Silence can be Misleading

In commercial negotiations, it is always important to remember that Australian Consumer Law prohibits misleading and deceptive conduct. Sometimes, silence can amount to misleading and deceptive conduct. There are two categories that silence can fall under in commercial negotiations: (1) Half-truths and, (2) Mere Silence. Both are explained below.

(1) ‘Half-truths’:

Half-truths can be misleading. This is where silence has created some positive representation to the other party and therefore the silence has created a misleading state of affairs. If the party causing this silent misrepresentation does not fix this misrepresentation, it is likely that they will breach Australian Consumer Law.

For example
A wants to buy property insurance. A decides to buy an insurance policy from B. B does not tell A that the insurance policy cannot be cancelled or transferred. B also fails to tell A that the insurance policy does not cover property, even though B is aware that A wanted property insurance. A was not provided with a full copy of the insurance policy before signing. A trusted B’s word. A would not have entered into the insurance policy if B had disclosed all the facts. Therefore, B’s silence amounted to a half-truth as it created a positive representation to A that the insurance was property insurance.

(2) ‘Mere silence’:

Mere silence is not misleading. This type of silence does not create any positive representations or anything that will misleading another party.

Key Takeaways:

Generally, silence does not equal acceptance in commercial negotiations. However, there are a few exceptions, with acceptance through conduct being the most common form of silent acceptance. However, it is always important to note that in commercial negotiations a failure to disclose can amount to misleading conduct.

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Mai Sarkissian

Mai is a Digital Marketing Coordinator at Lawpath, working as part of the Content Team. She is in her final year of a Bachelor of Laws degree at the University of Wollongong. She is interested in Business Law and Employment Law.