Elements in a Contract 4
An acceptance is an unconditional
willingness to be bound by the terms of an offer. The acceptance can be in
terms of performing an act, say for example painting a house for remuneration
or abstaining from watching one’s favorite television show for a reward, as in
instances of unilateral contracts.
An acceptance can also be inferred
or implied by conduct as in the case of Carlill v Carbolic Smoke Ball Co.
(1893) or without the formalization of an existing agreement as in the case of
Brogden v Metropolitan Railway Co. (1877).
As a general rule an acceptance must
be communicated to the offeror. There are however certain exceptions for
example when the performance of an act constitutes an acceptance like in the
case of Carlill v Carbolic Smoke Ball Co. (1893).
When it comes to communications by
post, it is deemed that the offeror is given sufficient notice of the
acceptance as soon as the letter of acceptance is posted. In Adams v Lindsell
(1818), the defendant wrote to the plaintiff offering to sell wool. The defendant
misdirected the letter and there was a delay in the letter reaching the
plaintiff. The defendant thinking that the plaintiff was no longer interested
sold the wool to someone else. The plaintiff sued for a breach of contract.
The plaintiff was successful. In
instances of posting the acceptance, the acceptance is deemed to have taken
place as soon as the letter is posted. This rule is known as the postal rule
and it is an exception to the requirement that, acceptance must be communicated
to the offeror, though it might place the offeror at a disadvantage.
The postal rule applies even if the
letter of acceptance is delayed or lost in the post. In Household Fire and
Carriage Accident Insurance Co. v Grant (1879), Mr. Grant offered to buy shares
in Household Fire and Carriage Accident Insurance. The company accepted the
offer and allotted him the respective shares and sent him a letter informing
him of this. The letter was lost in the post and Mr. Grant was not notified of
the acceptance. In the meantime, Mr. Grant’s dividends were credited to his
account.
Household Fire and Carriage Accident
Insurance subsequently went bankrupt and the liquidators requested that Mr.
Grant make the outstanding payments on his shares. Mr. Grant refused.
It was held that there was a valid
contract in place. The post office is such a common agent that as soon as the
letter of acceptance makes it to the post office, the contract is concluded. It
is as good as a messenger putting the letter of acceptance in the hands of the offeror.
The postal rule however does not
apply if it was not reasonable to use the post as a means of communication as
in instances where the offeror clearly stipulates that he must be notified in
writing.
In Holwell Securities Ltd. v Hughes
(1974) the defendant offered to sell the plaintiff his house and the option was
exercisable by a notice in writing to the defendant within 6 months of the
offer being made. 5 days prior to the completion of the 6 months, the plaintiff
sent a letter to the defendant communicating his acceptance but the letter
never arrived.
The Court of Appeal decided that the
offer which clearly stipulated that the defendant must be notified in writing
could not be accepted by merely posting a letter. As a general rule if the
offeror stipulates that an offer can only be accepted in a specific manner than
the offer can only be accepted in the manner stipulated by the offeror.
If an acceptance takes place via an
electronic medium say for example fax or e-mail, it will take place at the time
it is received. In Entores Ltd v Miles Far East Corp. (1955) – A telex was sent
from England to Holland offering to purchase a certain quantity of cathodes.
The office in Holland sent a telex back accepting the offer. The question
before the courts was where did the acceptance take place? If the acceptance
took place at the time the telex was sent it would be in Holland and if the
acceptance took place at the time it was received it would be in England.
It was held that when an acceptance
is communicated via electronic means, acceptance takes place or occurs when it
is brought to the attention of the offeror, i.e. it took place in England.
Silence however does not constitute
acceptance and neither can the offeror stipulate otherwise. In Felthouse v
Bindley (1862) a man wrote to his nephew informing him of his intention to
purchase his nephew’s horse. He further stated that if he hears no more about
the horse he’ll considered that the horse is his. The nephew did not reply to
his uncle but he did instruct the auctioneer not to sell his horse along with
his other farming stock. The auctioneer forgot and sold the horse.
The court held that despite the fact
that the nephew may have intended to sell the horse to his uncle by instructing
the auctioneer not to sell the horse along with his other farming stock, his
intention was never communicated to his uncle and therefore there was no
contract. As a general rule silence, does not constitute the acceptance of an
offer.
The offer must be accepted on its
original terms and any attempt to vary the terms of the offer will be viewed as
a counter-offer and as a rejection of the original offer. In Hyde v Wrench
(1840) the defendant wrote to the plaintiff offering to sell his farm for
£1,000 to which the plaintiff replied that he was willing to buy it for £950.
The defendant refused to sell the
property for £950 and a few days later the plaintiff wrote to the defendant
stating that he was willing to purchase the property for £1,000. It was held
that the plaintiff’s counter offer was a rejection of the defendant’s offer and
that the original offer could not be revived.
In Northland Airliners Ltd v Dennis
Ferranti Meters Ltd. (1970) the seller negotiated with the buyer for the sale
of an aircraft. The seller then sent a telegram stating that the sale was
confirmed and asked the buyer to remit the specified amount. The buyer remitted
the said amount, with the condition that it was to be held in trust until the
delivery of the aircraft and added that the delivery was to be made by a third
party, and within a specific date. The seller did not reply but sold the
aircraft to another buyer for a higher price. The Court of Appeal held that
there was no contract between the parties. The buyer’s reply introduced two new
terms with regards to payment and delivery.
A counter-offer however must be
distinguished from a mere request for additional information. In Stevenson,
Jacques and Co. v McLean (1880) the defendant wrote to the plaintiff offering
to sell a specific quantity of iron, cash, and left the offer open until
Monday. On Monday morning, the plaintiff wrote to the defendant asking if the
defendant would accept delivery over 2 months or otherwise the longest time
permissible. The defendant did not reply but sold the iron instead to a third
party.
The plaintiff not having heard from
the defendant, later on the same day sent a telegram stating that he’d accepted
the defendant’s offer. It was held that there was a valid contract in place
because the plaintiff’s initial telegram did not amount to a counter proposal
and that it was a mere inquiry.
An offer cannot be withdrawn after
it is accepted but it can be withdrawn at any time prior to the acceptance. In
Payne and Cave (1789) the defendant made an offer at an auction but withdrew
his offer prior to the fall of the auctioneer’s hammer. It was held that the
defendant was free to withdraw his offer any time prior to the fall of the
hammer.
Items at an auction are invitations
to treat and it is up to any interested party to step up and make an offer
which the auctioneer can either accept or reject.
In Routledge v Grant (1828) the
defendant offered to take up a lease on the plaintiff’s premises and gave the
plaintiff 6 weeks to make up his mind. 3 weeks later the defendant withdrew his
offer and the plaintiff sued for a breach of contract. It was held that there
was no breach of contract and that the defendant was free to withdraw his
offer, i.e. either party could either withdraw or reject the offer within the 6
weeks.
An exception to the rule that an
offer may be withdrawn at any time prior to acceptance occurs when the
plaintiff provides some form of consideration to keep the offer open for a
fixed or specific period of time.
In Dahlia v Four Millbank Nominees
(1978) the plaintiff had agreed to purchase some property from the defendant
and the defendant agreed to keep the option open if the plaintiff arranged for
a bank draft to be delivered to the defendant within a certain time and date.
The plaintiff complied with the defendant’s request but the defendant refused
to proceed with the sale.
It was held that there was a
contract in place and that the acceptance was similar to an acceptance in a
unilateral contract. Once the offeree has started performing the act, the
offeror must not stop or prevent the condition or the stipulation from being
satisfied.
The withdrawal of an offer must be
communicated to the offeree. In Byrne v Van Tienhoven (1880) the defendant
mailed an offer to the plaintiff to sell tin pin plates. Approximately a week
later he wrote to the plaintiff revoking the offer. The plaintiff accepted the
offer as soon as the letter arrived and telegrammed his acceptance to the
defendant.
Subsequently, the plaintiff received
the letter of revocation and sued for a breach of contract. It was held that
there was a contract in place and the contract came into existence as soon as
the plaintiff sent his telegram. The postal rule was applied
The withdrawal however, does not
have to be communicated in person. In Dickinson v Dodds (1876) the plaintiff
was given an option to purchase some land from the defendant and the defendant
stated that the option would remain open for 2 days. The defendant then sold
the land to someone else the next day and the plaintiff came to know of it the
same day. The plaintiff then decided to take up the offer, after coming to know
that the land had been sold. It was held that there was no contract in place
and it was clear that the defendant did not intend to sell the plaintiff the
property - it was as obvious as if the defendant had told the plaintiff so
himself.
Copyright © 2019 by Dyarne Ward
and Kathiresan Ramachanderam
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