Acceptance

Communication of the Offer An offer, in order to be open for acceptance, must be communicated to the potential offeree(s). In most cases, communication of an offer will not give rise to any problems. There are, however, one or two special cases, such as the postal rule and Internet and e-mail contracts.

Acceptance is what turns a specific offer, made with the intention to be bound, into an agreement.

Brogden v Metropolitan Railway [1877] Acceptance is the final, unconditional agreement to all the terms. It may be express, or implied by conduct. Here, the parties had been respectively delivering and ordering coal without any formal terms agreed.

Form of Acceptance Unless the offer stipulates otherwise, an acceptance can be in any form. Mirror Image Rule The courts have indicated that it is perfectly possible for an offeror to insist upon a particular form of acceptance. However, in order to be effective, the clause in the offer must indicate explicitly and clearly that the particular form of communication and only that form of communication will suffice.

Sterling Hydraulics v Dichtomatik [2006] An acknowledgment of an offer which contains a vague and not very prominent reference to the acknowledger’s terms is likely to be treated as an acceptance rather than a counter-offer.

Counter Offers: When the offeree alters the terms or adds new terms. A counter offer becomes the offer itself which must be accepted for an agreement to subsist. The further effect is to operate as a rejection.

If a counter-offer purports to accept, but actually rejects the original offer, it must be distinguished from a request for further information. If it is only a request for further information, then the offer will remain available for acceptance.

Butler Machine Tool Co v Ex-Cell-O Corporation [1979] Battle of the Forms Each successive document creates a new counter offer. Butler Machine Tool Co v Ex-Cell-O Corporation [1979]

Balmoral Group v Borealis [2006] Where there has been a regular course of dealing, with one party supplying a form on which its terms are set out, it is likely that the other party will be taken to have accepted these terms, unless it has raised an objection to them.

Foley v Classique Coaches [1934] The courts will seek to find certainty in contracts that contain ambiguous terms or are silent on a particular matter. Here, the parties traded for 3 years. The document stated that petrol was to be supplied “at a price to be agreed by the parties in writing and from time to time.” CoA held that it was to be implied that the petrol would be at a reasonable price and that the existence of an arbitration clause to resolve disputes made the contract sufficiently certain.

British Steel Corp v Cleveland Bridge & Engineering [1984] Sometimes not enough information has been decided for a contract to exist. Here, court held no contract but that the principle of quantum meruit should be applied.

Retraction (Revocation) of Offer The rule is that where an offer is withdrawn before it is accepted, it ceases to be open for acceptance. It does not matter how far advanced the negotiations are, as long as a final deal has not been reached, the offeror may withdraw his offer, and no contract will exist.

Retraction (Revocation) of Offer Revocation must be communicated to the offeree in order to be effective. This is generally taken to mean actual communication, and in the case of Henthorn v Fraser, Lord Herschell referred to the need to have the withdrawal ‘brought to the mind of the person to whom the offer is made’.

Timing of Revocations

Revocation of a Unilateral Offer Once an Offeree has started to perform on an unilateral offer, the offeror may not revoke. Errington v Errington & Woods [1952] Kids pay house payments for dad in return for house Daulia v Four Mill Bank Nominees [1978] Bring ££ and signed K for property at 10am

Termination of offer Where fixed time limit for acceptance stipulated in offer Where no fixed time for acceptance, but where delay in acceptance Death

Communication of Acceptance General Rule: Acceptance has to be communicated to the Offeror. Exceptions: Implied waiver of communication in the case of unilateral contracts (Carbolic Smokeball) Acceptance by post.

Communication of Acceptance Acceptance is communicated when the offeror receives it. Entores v Miles Far East Corporation [1955]

Communication of Acceptance Normally, silence will not suffice as acceptance of an offer in bilateral agreements. Felthouse v Bindley [1862]

Exceptions to the silence rule If there has been a course of dealing whereby the offeree has taken the benefit of services offered, the offeree’s silence or conduct can constitute acceptance. If it is the offeree who is attempting to hold the offeror to the offeror’s stipulation that silence will constitute acceptance. If it was the offeree, not the offeror, who initiated the proposal that the offeree’s silence would constitute acceptance.

See Also, Re Selectmove [1995] The tax collector, not the offeror, company, who initiated the proposal that the offeree’s silence would constitute acceptance. Virtol v NorElf [1996] citing Rust v Abbey Life [1979] A woman’s inaction over 7 months was taken to be acceptance of an investment policy taken out on her behalf.

Postal Rule This rule provides that an acceptance is effective at the time of posting, irrespective of when the letter arrives. (Adams v Lindsell, 1818) This is crucial, because the contract is concluded as soon as the acceptance is effective.

Adams v Lindsall

Avoiding the Postal Rule In Holwell Securities Ltd. v Hughes [1974] the Court of Appeal considered an option to purchase, which provided that the option was exercisable: ‘…by notice in writing to [the offeror] at any time within six months of the date hereof…’. It was held that these words excluded the operation of the postal rule, since the wording suggested actual communication of the acceptance of the acceptance to the offeror.

Instantaneous methods of communicating but non-instantaneous messages Communicate during office hours -> actual communication Communicating outside office hours -> deemed to be received the following day. Answering Machines -> point of communication is when call is made E-mail -> ensure notice when received and read

Entores v Miles Far East Corporation [1955] Brinkibon Ltd v Stahag Stahl und Stahlwarenhandlsgesellschaft mbH [1983] Mondial Shipping and Chartering BV v Astarte Shipping Ltd [1995] Electronic Commerce (EC Directive) Regulations 2002

Summary

Jurisdiction and choice of law Another reason for the importance of establishing the timing question relates to jurisdiction. If the acceptor is e-mailing from a different country to the one where the offeror is based, the timing of acceptance may have a bearing on whether the contract is concluded in the sender’s country or in the offeror’s jurisdiction.

Jurisdiction and choice of law This might matter where a dispute arises and there is a need for litigation; in which country should the litigation take place? Also the law of which jurisdiction should apply? Both of these are pertinent questions. These questions (timing and jurisdiction) have not yet been answered in the UK, but no doubt the courts will be required to grapple with such problems in due course.

Advise each party as to their legal position. Andrea has decided to sell her caravan. She parks it outside her house with a notice on the front windscreen stating: “For sale. Pristine example – one owner. £4,750 or near offer. Please call number 34 or telephone: 713850, only. First person to agree a price WILL get the caravan.”

Advise each party as to their legal position. On Monday at 9:00 a.m., Bernice sees the caravan, but as she is late for the dentist, she telephones Andrea from work at 10:00 a.m., and makes an offer of £4,500 which Andrea says she would like to consider. Bernice says she will assume Andrea has accepted unless she hears from her by 9:00 p.m. that evening, a proposal to which Andrea agrees.

Advise each party as to their legal position. At 11:00 a.m. on Monday, Curtis calls at Andrea’s house but Fenella, Andrea’s daughter, is the only person there. He therefore leave a note reading: “Monday 11:00 a.m. Please keep caravan for me – here is a cheque for £4,750, Curtis.” Fenella leaves the note on a desk in Andrea’s study.

Advise each party as to their legal position. At 2:15 p.m. on Monday, David sees the notice and, within a few minutes, has posted a letter of acceptance and cheque for £4,750, using the post-box at the end of the street. Unfortunately, David misaddresses his letter so it only arrives on Friday.

Advise each party as to their legal position. At 3:00 p.m. on Monday, Andrea decides to accept Bernice’s offer and posts a letter to Bernice’s business address saying: “I agree to sell on your terms. Because of the lower price can you pay in cash?” At 9:30 p.m. on Monday, Andrea reads Curtis’s acceptance and immediately telephones Bernice’s business address, leaving a message on the recorded answering service: “Ignore the letter you will receive – deal off. Andrea.” Bernice is away on business and only listens to the tape on Wednesday evening.

Thinking Points Identify difference between an offer and an invitation to treat Define counter-offer Explain the use of silence as a means of communicating acceptance Review the moment at which a recorded message of acceptance becomes effective Articulate the limitations of the postal rule Explain the relevance of specifying the anticipated mode of for communicating acceptance.

Cases to Review Carlill v Carbolic Smokeball Co. Partridge v Crittenden Fisher v Bell Hyde v Wrench Harvey v Facey Felthouse v Bindley Society of Lloyds v Twinn Holwell Securities v Hughes Lindsell v Adams Household Fire & Carriage v Grant

Margaret, the sales director at TechMech, is approached by Phillip, a local businessman, who outlines the size and nature of his business enterprise and asks Margaret to quote a price for the installation of TechMech’s new accounts software system. Margaret, realising that her monthly sales quota has not yet been reached, replies: “I am sure that for a business of your size we can guarantee a price of £3,000, covering all installation costs and appropriate staff training. But please get back to me quickly; I cannot hold that price for more than a week.”

Margaret, the sales director at TechMech, is approached by Phillip, a local businessman Later that day Phillip receives an advertisement by email from CostPlus Ltd which states: “We can offer ‘state-of-the-art’ accountancy software for small businesses at a price guaranteed not to exceed £2,500.” He immediately telephones CostPlus and places an order. However, after discussing the matter further with a CostPlus representative, it becomes apparent that the actual costs of installation would exceed £4,000. Phillip thereupon withdraws his order.

Margaret, the sales director at TechMech, is approached by Phillip, a local businessman Next day, Phillip telephones TechMech. He leaves a message on the answering machine accepting the offer of £3,000 made by Margaret, at the same time asking whether the cost could also include on-site training for any new staff he takes on over the next six months. Subsequently, Phillip has second thoughts and telephones TechMech to cancel his order. The secretary, now on duty, points out that she has passed all the answering service tapes over to Margaret who would be listening to them shortly, but that she would make a note of his wishes. Advise Phillip whether he has concluded a contract with TechMech and/or CostPlus and, if so, on what terms?

Advise Phillip whether he has concluded a contract with TechMech and/or CostPlus and, if so, on what terms?

Answer Plan: Does the CostPlus advertisement demonstrate sufficient intent and clarity to constitute an offer or is it merely an invitation to treat? Is Margaret’s response to Philip’s enquiry an offer or an ITT? Does Philip’s attempted acceptance constitute a counter offer, a request for information or an acceptance subject to a preferred dispensation? If Philip’s recorded message constitutes an unqualified acceptance, when was it communicated to TechMech? Did Philip revoke his ‘acceptance’ in time?

Case to Review Partridge v Crittenden Fisher v Bell Pharmaceutical Society of GB v Boots Harvey v Facey Carlill v Carbolic Smoke Ball Company Gibson v Manchester City Council Hyde v Wrench Entores v Miles Far East Corp Brinkibon v Stahag Stahl und Stahl

Oftmark Ltd & Aftercool Ltd On Wednesday Oftmark Ltd offers to sell 100 tonnes of steel to Aftercool Ltd at £500 per tonne. The offer to Aftercool states: “Please telephone or email an acceptance by noon today. Delivery will take place next Monday.” Aftercool Ltd faxes an acceptance at 10:00 a.m., the fax machine informing the clerical assistant that the message has been properly relayed to Oftmark. Unfortunately, the Oftmark fax machine has not been fitted with a new printing cartridge so the acceptance is not received. Moreover, as Aftercool Ltd believes that a firm contract exists, it enters into a binding contract with Torquecar Ltd to produce body panels, using the anticipated delivery of steel on Monday.

Oftmark Ltd & Aftercool Ltd Advise Aftercool Ltd whether there is a binding contract with Oftmark Ltd.

Oftmark Ltd & Aftercool Ltd Would your advice differ in the following circumstances? Aftercool emailed a withdrawal of its acceptance before noon, but the email was accidentally deleted by an Oftmark employee. Aftercool telephoned an acceptance to Oftmark in the afternoon. Instead of a telephoned acceptance Oftmark’s offer had specified: “Please notify us of your acceptance by first class registered post sent before noon.” Aftercool sent a letter of acceptance before noon by unregistered post which was never received by Oftmark Ltd.

Answer Plan What is the effect of Aftercool employing a mode of acceptance different from that stipulated? As Aftercool used an instantaneous means of communication, when is its acceptance effective? Flexibility possible?

Answer Plan Flexibility possible? At what point was Aftercool’s emailed acceptance effective: when accessible or when read? When did Oftmark’s offer lapse? Did Oftmark impliedly exclude the postal rule?

Cases to Review Entores v Miles Far East Corp Brinkibon v Stahag Stahl und Stahl The Brimnes Holwell Securities v Hughes

Further Reading Coote, “The Instantaneous Transmission of Acceptances” (1971) 4 NZ UL Review 31 Hill, “Flogging a Dead Horse – The Postal Acceptance Rule and E-mail” (2001) 17 JCL 151 McMeel, “Contractual Intentions: The Smoke Ball Strikes Back” (1997) 113 LQR 47