#2242 - What Constitutes Acceptance - Contract Law

Acceptance

Requirements

1. Correspondence of acceptance with the offer – must mirror the offer exactly

• Counter Offers

  • To be valid, an acceptance must be unqualified – changing a term, quantity, subject matter etc.

    • Is making a counter offer which is then up to the original offeror to accept or reject as they will

    • This doesn’t mean there has to be precise verbal correspondence with the original offer, however

      • Lark v Outhwaite [1991]:

    • Similarly, a reply which adds something (e.g. extra time to pay) may be effective so long as

• Battle of Forms

  • If the parties purport to conclude a contract by exchange of forms which are incompatible

    • E.g. X offers to sell goods on terms X*

    • Y “accepts” by placing an order on his terms Y*.

    • X delivers the goods with invoice X* and Y receives the goods without objection.

      • Then who wins?

  • Butler v Ex-Cell-O Corporation (England) Ltd [1979]: Seller insisted on price variation clause, buyers sent letter spelling out different terms with no price variation clause, sellers sent back acceptance form to buyers.

    • Lord Denning:

      • Looking at whole of the correspondence, clear that buyers intended contract to be on their terms, not the seller’s

        • And by doing so, fired “the last shot”

          • Which the sellers made no objection to.

• Lawton LJ: Battle of the forms can be analysed as follows:

• Offer Sellers made an offer including price variation clause

• Counter Offer(1) Buyers then submitted a new set of terms so different on material points (inc. no price variation clause) they could only be seen as a counter offer(1)

  • No additional Counter Offer(2) The sellers failed to make any objection nor any additional terms nor a rejection of the counter offer(1)

    • Acceptance of Counter Offer (1) Thus, the return of the form by the sellers constituted an acceptance of the counter offer

      • Binding Contract And they are bound by the terms of the buyer’s counter offer(1).

2. Given in response to an offer

• A valid acceptance is one made in response to a known offer, not one made in ignorance, even if matching terms.

  • Cross Offers

    • Two identical cross offers in ignorance aren’t a contract

      • Even if they match in terms

        • until one is agreed

    • Shared intention isn’t a contract

  • Reward

    • Person who is ignorant of a reward is not contractually entitled to it.

      • Gibbons v Proctor [1891]: Police officer claimed reward for info because he had found out about the reward before the superintendent had received the information, even though at the time of giving info he didn’t know there was a reward.

        • Held: Officer entitled to reward.

      • R v Clarke (1931): Reward offered for information leading to the arrest of murderers. C gave that information, but admitted he had forgotten about the reward at the time

        • Held that as there was no intention to earn the reward, C was not entitled to get it as he had not accepted it.

3. Made by an appropriate method

• Absence of proscribed method of acceptance

  • In absence of any stipulation, you must conduct yourself in such a way that objectively shows your intention to accept.

  • Such as by conduct:

    • Brogden v Metropolitan Railway (1877): B supplied M with coal for two years without contract. M wished to regulate this and sent a draft contract to B. B added a clause, sent it back and said “approved”. M put it in a drawer. Two years later M ordered coal and B refused. M claimed breach of contract.

      • Lord Blackburn: If X sent a letter to Y saying, ship some goods for price Z, ship as soon as you receive this letter if you accept it, and Y then sent the cargo.

        • Y would be bound by his conduct as an acceptance

          • And X would be bound to pay owing to his manner of offer.

        • If both parties act upon a draft

          • It is equally binding

            • Because that is the clear intent that it should be so (otherwise neither party would either order the coal or supply it)

    • BUT RTS Flexible Systems RTS sent a letter of intent to M saying that they intend to form a contract with them, but that in the mean time, M should continue with the work they were doing. Is that a contract?

      • Lord Clarke

        • The moral of this story is to agree first and contract later

        • Whether there is a binding contract between the parties and what terms depends on what they have agreed

        • It depends not upon on their subjective state of mind

          • But upon a consideration that looks at words or conduct,

            • and whether that leads to objectively to a conclusion that they intended to create legal relations..

            • And had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations

        • The mere fact that work has been done does not mean there is a contract

    • British Steel

      • Robert Goff J

        • No contract even though agreement had been fully executed

          • But fact that work has been done = strong evidence that strong contract in place for the parties.

        • However, even though work done, the presence of active disagreement means that cannot be contract on these facts

          • So answer to claim = restitution, not breach of contract.

  • Or in battle of forms cases, where you fail to object to the “last shot fired”

• Where there is a prescribed method of acceptance

  • Technically offeree must communicate acceptance by the proscribed way, but courts reluctant to enforce this if acceptance doesn’t disadvantage offeror.

    • MDC for Education v Commercial and General Investments Ltd [1970]: M invited tenders on a particular form, stating that person who won would be informed by address given. M actually sent to C’s surveyors acceptance rather than C. C held no contract

      • Held that M had stipulated the method so could waive it

        • And that C was not disadvantaged by M sending the letter to surveyors

          • And mode of acceptance not the sole permitted means of acceptance.

    • RTS Flexible Systems

      • Lord Clarke

        • RTS could surely not have refused to perform the contract pending a formal contract being signed and exchanged, despite a contractual term to that effect

          • If reasonable honest businessman, we conclude that whether RTS or Muller man,

            • he would have concluded that parties intended work should be carried out for agreed price

            • Without the necessity for a formal written agreement, which had been overtaken by events

• But you generally can’t accept by silence

  • Felthouse v Bendley (1862): C asks N to sell horse to him, says “here’s my offer, if I hear nothing = mine”. N tells D not to auction the horse to anyone else, but D does so anyway by mistake. C sues.

    • Wiles J: Uncle had no right to impose on his nephew sale of the horse

      • Unless he chose to accept it

      • N had intention to sell

        • But had done no actual act of acceptance so is therefore not bound.

  • Miller: if X is willing to accept by silence, and O waives right to communication

    • Law should not interfere.

  • Chan Wishart: policy decisions behind this are

    • Silence is too ambiguous

    • Acceptance must be communicated so that offeror knows when he is bound by contract – much harder with just silence

    • Prevents Z exploiting X’s inertia by assuming acceptance in lieu of any response

  • BUT....

    • Silence means different things in different contexts

    • Lack of a response should not destroy a contract if an offeror who has invited acceptance by silence when the offeree relies on this invitation.

4. Communicated to the offeror

• Generally, offeree must accept offer from offeror

  • Chen Wishart: only then can offeror know that he is bound by the terms of the contract.

    • Different rules apply depending on the method of communication.

• Two way instantaneous methods of communication

  • Entore v Miles Far East Corp [1955]: Facts concerned “instantaneous transfer” not postal acceptance

    • Denning LJ: contract only complete when acceptance communicated to the offeror and comes to offeror notice.

      • If fault in the line or problem in communication

        • Then only when offeror receives the acceptance is the contract formed (risk with offeree even if he reasonably believes it has got through)

      • Exception = where fault lies with the offeror (i.e. by not trying to rectify the problem after being cut off)

        • and offeree reasonably believes the message has got through (via doctrine of estoppel).

• One way instantaneous

  • E.g. email, text message, answer machine

    • Essentially where message is sent instantly but both parties are not “present” on the other end of the line.

      • Lord Wilbeforce: no universal rule can cover all such cases

        • Must be resolved with reference to the intentions of the party

        • Sound business practise

        • Occasional judgement where risks should lie

  • Acceptance = When reasonable offeror would access the message, taking account of all the circumstances

    • Tenax SS Co Ltd v The Brimnes [1975]:

      • Held If acceptance is communicated during office hours in a business,

        • acceptance/revocation effective when it got to the “telex” machine regardless whether read

          • B/c Invited method by offeror is expected to be checked reasonably often

            • unless offeror indicates when he won’t be around/ when likely to check again.

• Where method of communication fails

  • Brinkibon Case [1982]:

    • Where offeror has taken on the risk

      • E.g. Ring me to confirm offer, but my answer phone does not work

        • It is implied from the offer that the offeror will keep the answer phone in good condition

          • so may be liable for any break down if he invited that method of acceptance.

    • If the break down can’t be either person’s fault (e.g. telex not delivered, email sever breaks down)

      • Then Denning rule should apply

        • and offeree takes the...