McKendrick Acceptance

Question 1

What is acceptance

Answer 1

A final and unqualified expression of assent to the terms of an offer, that must be communicated with the offeror

Question 2

Must the acceptance coincide exactly with the terms of the offer?

Answer 2

Generally, YES - “unqualified assent”. An attempt to vary terms = counter offer. Counter offer kills initial offer.

Question 3

Counter offer kills initial offer. What’s the rule proof?

Answer 3

Hyde v Wrench (1840). D offered to sell P his farm for £1000. P offered to buy for £950, D rejected. P said he’ll accept at £1000, but D did not reply.

Court held no contract concluded, and D’s initial offer was killed when P counter-offered, so P cannot re-accept the killed offer.

Question 4

How does Stevenson, Jacques and Co v McLean (1880) affect the rule proof in Hyde v Wrench?

Answer 4

TLDR; Mere inquiry is not a counter-offer. Also relevant for revocation and acceptance via telegram.

D made an offer to P to sell iron, and P enquired if they would accept a lower price. D decided to sell to a third party instead, sent a telegram to revoke their offer. However, P sent an acceptance telegram before D’s telegram arrived.

Court held that the inquiry was not a counter-offer, and therefore the initial offer still remained. Furthermore, P had accepted offer prior to the revocation being brought to their attention. P was entitled to recover.

Question 5

Brogden v Metropolitan Railway Co (1877)

Answer 5

Facts: M sent B a draft agreement for supply of coal. B amended agreement and returned it. No further negotiations or transfer of agreements was processed. M ordered coal from B, B supplied and M paid for it, but a dispute broke out and M denied any binding contract.

Holding/Rule: Where the original offeror receives the counter-offer and proceeds to perform the contract, the performance would be the acceptance and the contract would be based on the terms in the counter offer

Question 6

Battle of forms and acceptance. Rule proof?

Answer 6

Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd (1979)

Question 7

Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd (1979). Facts, holding? Analysis later.

Answer 7

Classic case of ‘battle of forms’. P sold machines, gave a quotation to D with terms and conditions with price variation clause. Also had a clause saying that their terms prevail over the buyer’s terms.
D gave an order for the machine with their own form, with terms and conditions without the price variation clause. There was a tear-off slip for P to return, acknowledging the terms and accepting the order.
P returned, but also attached a letter saying the order is “in accordance with our revised quotation”.
When the machine was delivered, P wanted to vary price, D refused. P sue D.
Lower court found in favour of P, but Court of Appeal found for defendants and allowed appeal.
Holding of the case isn’t so clear, but P’s original offer was met by D’s counter-offer, which P accepted when they signed and returned the acknowledgment slip, and their letter was not a counter-offer. The letter sent could be looked at in the business sense, referring to the quotation and the price, but not the small print conditions on the back of the quotation

Question 8

Analysis of Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd (1979)

Answer 8

Three judgments - same outcome but different means of reasoning.

Lawton and Bridge LJJ used traditional reasoning, looking for offer and an acceptance mirroring terms of offer - promotes certainty.
However, this approach often finds that there is no contract between parties, which does not represent real practice because there are often discrepancies between terms. Lawton and Bridge LJJ strained the facts to reach conclusion that there was an agreement, saying that the “in accordance to our quotation” simply referred to the order, and not the terms and conditions of the plaintiffs.

Denning takes the more liberal approach, again criticising the offer and acceptance approach. Advocated that as long as parties “have reached agreement on al material points, even though there may be differences between the forms and conditions printed on the back of them”. This is a flexible approach that is more consistent with commercial practicality, to find an agreement, and then work out the terms.
But this view promotes uncertainty - what is a “material point” - is the price of the goods not a material point, or is it that the order and initial price is important, but the variation clause is not?

Question 9

How does Tekdata Interconnections Ltd v Amphenol Ltd [2009] relate to battle of forms?

Answer 9

Court held that there is no general principle for battle of forms, and the traditional method of offer and acceptance must be used to determine which terms concluded the contract by ascertaining who fired the last shot, unless the intentions of the parties clearly intended otherwise.
“An offer to buy containing the purchaser’s terms which is followed by an acknowledgement of purchase containing the seller’s terms which is followed by delivery will (other things being equal) result in a contract on the seller’s terms”
In other words, courts generally willing to rule in favour of the application of seller’s terms, and the onus is upon the buyer and that a seller insisting his terms prevail (and did not sign the buyer’s tear-off acknowledgement slip) will generally be in a strong position.

Question 10

Must the acceptance be communicated to the offeror? Supporting cases?

Answer 10

Yes, for the acceptance to be valid, it must be communicated to the offeror - otherwise, an offeror could be bound by an acceptance he was unaware of.

Entores Ltd v Miles Far East Corporation (1955)
Brinkibon Ltd v Stahag-Stahl und Stahlwarenhandelsgesellschaft mbH (1983)

Question 11

Entores Ltd v Miles Far East Corporation (1955)

Answer 11

Determining when the contract was concluded by telex - which jurisdiction?
Lord Denning said that the acceptance must be communicated to the offeror for a contract to be concluded. Onus is on the offeree to ensure that the acceptance gets through to the offeror.
If the offeree reasonably thinks his message has gotten through, and the offeror did not bother to request for a repeat of the message of acceptance, then the offeror is clearly bound. ONLY if the offeror is not at fault for not receiving the message, and even though the offeree reasonably believes it was communicated - then there is no contract.

Question 12

Brinkibon Ltd v Stahag-Stahl und Stahlwarenhandelsgesellschaft mbH (1983)

Answer 12

Endorsed Entores Ltd v Miles Far East Corporation. Similar facts.

House of Lords supported the general rule, although disclaimed that it was not universal, and has to be aligned with the mutual intention of parties.

Question 13

Is acceptance/revocation for instantaneous communications when (a) the message received on the machine or (b) read by offeror？

Answer 13

Tenax SS Co Ltd v The Brimnes (1975) - In this case, it was revocation. Court held that D’s revocation sent outside of office hours did not take effect immediately, and had to be reasonably brought to the mind of P.

Therefore, Factual matrix must be referred to.
Rule is: When a reasonable offeror would access the message, taking account of all the circumstances.
• If telex is sent to a business during business hours, communication is henceforth effective even if it remains unread
• Outside of office hours or to non-business premises would have to consider other factors.
• If offeror permitted or invited this mode of acceptance, the offeror is expected to act reasonably by checking for “messages”
Risk of the failure of communication is determinative. In the event that the offeror did not act reasonably and the mode of communication is within his control, then he bears the risk. In the event where neither are blameworthy – same as two-way: offeror is favoured and offeree bears the risk, where neither is bound by a contract.

Question 14

What about instances where a method of acceptance is prescribed?

Answer 14

Generally, offeror can prescribe a particular method of acceptance, but if this method is not complied with, it depends on the terms of the offer. If the form of the acceptance is mandatory, then purported acceptance assuming a different form will not be effective. If it is not mandatory, and method of acceptance adopted differs from prescribed means, and is no less advantageous to the offeror, then acceptance may be effective to conclude contract.

Question 15

Case for prescribed method of acceptance?

Answer 15

Manchester Diocesan Council for Education v Commercial and General Investments Ltd (1970).
Acceptance was sent to the surveyor’s address, rather than the delivery address given. Courts ruled that it made no difference.

Determined that it is incumbent upon an offeror to state in clear terms that acceptance must assume a particular form, and state that the form is mandatory and that other forms will not be valid. Otherwise, any form that is equally efficacious from the POV of offeror will be considered valid.

Question 16

Is silence a valid form of acceptance? What is the classic case?

Answer 16

General rule is NO, otherwise people will make offers with statements to the effect that the offer would be regarded as accepted if silence - the law will not impose an obligation on others to take positive steps to reject unwanted offers. Silence is not a positive act to accept offers either.

Felthouse v Bindley (1862). Uncle told nephew he will buy his horse, and will take his silence as acceptance. Nephew told auctioneer that the horse had been sold, but auctioneer accidentally sold the horse. Uncle sued auctioneer. Court held that no contract had existed in the first place.
This case has been criticised because the nephew had told the auctioneer the horse was reserved - this agreement had induced performance on part of the nephew. Furthermore, it would’ve been unimaginable based on the ruling of this case, if the litigation occurred between uncle and nephew, if the nephew sued the uncle for deciding not to buy the horse afterwards. Seems like the offeree cannot rely on a promise to which he did not positively communicate his acceptance.
Compare with Brogden v Metropolitan Railway, where the counter-offer and subsequent conduct (making an order, without actually accepting the counter-offer) amounted to an acceptance.

Can also consider how in Vitol SA v Norelf Ltd (1996), the HL recognised that silence may be valid acceptance of an offer in cases where positive conduct would have otherwise taken place due to contractual obligations (in this instance, D was understood to have accepted V’s repudiation of the contract by not performing their contractual obligations that they otherwise would have); therefore, this is also an acceptance by conduct case

Question 17

Postal acceptance rule? Proof. Will the postal acceptance rule be abolished?

Answer 17

Acceptance takes place when the letter of acceptance is posted. Adams v Lindsell (1818)

The postal acceptance rule is considerably secured in the legal system, unlikely to be uprooted judicially. Rather, the courts are likely to widen exceptions to the general rule, rather than abolish it.

Question 18

What is the rule proof that the courts will likely widen the exceptions to postal acceptance rule?

Answer 18

Holwell Securities Ltd v Hughes (1974)

Russell LJ set out a number of requirements that must be satisfied before postal rule is applicable:

(1) Parties must contemplate that postal service will be used to communicate acceptance (Henthorn v Fraser)
(2) Parties can contract out of the postal acceptance rule. In Holwell Securities, the clause stated that D must receive “notice in writing”, and the court interpreted that as D must have received the writing for acceptance to take place, rather than the act of posting constituting acceptance.

Question 19

What if the letter never reached the offeror? Would there be valid acceptance? What is the rule proof?

Answer 19

There is valid acceptance even if the letter is lost.

Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879)
D applied for shares in a company but never received the letter of acceptance. Company was liquidated, and liquidator sought to recover unpaid balance from D. D denied he was a shareholder, was unsuccessful.
Court held that even though the letter went astray, it did not discharge him from the contract.

Such a rule places the onus on the offeror to check if his offer had been accepted, and prevents situations where the offeror can claim a discharged contract on the basis that the letter was lost (which would be a convenient way to allege non existence of a contract).

Question 20

Justifications for the postal acceptance rule?

Answer 20

1. Expediency - consistent rule that makes contract formation by post certain. If actual notification were required, no contract could ever be completed, and if each party would require notification, this might go on ad infinitum.
   Counter 1: It would be possible to hold that acceptance took effect when it came to notice of the offeror, whether offeree knew of this or not. Why favour the offeree, rather than the offeror?
2. Post office is the common agent of both parties. Communication to the agent immediately completes the contract.
   Counter 2: Weak argument. Contents of the sealed letter cannot have been said to be communicated to this agent, and a mere delivery of acceptance to such an agent does not logically complete a contract.
3. Minimises difficulty of proof. Easier to prove a letter has been posted, than it has been received. This depends on the efficiency of parties of how they keep incoming and outgoing letters.
   This is probably the strongest argument. The onus should be on the offeror to ascertain if his offer has been accepted or not, and he bears the risk of making the offer by post and allowing for the completion of the contract via post.

Conclusion: The postal acceptance rule is arbitrary, and is not an ideal arrangement. Regardless, either party is prejudiced when negotiations are conducted by post, and there is risk involved for both parties. Posting rule favours the offeree. It is useful in limiting the offeror’s power to withdraw his offer at will.

Question 21

Postal acceptance rule vs Telex vs Email

Answer 21

Brinkibon affirms that the postal rule does not apply to instantaneous forms of communications, and that practical significance of postal rule is likely to recede due to technological advancements.
It may be noted that Lawton LJ in Holwell Securities v Hughes did mention that the postal acceptance rule should not apply when it produces “manifest inconvenience and absurdity” - although this proposition did not gain much support, it may make all the more sense that in the modern context, parties do not normally contemplate postal means for contract formation for this very reason.

Lastly, VK Rajah in Chwee Kin Keong v Digilandmall.com Pte Ltd observed that emails should not follow the postal acceptance rule - invariably instantaneous, and prompt response is received. The general principle that acceptance must be communicated to the recipient for the contract to be valid remains.

Question 22

For unilateral contracts, what are the relevant cases?

Answer 22

1. Carlill v Carbolic Smoke Ball Co
   Communication of acceptance may be waived for unilateral contracts
2. Daulia Ltd v Four Millbank Nominees Ltd (1978)
   Offeror cannot revoke offer once offeree has embarked on performance
3. Errington v Errington (1952)
   There is no obligation for offeree to perform, but the offeror or his estate may not revoke the offer while the offeree is still performing in reliance on the offer

Question 23

Acceptance in ignorance of an offer - causal nexus between parties

Answer 23

General rule: Performance of requested act is not acceptance, unless party performing the act knew of the offer. Neither do cross-offers create a contract.
Otherwise, a party could find himself bound to a contract that he was unaware of.

Question 24

Cross-offer case?

Answer 24

Tinn v Hoffman and Co (1873)
H offered to sell T 800 tons of iron. Simultaneously, T offered H to buy iron on the same terms.
Held that simultaneous offers made in ignorance of each other are not binding.

Needs to be a causal nexus between parties! Shared intention does not create offer. Why?
• Each party needs to know when he is contractually bound
• When they can rely on the contract
• Whether there is liability
(in reality, cross-offers do not cause problems unless one side changes his mind)

Question 25

How about causal nexus for unilateral contract?

Answer 25

Performance of the requested act must be done with existence of the reward, otherwise the offeree is not entitled.

Gibbons v Proctor (1891): Police officer allowed to claim reward. Was ignorant when he gave information to a fellow officer, but by the time the information reached the superintendent, he knew of the reward

Williams v Carwardine (1833): Courts ruled that informant was entitled to reward because “she must have known” of reward, and was entitled even if she did not act from the desire of receiving the reward.
Courts are willing to IMPLY existence of knowledge, and does not inquire into the motive of the person carrying out the act.

Courts are willing to infer informant’s knowledge of offer because the offeror has received the benefit he had offered to pay for, and informants who benefit the offeror should be rewarded for doing so – particularly for meritorious claimants

Question 26

What is the Australian case where the courts did not imply knowledge of reward for causal nexus?

Answer 26

R v Clarke (1927): One of the criminals arrested for murder gave information to clear himself of a murder charge. The government had offered a reward for such information earlier. He claimed for the reward, court held that he had not relied or acted on the offer of a reward.
Australian court emphasized that the act has to be done in reliance, and acted on because of the reward - giving the example of a reward to voluntarily swim a distance would not apply to a person who was thrown overboard and swam the same distance to save his own life.

While this contradicts Williams v Carwardine, it may be just that in R v Clarke, the informant was not a meritorious informant. Otherwise, there is not much to lose by implying knowledge of the reward and disregarding the motive of performing the act, since the offeror benefits either way.

Question 27

How about revoking an offer via post? Case?

Answer 27

For valid revocation, the revocation via post must be received by the offeree.

Byrne and Co v Van Tienhoven and Co (1880)
D sent and offer to sell to P, letter took 11 days to arrive. P immediately accepted via telegram.
However, during that 11 days, D revoked their offer via letter, but only arrived after P had sent their acceptance.
P sued for damages for non-delivery, while D denied liability and the existence of contract.

Even though both parties were never actually in agreement at any point in time, the court held that a contract had existed because ACCEPTANCE took place when TELEGRAM WAS SENT, but NOT REVOCATION.

Merits is that this is consistent with the postal acceptance rule. The problem with this case is that the postal acceptance rule is a rigid, arbitrary rule that is inconsistent with how there should be communication and agreement between contracting parties - in which case the rigidity of the postal acceptance rule poses obstacles that may prevent this, especially in Byrne where revocation was intended even before the offer was properly communicated to the offeree.

Question 28

Terminating an offer

Answer 28

General rule is that offer may be withdrawn any time before it has been accepted, and must be communicated to the offeree prior to acceptance.

Can look at Byrne and Co v Van Tienhoven and Co.

Question 29

Termination of Offer by a third party AND can an offeror be bound if he promise to keep the offer open for a certain period of time?

Answer 29

Dickinson v Dodds (1876)

(1) Revocation communicated to the plaintiff by a third party was effective to withdraw offer. In this case, the third party was the defendant’s agent, and so he was reliable.

D said he would keep offer open until Friday, but was revoked before then to sell to another.

(2) This case is an authority that a promise to keep an offer open for a particular period of time is not binding, unless offeree provides consideration for the promise to keep offer open.

Question 30

Termination of Offer because of a change in circumstances. Two cases.

Answer 30

Courts are willing to imply a term that the offer is valid condition on the circumstances.
If, and when the offer was made subject to certain conditions, and such conditions are not present, then the offer is terminated. Example would be if the offer is made conditionally that the subject matter of the contract remains in a good condition until acceptance, but the subject matter deteriorates, then the offer cannot be accepted. A condition is implied into the offer. (Financings Ltd v Stimson (1962))
Also, when a fundamental change in the circumstances on which the terms of the offer were based, the offer is lapsed because of the implied term where the offer is interpreted to have a condition implied in the offer.
Also Norwest Holdings Pte Ltd v Newport Mining (2010) for the purchase of a mine in Sichuan during the earthquake.