Acceptance

Acceptance

By the end of this lecture you should:

1. Have understood what acceptance is;

2. How acceptance can be made; and

3. When acceptance will be valid.

Acceptance

The formalities of a contract are:

• Offer;

• Acceptance;

• Consideration; and

• An intention to create legally binding relations.

Definition of Acceptance

Acceptance can be defined as:

the unconditional assent to all the terms of the offer

No acceptance

Acceptance will not occur when:

1.The acceptance amounts to a counter offer

2.The words ‘subject to contract’ are used

Acceptance

Acceptance can occur either:

1. Expressly; or

2. Impliedly.

Implied acceptance

Brogden v Metropolitan Railway Co.

(1877) 2 App Cas 666 HL

Silence is not acceptance

Felthouse v Bindley

(1862) 11 CBNS 869

Entores Ltd v Miles Far East Corporation

[1955] 2 All ER 493

Lord Denning said : ~

Suppose, for instance, that I shout an offer to a man across a river ... but I do not hear his reply because it is drowned by an aircraft flying overhead. There is no contract at that moment. If he wishes to make a contract, he must wait until the aircraft is gone and then shout back his acceptance so that I can hear what he says.

Powell v Lee(1908) 99 L. T. 284

Channell J said:

There must be notice of acceptance from the contracting party in some way, and the mere fact that the managers did not authorise such a communication, which is the usual course adopted, implies that they meant to reserve the power to reconsider the decision at which they had arrived.

Valid Acceptance

In order for acceptance to be valid we have seen that acceptance must be: ~

1. Communicated to the offeror; and

2. If a body is represented, made by a person who is authorised to accept.

Exceptions

There are some exceptions to the normal rules that apply to acceptance. These exceptions can be found in: ~

1. The postal rule; and

2. Unilateral contracts.

The Postal Rule

What is the postal rule?

The Postal Rule

Adams v Lindsell

(1818) 106 ER 250

The Postal Rule

Cross reference Adams v Lindsell with

Byrne and Co v Van Tienhoven and Co

(1880)

The Postal Rule

Holwell Securities v Hughes

[1974] 1 All ER 161 CA

Holwell Securities v Hughes

Russell LJ said: ~ The relevant language here is, ‘the said option shall be exercisable by notice in writing to the intending Vendor ... ’ a very common phrase in an option agreement. There is, of course, nothing in that phrase to suggest that notification to the defendant could not be made by post. But the requirement of ‘notice ... to’, in my judgement, is language which should be taken expressly to assert the ordinary situation in law that acceptance requires to be communicated or notified to the offeror, and is inconsistent with the theory that acceptance can be constituted by the act of posting ... as acceptance without notification.

Holwell Securities v Hughes

Russell LJ said: ~

The answer might well be that in the circumstances the defendant had impliedly invited communication by use of an orifice in his front door designed to receive communications.

Acceptance & the postal rule

Re London and Northern Bank ex parte Jones

[1900] 1 Ch. 220

Prescribed methods of communication

Yates Building Co. Ltd v Pulleyn & Sons (York) Ltd

(1975) 119 SJ 370

Unilateral Contracts

Carlill v Carbolic Smoke Ball Company

[1893] 1 QB 256

Summary

1. When the words subject to contract are used, or if the acceptance inserts new terms into a contract, so as to amount to a Counter Offer, no acceptance will occur.

2. Acceptance can occur either expressly or impliedly through conduct.

3. Silence cannot constitute acceptance

4. The postal rule states, when it is applicable, that acceptance will be deemed effective when the letter of acceptance is posted.

5. Acceptance will not be valid until it is communicated to the offeror unless the postal rule is valid, or the offer was made unilaterally.