English Law of Contract Offer, Acceptance etc. (Part II) September 14 th 2007 Research Fellow Herman Bruserud

V. Communication Communication of offer –Actual communication required for the offer to take effect Communication of acceptance –Starting point: The acceptance must be actually communicated to take effect – “receipt rule” (Entores Ltd v Miles Far East Corporation) Q3 Communication of Offer Communication of Acceptance “Suppose, for instance, that I shout an offer to a man across a courtyard but I do not hear his reply because it is drowned by an aircraft flying overhead. There is no contract at that moment. If he wishes to make a contract, he must wait till the aircraft is gone and then shout back his acceptance so that I can hear what he says. Not until I have his answer am I bound (…).” (Denning LJ in Entores Ltd v Miles Far East Corporation)

V. Communication (cont.) Communication of acceptance (cont.) –Exceptions Implied waiver of communication in unilateral contracts –Performance of the condition constitutes the acceptance – no need to communicate that you are attempting to perform the condition Q3 Communication of Offer Communication of Acceptance “In the advertisement cases it seems to me to follow as an inference to be drawn from the transaction itself that a person is not to notify his acceptance of the offer before he performs the condition, but if he performs the condition notification is dispensed with.” (Bowen LJ in Carlill v Carbolic Smoke Ball Co.)

V. Communication (cont.) Communication of acceptance (cont.) –Exceptions (cont.) Silence as acceptance in bilateral contracts? –General rule: The offeror can not waive the need for communication to that effect that silence will constitute acceptance (Felthouse v Bindley) –Exceptions »The offeree’s silence where there has been a previous course of dealing where the offeree has taken the benefit of services offered »May be if it is the offeree who is attempting to hold the offeror to the offeror’s waiver of communication (Estoppel basis) Q3 Communication of Offer Communication of Acceptance

V. Communication (cont.) Communication of acceptance (cont.) Silence as acceptance in bilateral contracts? (cont.) –Exceptions (cont.) »If it was the offeree who initiated that the offeree’s slience would constitute acceptance (Re Selectmove Ltd (obiter)) Q3 Communication of Offer Communication of Acceptance

V. Communication (cont.) Communication of acceptance (cont.) The postal rule –The offeror bears the risk of delay and loss of the acceptance – the contract is concluded as soon as the letter is sent (Adams v Lindsell) –The rule only applies where it is reasonable in all the circumstances for the offeree to use the post (Henthorn v Fraser) –Can be avoided »Stipulating that an other means of acceptance than by post is required »To stipulate that actual communication is required (Holwell Securities Ltd v Hughes) Q3 Communication of Offer Communication of Acceptance

V. Communication (cont.) Communication of acceptance (cont.) The postal rule (cont.) –Is retraction of a postal acceptance possible? »No clear authority on the question Distinction: Q3 Communication of Offer Communication of Acceptance Instantaneous methods of communications Non-instantaneous methods of communications The postal rule applies at least to acceptances (legitimately) made by post and telegram Receipt rule: The acceptance has no effect unless actually communicated, but… Applies at least to oral communication and communication by telephone, telex and fax

V. Communication (cont.) Communication of acceptance (cont.) Distinction: (cont.) –(…) but… »Non-instantaneous communications using instantaneous methods Q3 Communication of Offer Communication of Acceptance “But suppose that he does not know that his message did not get home. He thinks it has. This may happen if the listener on the telephone does not catch the words of acceptance, but nevertheless does not trouble to ask for them to be repeated: or if the ink on the teleprinter fails at the receiving end, but the clerk does not ask for the message to be repeated: so that the man who sends an acceptance reasonably believes that his message has been received. The offeror in such circumstances is clearly bound, because he will be estopped from saying that he did not receive the message of acceptance. It is his own fault that he did not get it. But if there should be a case where the offeror without fault on his part does not receive the message of acceptance – yet the sender of it reasonably believes it has got home when it has not – then I think there is no contract.” (Denning LJ in Entores Ltd v Miles Far East Corporation)

V. Communication (cont.) Communication of acceptance (cont.) –Non-instantaneous communications using instantaneous methods (cont.) Q3 Communication of Offer Communication of Acceptance Any general principle? Suggestion from Poole: ”(…) if the offeree has done all that he might reasonably be expected to do to get his message through, that acceptance should take effect when the offeree might reasonably expect it to be communicated”

V. Communication (cont.) Communication of acceptance (cont.) »Non-instantaneous communications using instantaneous methods – authority –When it comes to s and internet contracting – see Poole pp. 72ff. Q3 Communication of Offer Communication of Acceptance Acceptances left during or outside ordinary office hours: OpeningClosing Opening next ordinary office day The offeree can reasonably expect the acceptance to be received The offeree can not reasonably expect the acceptance to be received until the opening of the next ordinary office day

V. Communication (cont.) Communication of revocation of offer –Must be actually communicated (Byrne v van Tienhoven) Exception: Unilateral offers made to whole world –Probably sufficient to give the same notoriety to the revocation that was given to the offer (Shuey v United States) –The revocation needs not to be authorized by the offeror (Dickinson v Dodds) Q3 Communication of Offer Communication of Acceptance

VI. What needs to be apparent to constitute an agreement – the non-traditional approach The traditional approach (offer and acceptance) might be to rigid –Some case law supporting the finding of the existence of agreement on another basis, but… –Especially relevant when performance under the (alleged) contract has been rendered ”there may be certain types of contract, though I think they are exceptional, which do not fit easily into the normal analysis of a contract as being constituted by offer and acceptance.” (Lord Diplock in Gibson v Manchester City Council)

VII. Intention to create legal relations A criterion which must be met for a(n enforceable) contract to come into existence –Objectively determined: ”(…) the court does not try to discover the intention by looking into the minds of the parties. It looks at the situation in which they were placed and asks itself: Would reasonable people regard this agreement as intended to be legally binding?” (Lord Denning in Merritt v Merritt)

VII. Intention to create legal relations Agreements divided into two types: Social/Domestic agreements Commercial agreements Presumed to be no intention Presumed to be intention Presumption of intention, or lack of intention, can however be rebutted

VII. Intention to create legal relations (cont.) What constitutes a social/domestic agreement? ” (…) as a rule, when arrangements are made between close relations, for example, between husband and wife, parent and child or uncle and nephew in relation to an allowance, there is a presumption against an intention of creating any legal relationship. This is not a presumption of law, but of fact. It derives from experience of life and human nature which shows that in such circumstances men and women usually do not intend to create legal rights and obligations, but intend to rely solely on family ties of mutual trust and affection. (…) There may, however, be circumstances in which this presumption, like all other presumptions of fact, can be rebutted.” (Salmon LJ in Jones v Padavatton)

VII. Intention to create legal relations (cont.) Presumption applies to agreements between people in close relationships – typically within families and between friends Rebutting the presumption of no intention to create legal relations –Factors Express statements unlikely to be conclusive Certainty of terms Seriousness Reliance Policy considerations Especially close connection between these factors

VII. Intention to create legal relations (cont.) Commercial agreements Rebutting the presumption of intention to create legal relations –Very hard to rebut Some especially important instances –Advertising (Carlill v. Carbolic Smoke Ball Co., Esso Petroleum v Commissioners for Customs and Exercise) –Comfort letter or guarantee? (Kleinewort Benson Ltd v Malaysia Mining Corporation Bhd)

VII. Intention to create legal relations (cont.) Some especially important instances (cont.) –Honour clauses an other express terms: A contextual approach (Sadler v. Reynolds, Edmonds v Lawson) “Honourable Pledge Clause This arrangement is not entered into, nor is this memorandum written, as a formal or legal agreement (…) but is only a definite expression and record of the purpose and intention of the … parties concerned to which they each honourably pledge themselves with the fullest confidence … that it will be carried through by each of the … parties with mutual loyalty and friendly co-operation” (Rose and Frank Co. V Crompton Bros.)

VIII. Shortly on certainty of agreements The courts will not enforce agreements which does not reach a certain level of certainty: Important terms not agreed upon Term(s) are to vague

VIII. Shortly on certainty of agreements (cont.) The willingness of the courts to “intervene” to “find” a contract Agreements where essential terms are vague –Ambiguity –Objective basis for determining meaning –Where performance has been rendered –Severance of meaningless clauses

VIII. Shortly on certainty of agreements (cont.) Agreements where essential terms are missing –General principle: Needs to be agreement on all important terms to reach the sufficient level of certainty –Agreements to agree Generally Agreements to agree a price –Mechanisms for determining the price (see Poole pp. 95ff.)

VIII. Shortly on certainty of agreements (cont.) Availability of restitutionary remedy where there is no contract