Acceptance
Acceptance Editor’s comments: The chapter of offer & acceptance is most often than not taken lightly by students. However, strong understanding and grasp of this topic is IMPORTANT as it sets out the foundation and basis when a course of action is ever taken. If there is no contract that is formed; or there is no enforceable contract, there would not be a cause of action from the outset. In this topic, you would have to learn the rules of acceptance. In this chapter, you will cover the following topics:
- What are the elements that are needed to form a valid acceptance?
- What is an acceptance?
- Why do are the rule important?
- Rules pertaining to an acceptance
- Evading the communication rule
- Posta l Rule and its elements
This chapter is a continuation of the chapter of offer where you would have to first establish an offer and now effectively accept it to form a valid and binding contract Q: What is a valid & binding contract? A simple definition of a valid and binding contract was offered by Lord Wilberforce, New Zealand Shipping v A.M. Satterwaite[1] ( The Eurymedon) stating that an enforceable contract is found with the existence of
- offer
- acceptance
- consideration
- Intentions to Create Legal Relations
Note: All the elements needs to be present before it would be considered as a valid and binding contract. This is because all contracts are agreements but not all agreements are contracts. Consider the difference of elements below:
| Contract |
Offer, Acceptance, Consideration, ITCLR |
| Agreement |
Offer & Acceptance |
What is a valid acceptance? An acceptance is a final and an unqualified assent to the terms proposed by the offeree which was communicated to the Offeror (Powell v Lee) An acceptance is sometimes referred to as the "mirror image of the offer." Like an offer, an acceptance is also objectively determined from the words and conduct of the offeree (IRC v Fry). Note: You would have to note the case of Williams v Carwardine [2] where it was held that the motive of acceptance is irrelevant
| Points to Ponder 1. Would an intention to make an invoice tantamount to an acceptance? 2. Would a statement of intention to accept amount to acceptance? 3. Can someone accept an offer? |
The General Rule of Acceptance was provided in Powell v Lee that : 1. It must be an unqualified assent 2. It must be communicated However you would have to take note of Brogden v Metropolitan Railway; where when there is an absence of clear acceptance; an acceptance can be made by conduct, for e.g. Despatching the goods in response to the order This would tantamount to effective acceptance The first rule is that it must be an Unqualified Assent Therefore, what does it mean to be an unqualified assent? This would mean that there is no variation of the original offer. This is because any variations of the original offer will effectively ‘kills’ off the initial offer. This could be seen in the case of : Hyde v Wrench[3]- where the variation amounted to a counter offer However, in the case of Stevenson v McLean[4]- statements that is deemed to be merely asking for information does not amount to a counter offer. Whenever the offeree was to introduce a new term or to vary the original offer, this will effectively create a counter offer where the parties’ roles are effectively changed. This only happens when there is an assertion of a new term and not asking for information.
| What does it mean to vary or to assert a new term to the contract? Points to ponder: ü If someone were to say, in response to your offer, I will buy the stereo system. However, €3000 is rather a lot, will you accept € 2500?” – is this a statement or is this asking for more information? ü Can someone counter an offer; which they don’t know about? Note: In a normal scenario in a discussion, there will be many counter offers and asking for information, the last shot of doctrine is the crucial point – the last event will determine the situation (BRS v Arthur V Crutchley) This is more important in the recent years with standard form agreements; the courts at many times may change/vary the terms of the agreements in order to assist parties to form an agreement (Butler Machine Tool Co. Ltd. v Ex-Cell-O Corporation (England) Ltd. [5]) |
Note: You would have to know the difference between cross and counter offers. Cross- offers are not Counter-Offers In the case of Tinn v Hoffman & Co.[6]It as stated that Cross-offers, is when 2 parties are making offer to each other in ignorance of each other’s offer. This will effectively “Kill off” both the offers. Anson argues that the only way to overcome this is to show that one party has already had contemplated that another is going to make an offer and nonetheless continue to make an offer to make a counter offer. In order to be effective acceptance, there must be Communication of Acceptance The General Rule as found in Powell v Lee[7]is that acceptance has no effect until it is communicated
| Why? What will be the implication if acceptance is not communicated? |
This rule does not apply to unilateral contracts as the method of acceptance is by performing the act.[8] Note: However, in the case of Manchester Dioecesan Council For Education’s Case It was also stated that an offeror can stipulate the manner of acceptance which the offeree will have to abide, failing which there would not be an acceptance unless the alternative method is a reasonable method
Points to ponder
- If a person stipulated to call them, and you meet them personally to tell them of the acceptance; is it a reasonable method?
- When the offeror asks the offeree to write to him, and yet the offeree sends an email instead; will it be a reasonable method?
- Can an offeror stipulate silence as a method of acceptance?
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In that case of Felthouse v Bindley[9]It was stated that An offeror cannot impose silence as a method of acceptance –why? This was seen in Gebr Van Weelde Scheepvaartkantor BV v Cia Naviera Sea Orient SA,- The Agrabele [10] where Evans J, had stated that I there are significance in the matter, there will be an implied undertaking to speak. Therefore there could not be acceptance even though the offeror had indicated silence amounting to acceptance.
Points to ponder:
- when will a contract take place if there isn’t a need for the offeree to communicate the acceptance?
- Will the offeror know he is bound if there is no communication of the acceptance?
- Can the offerree impose silence as a method of acceptance instead?
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However, an offeree may effectively indicate that silence amount to effective acceptance. In the case of Re Selectmove[11] where it was stated that an offeree may impose silence as a method of acceptance. This is because the offeree is imposing a burden upon himself to speak if he does not want to accept. Postal Rule However, there is a clear exception to communication rule where it is stated that The Postal Rule to Evade the Rule of Communication This is enunciated in the case of Adams v Lindsell[12]where it was first stated that the communication of the acceptance is deemed communicated upon the letter being posted It is immaterial that the letter has arrived late in Adams
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Note: This rule had served many mischief: Points to Ponder <
Can the postal rule be applicable when the letter is lost?
What are the requirements of the postal rule? How can you extend the postal rule to other modes of communications? What is the main reason for the postal rule?
If communication of acceptance takes place at the time of the posting, can there be a retracted?
Reasons for the Postal Rule[13] 1. If the rule were otherwise; no contract would ever come into existence[14]. 2. The post office is the agent of the offeror to receive the acceptance of the offer[15] 3. The postal rule assists evidence. It is argued through one way or another that
Points to Ponder
it is easier to prove the sending by post rather than its receipt :
1. How can we say that the postal rule will assist contracts when the offeror does not even know that there was an acceptance? 2. What is the common agency relationship and can it be formed without an express agency relationship? 3. How can we proof sending? Do you normally track what you send? Evidence? |
Q: Can the postal rule be applicable when the letter is lost as opposed to be delayed? The case of Household Fire Insurance v Grant[16]indicates that the Postal rule still applies even if the letter is lost Note: With regards to the issue of the non delivery of the letter of acceptance, Treitel[17]& Re London and Northern Bank[18] had provided that proviso which states that the postal rule will only apply if the letter had been correctly stamped and addressed The Reason for this is that the offeror may have taken the risk of accidents occurring in the post leading to delay, loss or destruction, it is unreasonable to let the offeror bear the further risk of the offeree's carelessness.
| Points to ponder: Are the proviso something that is reasonable or add value to the law? |
Note: Professor Ewan McKendrick disagrees that the rule should be applied to situations when the letter is lost quoting L, Shand, in Mason v Benhar Coal stating that since the offeree knows as to when the letter should arrive and should take initiative to check as to whether has arrived or not[19] In applying the postal rule there are someguidelines that needs to be satisfied Guidelines to apply the Postal Rule[20]are: 1. The mode of communication must not be instantaneous Entoresv Miles Far East Corporation[21].Indicates that the Postal rule does not apply to communications of instantaneous methods of communications as it is a direct communication However, in Brinkibon v Stahag Stahl, Lord Wilberforce had stated that: <!--[if !supportLists]--> · <!--[endif]--> One should not automatically rule out the application of the postal rule when method o the communication is merely a “conduit pipe” <!--[if !supportLists]--> · <!--[endif]--> Instantaneous modes of communication bears the same risks as the post
| Points to ponder: How are the risk of the post the same as those of fax machines? What are the risks involved when communicating using the email? Can this rule be applied to answering machines?[22] How are these different? Should the law allow an extension of the rule? |
Note in Entores v Miles Far East Corporation[23], it was suggested that one will have to consider the balance of fault when determining whether the postal rule should apply to instantaneous modes of communication.
--> If the offeror is at fault – the postal rule may apply <!--[if !supportLists]--> · <!--[endif]--> If the offeree is at fault – the postal rule will not apply This was illustrated in the classic examples of the air plane and telephone conversation of L Denning Note: whatis seeks on the balance of fault principle is the concept of “negligence” e.g. Tenaxv The Brimnes – Postal rule was extended to a revocation of an offer when the revocation was faxed to the office of the offeree during working hours and yet it was not been checked. 2. It must be reasonable to use the method In Henthorn v Fraser[24],it was accepted that Itis reasonable to use the post if the parties are living far apart and that the acceptance need not be made in the same manner in which the offer was given 3. The Postal Rule must not be ousted by Terms of the Offer. This is where the terms of the offer wouldnot have indicated that there postal should not apply. Most often than not, itis a matter of construction of the terms of the offeror. e.g. Holwell Securities v Hughes[25]where notice by theofferor negates the postal rule Problems by the Postal Rule a. Retraction of Acceptance via a speedier mean If it accepted that there is postal rule where the acceptance is communicated at the time the letter is posted, could there be a retraction of the letter by speedier means? There are no English authorities on this point but only conflicting views. There is a New Zealand case of Wenkheimv Arndt[26]where the retraction has no effect. The reason for this is that the law should not encourage evacillation of acceptance by the offeree. The offeree ought not to be given the benefit of both worlds by "blowing hot and cold." However, Hudson[27] argues that absurd to conclude that there was a contract when the letter of acceptance was posted so that the subsequent retraction of the offer was not an effective revocation but a breach of contract. However, since the offeror does not know of the acceptance, there was no expectations on the part of the offeror and hence iit should not be unconscionable for the offeree to revoke the acceptance. This is seen in the case of Dunmore (Countess) v Alexander (Scottish Case)[28].where the offeree should be allowed to withdraw the acceptance by speedier means b. Garbled Acceptance In Henkel v Pape[29], It was stated that If the offer is so garbled, there will not be a contract. Q: what about acceptance? It was also stated that if the offeree were to telegraph an acceptance but it was garbled so as to indicate a counter offer, a contract would have been concluded so long as it was reasonable for the offeror to accept . [2][1833] 5 C & P 566; 4 B & Ad 621 [3][1850] [4][1880] [5][1979] [6][1873] 29 LT 271 at 278 [7][1908] [8]See Carlill v Carbolic Smokeball Company [9][1862] [10][1985] [11][1995] [12][1818] [13]see Winfield, (1939), 55 LQR 499 at 508-509 [14]Adams v Lindsell, Dunlop v Higgins [1848] [15]per Thesiger LJ in Household Fire Insurance v Grant [16][1879] Thesiger and Bagally LJJ, Bramwell LJ dissenting [17]Law of Contract, 9th edition pg. 26-27 [18][1900] 1 Ch 220 [19]See, L Denning, Entores v Miles Far East Corporation [20]L. Wilberforce, Brinkibon v Stahag Stahl GmbH [1983], said “intention of theparties, by sound business practice and in some cases by a judgement of wherethe risk should lie." [21]Lord Denning, [1955] [22]Coote, 4 NZLR 33 argues that the postal rule could be applied to answeringmachines [23]supra [24][1982] [25][1974] [26]A to Z Bazaars (Pty) Ltd. v Minister of Agriculture [1974] (S. Africa) [27]82 LQR 169 [28][1830] [29][1870]
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