ACCEPTANCE

ACCEPTANCE

• No contract comes into existence until an offer is accepted and, in most cases, that acceptance is communicated to the offeror.

Felthouse v Bindley (1863)

• Felthouse v Bindley (1863) 142 ER 1037, Exch Ch• P discussed the purchase of a horse from his nephew J, and

prices were discussed. On 2 January P wrote to J saying "If I hear no more about him, I consider the horse is mine at £30-15-0" [£30.75]. J did not reply, no money was paid, and the horse remained in J's possession. J decided to sell the horse to P and told an auctioneer D to withdraw it from a sale, but D forgot this instruction and sold the horse elsewhere. P now sued D in conversion, claiming the horse was his property. The Court of Common Pleas (whose judgment was affirmed on appeal) said there was no contract: P's letter was an open offer that had not been accepted.

Silence• Although the offeror cannot stipulate that the

offeree's silence is to be taken as a sign of his acceptance of the offer, he can generally specify the method by which acceptance is to be communicated.

Compagnie de Commerce v Parkinson Stove [1953]

• Compagnie de Commerce v Parkinson Stove [1953] 2 Lloyds Rep 487, CA

• AA negotiated to buy some steel from RR, and RR made an offer with a stipulation that acceptance be notified only on a pre-printed form. AA accepted by letter and then sought to cancel their acceptance. The Court of Appeal said there was no valid acceptance and hence no binding contract, but added obiter that it might be possible to say in some cases that those in RR's position had waived the condition as to the mode of acceptance, expressly or

• by their conduct.

Eliason v Henshaw (1819)

• Eliason v Henshaw (1819) 4 Wheaton 225, Supreme Court (USA)

• D offered to buy a quantity of flour from P, and wrote asking for a reply "by return of wagon". P replied by post to D's other address, which took considerably longer, by the time the letter arrived D had already bought from other sources all the flour he needed. D refused to accept the purported contract as binding, and the court supported his view. The court said that the actual mode of reply was unimportant, and that any means might be used as long as the reply was received no later than would be expected by the method specified, but a different address and a substantial delay were enough to invalidate the acceptance.

Tinn v Hoffman (1873)

• Tinn v Hoffman (1873) 29 LT 271, Exch.Ch.• P wrote to D asking for a price on 800 tons of iron.

D offered the iron at 69s [69 shillings, or £3.45]per ton and asked for a reply "by return". It was conceded that since the offer was not in fact accepted by return of post there was no contract, but Honeyman J said obiter that a telegram or verbal message or any other means at least as fast as a letter written by return of post would have been sufficient.

Manchester Diocesan Council v Commercial & General Investments • Manchester Diocesan Council v Commercial & General Investments [1969] 3

All ER 1593, Buckley J• • PP were the owners of property to be sold by tender; the tender form

included a statement that the successful tenderer would be notified by a letter sent by post to the address given in the tender document. DD submitted a tender which PP decided to accept, and in September they notified DD's surveyor of this acceptance subject to the formal approval of the Secretary of State. That approval was given in November, and in January PP wrote to DD at the given address to confirm the agreement. The question arose as to when a contract had been concluded, and the judge said it was in September: the means of acceptance specified in the tender document was not stated to be the only means of acceptance, and so (although the postal rule below would not apply) any other means by which PP's acceptance was actually communicated would be sufficient.

Brogden v Metropolitan Railway (1877)

• Brogden v Metropolitan Railway (1877) LR 2 AC 666, HL• A regularly supplied RR with coal, and suggested after some

years that they should enter into a formal contract. A contract was drafted by RR and sent to A, who returned it with comments, but it was never formally executed. However, A supplied coal and RR paid for it for some time thereafter as if the draft contract had come into force. The House of Lords said that mere mental assent to the contract would not have been enough, but the fact that both parties acted upon it was enough to show acceptance of its terms as from the completion of the first delivery (or possibly, from the placing of the first order after the return of the draft).

Carlill v Carbolic Smoke Ball Co [1893]

• Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, CA• The makers DD of a health product published newspaper

advertisements promising to pay £100 to anyone who contracted flu after buying one of their smoke balls and using it as directed. The advertisement also said DD had deposited £1000 in a named bank to show their sincerity in this matter. P bought a smoke ball, used it as directed, and still caught flu; she sued for the £100 promised. The Court of Appeal said P had accepted DD's offer by buying the smoke ball and using it in accordance with the instructions given. It was not even necessary for P to notify DD of her acceptance, because the advertisement had made no mention of notification and had implied that all the customer need do was to buy and use the smoke ball.

Bowerman v ABTA [1995]• Bowerman v ABTA [1995] NLJ 1815, CA• PP booked a ski trip with a company that subsequently went out of

business. ABTA reimbursed their payments subject to a deduction of £10 insurance, and PP sued for that balance. The Court of Appeal said the notice displayed in the company's office, describing the ABTA protection scheme, was sufficient to create a binding contract when PP accepted its unilateral offer by booking with an ABTA member. The words "... ABTA arranges for you to be reimbursed ..." would be understood by the ordinary reader as clearly promising a legally enforceable agreement, no matter what might have been ABTA's private intention. [The reasoning adopted in this case would probably make a manufacturer's guarantee legally enforceable, even though the buyer's contract is with the retailer

Confetti Records v Warner Music (2003)

• Confetti Records v Warner Music (2003) Times 12/6/03, Lewison J

• CC owned the copyright in a particular piece of music, but agreed "subject to contract" that it might be included on an album to be produced by DD. CC sent DD the track with an invoice, DD began to process the track, and CC then changed their minds and e-mailed DD purporting to withdraw their consent. The judge said that in the light of the earlier agreement, CC by sending the track and invoice had made an offer which DD had accepted by conduct; the contract was complete at that point and the purported withdrawal came too late.

• Acceptance by conduct can raise questions as to the acceptor's motives, since a person cannot be said to have accepted an offer of which he was not aware.

Williams v Cawardine (1833)

• Williams v Cawardine (1833) 172 ER 1101, KB• D offered a reward to anyone giving information leading to the

arrest of a murderer M. P was severely beaten by M, and subsequently gave information that led to M's arrest and conviction of the murder. The jury found as a fact that she had been motivated by revenge and public duty, and not by the thought of the reward, but the court said she was entitled to the reward nevertheless. She was aware of the offer, which had been widely advertised, and her actual motive was immaterial. If the person knows of the reward and does the thing, said Littledale J, that is quite enough. It does not say, "whoever will come forward in consequence of this notice ...".

R v Clarke (1927)• R v Clarke (1927) 40 CLR 227, High Court (Australia)• The Government of Western Australia offered a reward (and a pardon, where

appropriate) to anyone giving information leading to the arrest and conviction of certain murderers. C, an accomplice, saw the advertisement and subsequently gave evidence leading to the conviction of the others. He admitted that his only motive was to clear himself of a charge of murder and that he had no thought of claiming the reward at the time. The High Court reversed a decision of the Full Court of Western Australia allowing his subsequent claim against the Crown, distinguishing Williams v Cawardine on the basis that Mrs Williams had at least had the offer in mind, even if it was not her primary motive. There cannot be assent without knowledge of an offer, said Higgins J, and ignorance is the same thing whether it comes from never having heard of the offer or having forgotten about it. Isaacs ACJ said there were many instances in which an act done with reference to an offer would be acceptance of the offer by performance, but the same act done with reference to a different object would not. An offer of £100 to the first person to swim 100 yards in the harbour on New Year's Day would not be satisfied by a person who fell overboard and swam the distance merely to save his life.

COUNTER OFFERS

• A counter-offer is not an acceptance, and actually kills the original offer.

• The majority of the court in Tinn v Hoffman above thought this would be true even where the counter-offer contains exactly the same terms as the original offer, though a minority dictum of Honeyman J suggests the contrary.

Hyde v Wrench (1840)

• Hyde v Wrench (1840) 49 ER 132, Lord Langdale MR• D wrote to P offering to sell his farm for £1000. P

immediately responded with an offer of £950, which D took time to consider. After a fortnight, D said he was not prepared to accept the lower offer, whereupon P purported to accept D's original offer and brought an action for specific performance. In the Rolls Court, the judge said there was no contract: by making his own offer P impliedly rejected the offer made by D and could not subsequently revive and accept it.

Stevenson v McLean (1880)

• Stevenson v McLean (1880) LR 5 QBD 346, Lush J• D wrote to P offering a quantity of iron at 40s [40

shillings] a ton, net cash. P telegraphed back asking whether D would accept 40s. for delivery over two months, or if not, what time they would give. Four hours later, having had no reply, P telegraphed accepting the original offer, to find D had already sold the iron elsewhere. P sued for breach of contract, and the judge said there was no counter-offer, merely an enquiry that should have been answered.

Butler Machine Tool v Ex-Cell-O [1979]

• Butler Machine Tool v Ex-Cell-O [1979] 1 All ER 965, CA • PP offered to sell a machine to DD on certain fixed terms including a

price variation clause, which were said to prevail over any other terms in the buyers' order. DD replied by placing an order on their standard order form, in which some of the terms were significantly different and there was no price variation clause. The order form incorporated a tear-off slip which read "We accept your order on the terms and conditions stated thereon", and this was signed and returned by PP. The Court of Appeal said DD's order on different terms constituted a counter-offer, which was accepted by PP when they returned the tear-off slip without further amendment. When there is a "battle of forms", said Lord Denning MR, it will be found in most cases that the contract is complete as soon as the last form is sent and received without objection being taken to it.

• Acceptance is normally effective and the contract complete when it is received by the offeror, but special rules have been devised to cover acceptance by post. Because of the time a letter spends in the postal system, there must inevitably be a period of uncertainty for one party or the other, and since the offeror can always protect himself by stipulating a different mode of acceptance the rule of default is one that protects the acceptor.

Adams v Lindsell (1818)

• Adams v Lindsell (1818) 106 ER 250, Lord Ellenborough

• D wrote to P offering to sell some wool, and asked for a reply "in course of post". This offer was delayed two days in the post, and consequently P's acceptance was late in coming back. On the day before it arrived (but after it had been expected), D sold the wool elsewhere. The court said P was entitled to damages: his acceptance was complete when his letter was posted, before the wool was sold to the third party.

Postal Rule

• This "postal rule" applies only to acceptances, not to withdrawals or other communications, but applies even if the letter is lost or delayed in the post unless the loss or delay is caused by the acceptor's error. It is a special principle limited to letters sent by ordinary post, however, and is restricted to situations in which the parties would reasonably have expected acceptance to be signified in that way.

Entores v Miles Far East [1955]• Entores v Miles Far East [1955] 2 All ER 493, CA• PP in London sent an offer by Telex to DD in Amsterdam, and the offer

was accepted by Telex. For technical reasons it became important to know where the contract had been made. The Court of Appeal said it had been made in London: the postal rule applies only to ordinary letters. The sender of a Telex message knows almost immediately whether or not it has been received, so there is no period of uncertainty requiring a special rule. [By analogy, it would seem that the same should apply to fax messages, but the status of telephone answering machines has yet to be determined. Entores suggests that acceptance should take place only on receipt of the message, but it seems wrong that the acceptor should bear the risk of a faulty receiving machine or negligence on the offeror's part. Can it be, as some writers suggest, that a telephone answering machine is to be regarded as the subscriber's agent for the receipt of messages?]

Tenax Steamship v The Brimnes (The Brimnes) [1974]

• Tenax Steamship v The Brimnes (The Brimnes) [1974] 3 All ER 88, CA• An offeror sent by Telex a notice of withdrawal; it was sent at around 5.45

one afternoon but not read until the next day even though the receiving office had been staffed until 6.30. The Court of Appeal agreed on the facts that the withdrawal was effective from its arrival, but differed as to the legal rule to be applied. Megaw LJ said that if a notice arrives at the address of the person to be notified, at such a time and by such a means that it would in the normal course of business come to his attention on its arrival, he cannot rely on his own or his servants' failure to act in a businesslike manner to postpone the effective time of the notice. Cairns LJ, however, felt that the sender should not rely on the recipients' reading every communication at once, and that in some circumstances a notice arriving late in the working day might quite legitimately not be "received" until the following morning.

•

Brinkibon v Stahag Stahl [1982]

• Brinkibon v Stahag Stahl [1982] 1 All ER 293, HL• AA in London sent a telex to RR in Vienna accepting RR's

offer and terms of sale, and subsequently had occasion to sue for breach of contract. The Court of Appeal said the claim must be set aside because the contract had been made outside the jurisdiction (i.e. in Vienna), and the House of Lords agreed. Lord Wilberforce said there was no general rule that could cover all the possible situations that might arise with the use of Telex machines: each case must be resolved by reference to the intention of the parties, to sound business practice, and in some cases to a judgment as to where the risks should lie.

Holwell Securities v Hughes [1974]

• Holwell Securities v Hughes [1974] 1 All ER 161, CA• D gave PP an option to purchase certain property,

exercisable by notice in writing to D within six months. Within the required time, PP wrote to D exercising their option but their letter, although properly addressed, never arrived. Templeman J dismissed PP's claim for specific performance or damages, and the Court of Appeal agreed. The wording of the offer was enough to make it clear that acceptance without actual notification would not be enough.

Electronic Communication

• The growth of electronic communication has raised new (and as yet unanswered) questions about the applicability of the postal rule to communications by e-mail and via the world-wide web. On the one hand, there are those who argue that e-mail is virtually simultaneous and that the postal rule should not apply, but this takes no account of the fact that e-mail messages are sometimes rejected by the server and that the recipient may not read the message immediately it arrives. The majority of academic commentators have therefore tended to the view that e-mail should be treated as a form of mail to which the postal rule should normally apply (subject to its exclusion by the parties' clear intention).

Web site that includes a reply form

• Where the offeror sets up a web site that includes a reply form, this comes closer to instantaneous communication because the offeree can tell at once whether his acceptance has been received. There is a substantial body of opinion to the effect that the postal rule should not apply here (and a quite sustainable view that a web page, like a shop window, normally constitutes an invitation to treat rather than an offer). But given the speed at which electronic communication is still developing, there are strong policy reasons for ensuring that the rules for electronic acceptance are the same no matter which particular form of software is being used.