#17252 - Communication Of Acceptance - GDL Contract Law

In some cases acceptance by conduct is permissible:

• This is the case in unilateral contracts: Carlill v Carbolic Smoke Ball Co (1893)

  • This may seem difficult to reconcile with judicial points re ad idem

• Incomplete negotiations may be overtaken by the parties’ subsequent conduct.

  • Brogden v Metropolitan Railway (1876) – Brogden supplied coal to MR for two years without a contract. Railway drew up contract to continue relationship. Brogden made a counter offer (left some parts blank). This was put in the desk draw.

    • HoL held that Brogden’s counter-offer had been accepted by the conduct of the company in placing orders for coal on its terms.

    • Lord Blackburn: “if both parties have acted upon that draft and treated it as binding, they will be bound by it”.

  • British Steel Corporation v Cleveland Bridge [1984] – shows limits of the realism of Brogden

    • British Steel received a letter of intent from Cleveland, expecting a contract to follow shortly. Requested BS started manufacture immediately. Parties failed to reach a consensus.

    • Held no contract had arisen (BS could therefore claim on quantum meruit basis), Goff J found that it was impossible to say what the terms of this purported contract were.

    • No unilateral contract had arisen as terms were undecided.

  • Professor Atiyah argues that this case sets a limit to what can be done by taking a “realistic” view of contract formation.

Acceptance by Silence/Inactivity – Generally not held to be valid acceptance.

• Felthouse v Bindley (1862) – Uncle wrote to Felthouse offering to buy a horse, saying “If I hear no more about him, I consider the horse mine at 30 15s”. F never replied, but instructed auctioneer to sell everything except his horse which was already sold. Auctioneer sold horse.

  • Action for tort of conversion against auctioneer failed as there was no acceptance on the facts.

  • This case actually mostly turns on its facts and the Statute of Frauds.

  • Willes J; “it is also clear that the uncle had no right to impose upon the nephew a sale of his horse …unless he chose to comply with the condition of writing to repudiate the offer”.

  • Silence places an unnecessary burden on the offeree.

  • This is an effective check upon the practice of “inertia selling”

    • Providing goods to consumers and stipulating that if no action is taken to return them within a specified time, they will be deemed to be accepted.

• The Leonidas D [1985]: Dispute arose in connection with a charter party, and had been referred to arbitration. Then nothing happened for 5.5years. Shipowners argued (inter alia) that the arbitration agreement had been mutually abandoned by an agreement to be inferred from the parties’ inactivity.

  • CA held that this inference was wrong

  • Goff LJ: “silence and inaction … [are] just as consistent with his having inadvertently forgotten about the matter; or with his simply hoping that the matter will die a natural death if he does not stir up the other party; or with his office staff, or his agents, or his insurers, or his solicitors, being appallingly slow”.

• Vitol v Norelf [1996]

  • Buyers of a cargo of propane sent a telex to the sellers in which they recorded that since the vessel would complete loading outside the contractually agreed period, they were repudiating the contract. The sellers made no response to this message but took no further steps to perform contract.

  • Lord Steyn: “Sometimes in the practical world of businessmen an omission to act may be as pregnant with meaning as a positive declaration.”

• Re Selectmove [1995] – S owed the IRS a large amount of tax. The MD offered a restructuring to the tax collector, who in turn said he would seek approval from his superiors. IRS was silent for 3 months until it threatened to wind up company for arrears.

  • Gibson LJ drew a distinction between cases where an offeror declares that silence will amount to acceptance, and cases in which the offeree proposes that this meaning should be attached to his silence

  • The latter would be acceptable case where silence=acceptance.

• Dresdner Kleinwort Ltd v Attrill [2013] – bank announced a bonus pool of 400million had been created for distribution. Later sought to retreat from this.

  • CA held that this was an offer which bound the bank in spite of absence of acceptance.

  • Two reasons:

    • Bank had disposed with need for acceptance: no one hearing the promise expected to be bound only if they accepted it.

    • The nature of the promise is inconsistent with the notion of individual acceptance (if two had accepted did bank have to pay everything to those two)

Transmitting Acceptance:

• Eliason v Henshaw (1819) – USA Case – Offer to purchase flour was made by letter, carried by wagon, requested that acceptance be made by return of wagon. offeree instead posted letter at Gerogetown, this took longer to arrive.

  • Held no acceptance: If the offeror makes it clear that only one form of communication will amount to a satisfactory response, freedom of contract demands that his stipulation be upheld.

  • Winfield critiques: if the offeror had received a posted acceptance at the same time or earlier than he would have received a reply by return of wagon, he could not have denied its validity.

• Entores v Miles Far East Corporation [1955] A London based company made an offer by telex to buy goods from a company in Amsterdam. Question turned on where the contract was concluded.

  • CA held that acceptance occurred on receipt of the message in London, so that the contract had been made within the jurisdiction.

  • For instantaneous communications therefore acceptance occurs at the place where the communication is received.

  • Denning LJ also laid down rule that where offeree is aware acceptance has not been received it is their responsibility to resend it. If they are not aware, and the offeror does not request it then there is no contract.

• The Brimnes [1975] The case turned on whether a notice withdrawing a ship from service had been received before or after an instalment of hire was paid.

  • The notice of withdrawal had been sent by telex between 17.30 and 18.00, but had not been seen by the defendants until the following morning (held due to the D’s fault Therefore the withdrawal was communicated in time as it would have been received ordinarily.

The Postal Rule

• Adams v Lindsell (1818) - simple but arbitrary rule is imposed; a posted letter of acceptance takes effect at the moment it is posted.

  • Based on grounds of finality (how does he know acceptance has reached offeror etc). Not a great burden as the letter of acceptance has probably arrived.

• Simon Gardner argues the rule arises around the time of the introduction of the penny post. Back then sending was considered the same as delivery – enthusiasm of the day with the new system.

  • But if two cross-offers do not make a contract, how can the parties be ad idem when only one party knows of the acceptance.

• Neutral explanation: if one notes that in posting a letter of acceptance, the offeree (in the language of Lord Blackburn in Brogden’s case, above) has done “an extraneous act which clenches the matter”. He cannot get his letter back. The moment of posting is therefore the point in time at which he commits himself.

• Household Fire Insurance Co v Grant (1879) – the letter and acceptance is still valid even if the letter is lost or destroyed in the post.

  • Grant offered to buy shares in the company. Letter of acceptance was lost in the post. Company...