ACCEPTANCE IN LAW OF CONTRACT
- ACCEPTANCE
Definition
s.2(b) : ‘when the person to whom the proposal is made signifies
his assent thereto, the proposal is said to be accepted’
s.2
(c) calls the person accepting the proposal the ‘promisee’
Mirror
principle
Acceptance
must be accepted on exactly the same terms as the offer without any variation
or modification – it must be absolute and unqualified (s.7)
If
the parties are still negotiating, an agreement is not yet formed:
LAU
BROTHERS & CO v CHINA PACIFIC NAVIGATION CO LTD [1965] 1 MLJ 1
In this case, negotiations
for the delivery of logs were conducted through a series of telegrams and
letters. Whilst still in negotiating stage, the defendants withdrew. Was there
a binding contract between two parties?
The
court held that the parties were still in a state of negotiation and no
agreement was formed. Therefore, the defendants were justified in withdrawing.
Any
modification / variation to the offer is a counter-proposal and is equivalent
to rejection.
HYDE
v WRENCH (1840) 3 Beav. 334
The
defendant offered to sell his estate to the plaintiff on 6 June for 1000. On 8
June, in reply, the plaintiff made a counter proposal to purchase at 950. When the defendant
refused to accept this pffer on 27 June, the plaintiff wrote again that he was
prepared to pay the original sum demanded.
The court held
that no contract existed between them. The plaintiff had rejected the original
proposal on 8 June so that he was no longer capable of accepting it later.
Request
for additional information is not a counter-offer.
STEVENSON
v MC LEAN (1880) 5 QBD 346
The
defendants wrote to the Plaintiffs offering to sell them iron at 40s, nett
cash, and indicating that he would hold the offer open till Monday. On Monday
morning at 9.42, the plaintiffs sent a telegram to the defendant saying:’
Please wire whether you would accept forty for delivery over two months, or if
not, longest limit you would give.’ No response to this telegram was received
from the defendant, but after receiving it, he sold the iron to another
purchaser and then at 1.25 pm sent a telegram to the plaintiffs advising them
of the sale. At 1.34 pm before the defendant’s telegram was received, the
plaintiff sent the defendant a further telegram accepting the original offer.
The plaintiffs claimed that the last telegram was an acceptance of the
defendant’s offer.
Held –
the court agreed with the plaintiffs’ claim and held also that the principle in
Hyde v wrench could not be applied in this case.
Acceptance
must be communicated with some positive action – silence cannot be imposed as
acceptance
FELTHOUSE V. BINDLEY (1862), 11 Cb (NS) 869
Is the leading English case in contract law where the long-standing maxim
that "silence does not amount to acceptance" was first expressed. Mr. Felthouse wanted to buy one of his nephew's
horses. Felthouse wrote to his nephew who wanted to sell the horse to him,
stating that "If I hear no more about him, I consider the horse
mine..." Subsequently, there was no notice from his nephew and Felthouse
considered the horse his own. The horse was not delivered to uncle Felthouse
and later there was an auction at the nephew's property for the other
livestock. The nephew told the auctioneer, Mr. Bindley, not to sell the horse
at the auction. By accident Bindley sold it anyway. Felthouse sued the
auctioneer in the tort of conversion however the action could only succeed if
it could be shown that Felthouse actually owned the horse. The court ruled that
Felthouse did not have ownership of the horse as there was no acceptance of the
contract. Acceptance must be communicated clearly and cannot be imposed due to
silence of one of the parties. The uncle had no right to impose a sale through
silence whereby the contract would only fail by repudiation. Though the nephew
expressed interest in completing the sale there was no communication of that
intention.
Acceptance
must be within reasonable time
s. 6(b) :
What
amounts to ‘reasonable time’ is a question of fact depending on the
circumstances of each case.
Acceptance
through Post
It
is an exception of the general rule that acceptance must be communicated.
s.4
: Communication of acceptance is complete:
i.
As against the
proposer, when it is put in a course of transmission to him, so as to be out of
the power of the acceptor.
ii.
As against the
acceptor, when it comes to the knowledge of the proposer.
|
Acceptance
through Telex, Phone and e-mail
For
acceptance through telex, fax and telephone, the same principle as that of
instantaneous communication applies i.e. it must be communicated to the offeror
to be valid
ENTORES LTD V. MILES
FAR EAST CORP [1955] 2 QB 327, CA.
Is a landmark English
decision in contract law on the moment of acceptance of a contract over telex.
Lord Denning found that the regular postal rule did not apply for instantaneous
means of communications such as a telex. Instead, acceptance occurs where the
message of acceptance is read. Entores was a London-based trading company that
sent an offer for the purchase of copper cathodes by telex from a company based
in Amsterdam. The Dutch company sent an acceptance by telex. The contract was
not fulfilled and so Entores attempted to sue the owner of the Dutch company
for damages. The controlling company, Miles Far East Corp., was based in the
U.S. and so Entores could only bring the action in the U.S. if it could be
found that the contract was formed in London rather than Amsterdam. Lord
Denning found that the contract was formed in London. He noted that the
instantaneous nature of telex meant that regular rules of acceptance by post
did not apply. Similar to a contract formed over the telephone, if the line
goes dead before acceptance is communicated the offeror will never know but the
offeree would be able to tell. As such, the offeror should not be bound.
BRINKIBON V. STAHLUND
STAHL MBH
Facts: This is a
conflict of laws case, in which Brinkibon wants to sue, in English
jurisdiction, an Austrian company for breach of an alleged contract for the
supply of steel. Brinkibon received a
telex from the Austrian company which constituted a counter offer. Brinkibon then sent a telex to the Austrian
company which constituted acceptance.
Brinkibon alleged a breach of contract, and wanted to sue. The issue was whether the contract was made
in England (in which case Brinkibon could sue) or in Austria (Brinkibon could
not sue). It was held that no contract
existed. The contract was made in Austria.
Brinkibon failed to show that that the contract was made in the English
jurisdiction, because the court applied the reception rule, and held that
acceptance was made when the telex reached Austria, and from this, that the
contract was created in Austria -- hence Austrian jurisdiction applies. The general rule “is that a contract is
formed when acceptance of an offer is communicated by the offeree to the
offeror. And if it is necessary to
determine where a contract is formed it appears logical that this should be at
the place where acceptance is communicated to the offeror.” Brinkibon’s conduct (opening a bank account
for payment) is seen as acceptance as well.
Ratio: A contract
which is brought into existence by an acceptance communicated by telex is
deemed to be mad e at the place at which the telex was received. This is an
exception to the "postal rule." So the "postal rule" does
not apply to fax transmissions.
For
communication through e-mail – the main issue that needs to be addressed is
whether acceptance through e-mail constitutes instantaneous communication or
delayed communication.
If
it is non-instantaneous, then the postal rule will apply that is acceptance is
deemed complete once the acceptor click the SEND button with his mouse.
This
is looking at the nature of the e-mail itself where any message send will be
channeled to a service provider before it reaches the intended recipient –
similar to that of using postal service
Thank you and see you in next part
ACCEPTANCE IN LAW OF CONTRACT
Reviewed by Kamaruddin Mahmood
on
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