COMPARATIVE CONTRACT LAW THE LAW OF CONTRACT (CONTINUED) COMPARATIVE LAW LLM KILAW FALL 2013 DR MYRA WILLIAMSON 1

WHAT HAPPENS AFTER THE OFFER HAS BEEN MADE? Until an offer is accepted, it creates no legal rights and it may be terminated Termination of an offer may happen in a number of ways: A) The death of the offeror or the offeree before acceptance has occurred B) By non-acceptance with the time specified, or within a reasonable time C) When it is revoked before acceptance D) When its rejected by the offeree (NOTE: A) and B) are sometimes called lapse) Offeror means the party that makes the offer Offeree means the party that receives the offer 2

A) LAPSE OF THE OFFER BY DEATH General rules: If the offeree dies, it is clear: the offer can no longer be accepted (and the estate of the offeree cannot accept it on his behalf) If the offeror dies, it is a bit unclear: An offeree cant accept after being informed of the death of the offeror If the offeree doesnt know…there are cases going both ways On one view, the offer is terminated automatically, whilst on the other view, the offeree should still be able to accept the offer. This is an area of law that is still not settled. 3

B) LAPSE OF THE OFFER BY NON-ACCEPTANCE The Rule: An offer may lapse if it is not accepted within the time stipulated OR within a reasonable time. Courts will decide what is a reasonable time The time may depend on the type of contract When an offer is made by one particular means, the means of acceptance should, prima facie, be by the same means Authority: Ramsgate Victoria Hotel v Montefiore (1866) Facts: M offered, by letter on 8 June, to purchase shares in a company No answer was received until 23 November M then refused the shares Held: Ms offer to buy the shares lapsed through unreasonable delay by Ramsgate in accepting 4

C) REVOCATION OF AN OFFER The offeror may decide to revoke the offer – they can do that at any time before acceptance But note that the revocation of an offer is of no effect until it is brought to the notice of the offeree Authority: Byrne v Van Tienhoven (1880) The facts: 1 October - V offered goods for sale to B: offer made by letter 11 October – B received the letter and accepted by telegraph immediately 8 October – V wrote to B revoking the offer 20 October – B received the letter of revocation 5

BYRNE V VAN TIENHOVEN (1880) 6 Held: B had accepted the offer on 11 October To be effective, revocation must be communicated to the offeree before the offeree has accepted The fact that the letter of 8 October had been posted and was on its way to B was immaterial (i.e. it didnt matter). This case is authority for the proposition that in order for a revocation of an offer to be effective, it must be communicated to the offeree before the offeree has accepted

C) REVOCATION CONTINUED… 7 Notice of revocation could come from a reliable source instead of directly from the offeror (this is sometimes called indirect revocation) Authority: Dickinson v Dodds (1876 )

D) REJECTION OF AN OFFER Rejection of an offer can take two forms: i. Where the offeree communicates his rejection to the offeror; and ii. Where the offeree makes a counter offer 8

REJECTION CONTINUED… 9 Hyde v Wrench (1840) The facts: W offered to sell a farm to H for £1,000 H replied that he would pay £950. W refused to accept the lower amount. H then said he would pay the original amount of £1,000. Then W changed his mind – refused to sell the farm to H H went to court to force W to sell him the farm (he sought an order for specific performance which means he wanted an a court order to force W to sell the farm to him)

REJECTION CONTD… 10 Held: There was no contract between Hyde and Wrench Why not? Because when H offered the sum of 950, that was a counter-offer The counter-offer was a rejection of the original offer This case is authority for the proposition that a counter-offer rejects the original offer

SUMMARY Now we have completed summarising the law around the first element of a contract: the offer We have looked at what an offer is, what it is not and how it can be terminated (4 ways). Now we will look at the second important element to prove that a contract exists: acceptance If either element (offer or acceptance) are missing, then there is no contract

ACCEPTANCE: GENERAL RULES 12 What is acceptance? Definition: Acceptance is the expression, orally, in writing or by conduct, of assent to the terms of the offer in the manner prescribed by the offeror The offer and the acceptance must correspond: there must be no room for doubt as to the fact of acceptance The mirror image rule: the acceptance must be absolute and must correspond exactly with the terms of the offer In other words, to be effective, the acceptance must be without qualification

COMMUNICATING ACCEPTANCE 13 1.Mental acceptance 2.Particular method of acceptance Mental acceptance means accepting an offer in ones mind but not communicating it to the offeror Generally, this is not sufficient Authority: Felthouse v Bindley (1862) Particular method of acceptance means that if a particular method is required, then acceptance must be by that method

FELTHOUSE V BINDLEY (1862) 14 The facts: Felthouse (the offeror) made an offer to his nephew: Felthouse offered by letter to buy his nephews horse F wrote: If I hear no more about him, I shall consider the horse mine at £30. 15s. The nephew did not reply But the nephew asked Bindley (the auctioneer) to keep the horse out of the sale of his farm stock

FELTHOUSE V BINDLEY (1862)… 15 The facts continued… Bindley accidentally sold the horse Felthouse sued Bindley for conversion of his property F believed that a contract had been made between him and his nephew for the horse because he had heard nothing after making the offer Held: there was no contract because the nephew had merely mentally accepted the offer The nephew should have communicated his acceptance to the offeror (Felthouse) Since the acceptance had not been communicated, there was no contract (F lost the case) This case is authority for the proposition that if an offer is made directly to a person, that person cannot simply mentally accept the offer and assume there is a contract The mental acceptance must be communicated to the offeror to count Mental acceptance by itself is insufficient

2. PARTICULAR METHODS OF ACCEPTANCE 16 General Rule: if the offeror prescribes a particular method of acceptance, then the method of acceptance should normally be followed e.g.. If the offeror requests acceptance by telegram, then acceptance by letter would be insufficient But where acceptance consists of performance of an act, this will be sufficient in itself (since the offeror does not contemplate acceptance orally or by letter) Authority: Carlill v Carbolic Smoke Ball Co

OTHER RULES OF ACCEPTANCE 17 Acceptance must be unqualified: acceptance must be absolute and conform exactly with the terms of the offer Authority: Neale v Merret (1930): M offered to sell land to N for £280. N replied: enclosed £80, promised to pay the balance by monthly installments of £50 each Held: N could not enforce acceptance; there was no contract because the acceptance was qualified (by the payment terms) Remember the rule: acceptance must mirror the offer (mirror image rule)

RULES REGARDING MODES OF ACCEPTANCE 18 A distinction is drawn between instantaneous and non-instantaneous methods of communication Instantaneous: telephone, , fax, Non-instantaneous: telegram, post Terminology: what does instantaneous mean? It means happening immediately or on the spot

RULES REGARDING ACCEPTANCE 19 A different rule applies to each: A. For non-instantaneous methods, such as acceptance by post, the rule is that acceptance takes effect as soon as the letter is posted B. For instantaneous methods the rule is that an offer has no effect until it reaches the offeror

A. NON-INSTANTANEOUS METHODS (E.G.. BY POST) 20 Acceptance by post, telegram The postal acceptance rule: was laid down by the court in the famous case of Adams v Lindsell (1818) The postal acceptance rule is one of the most famous principles of contract law in the common law – but its a kind of odd rule. Lets look at the case that established this rule. The facts: On 2 September, L wrote to A offering to sell A wool at a certain price & requesting an answer by post The letter to A went astray and didnt reach A until 5 September On the same day, A accepted and posted the letter Letter of acceptance didnt reach L until 9 th Sept On the 8 th Sept, L sold the wool to someone else

ADAMS V LINDSELL (1818) CONTD… 21 A sued L for breach of contract L argued in court that there was no contract until the acceptance had reached him Held: the offer was accepted on the day it was posted The offeror was bound from the time the letter was posted This decision has been criticized – its a famous decision and much discussed over the years The rule was probably made for commercial convenience but it has been subject to criticism

B. INSTANTANEOUS METHODS (E.G.. BY TELEPHONE) The case law shows that the acceptance rule is different when the method of communicating the acceptance is via an instantaneous communication (i.e. telephone) The postal rule does NOT apply to instantaneous methods of communication Here, the contract is complete only when the acceptance is received by the offeror For example, if acceptance is occurring orally over the telephone and the line goes dead during the communication, there is no contract

ENTORES LTD V MILES FAR EAST CORPORATION (1955) This is a landmark English case about the moment of acceptance via telex The Facts: Entores was a London-based trading company It sent an offer by telex for the purchase of copper cathodes Offer was made to a company based in Amsterdam called Miles Far East Corp The Dutch company sent an acceptance by telex. Later, defendants breached the contract Entores wanted to sue the Dutch company for damages Entores (plaintiff) wanted to show that the contract was made in London where the acceptance took place Why? So legal action could take place in an English court 23

PAUSE…WHAT IS A TELEX? Definition: a character printer connected to a telegraph that operates like a typewriter 24

ENTORES LTD V MILES FAR EAST CORPORATION (1955) Held: Denning LJ held that the contract had been made in London since the acceptance was not complete until actually received by the offeror (plaintiff) This decision was upheld by the House of Lords in Brinkbon Ltd v Stahag v Stahl (1982) Entores was an important judgment Denning LJ held that the postal rule cannot apply to instantaneous communications Extract: When a contract is made by post it is clear law throughout the common law countries that the acceptance is complete as soon as the letter is put into the post box, and that is the place where the contract is made. But there is no clear rule about contracts made by telephone or by Telex. Communications by these means are virtually instantaneous and stand on a different footing 25

SUMMARY OF ACCEPTANCE RULES 1.Mental acceptance, by itself is not enough 2. Particular method of acceptance – if specified it must be followed 3.Acceptance must be unqualified 4.Acceptance by post: The postal rule: Acceptance has effect from the moment it is posted (even if it never reaches its destination) 5. Acceptance by instantaneous means: The postal rule doesnt apply: Acceptance has effect from when it is received by the offeror

QUESTION: WHAT ABOUT S? What rule should apply to s? Are they more like telephone calls (instantaneous) or normal post (non-instantaneous)? See article The Postal Rule in a Digital Age This article will be the reading for this week. Once you have read the article, please read my post and comment on the article. Please consider whether there is a rule in Kuwait covering acceptance - does it matter how acceptance occurs?