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Elements in a Contract IV - Acceptance

Updated on July 10, 2017

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 smoking 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 Rly 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 contact.

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 the 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 a £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 & 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 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.

Subsequent to that 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 however 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.

© 2017 Kathiresan Ramachanderam and Dyarne Jessica Ward

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