Modes of Acceptance

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An acceptance must be communicated for it to be effective and valid. The mental assent of both parties is not required but the external manifestation should exist. The acceptor must dos something in order to notify his acceptance.

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For example, he should communicate his acceptance of the offeror. This can be illustrated in the case of Brogden v Metropolitan Railway Co (1877) 2 App Cas 666. In this case, the defendants had for some years supplied the plaintiffs with coals. It was suggested by the defendants that a contract should be entered into between them.

After their agents had met, the terms of the agreement were drawn up by the plaintiffs’ agent and sent to the defendants. The head of the defendants’ firm filled up certain parts of the agreement which had been left blank, inserted the name of the proposed arbitrator, wrote “approved” at the end of the page, and signed his own name. The defendants’ agent sent the document back to the plaintiffs’ agent, who put it in his desk. Nothing further was done to execute the agreement. For some time, both parties acted in accordance with the arrangements stated in the document.

Subsequently, the defendants declined to continue the supply of coals in this manner. The plaintiffs brought an action for damages for breach of contract. The defendants denied the existence of any contract for the supply of coals. the House of Lords held that there was no acceptance of the offer. Although there may be mental assent, the act of the plaintiff’s agent putting the document into his desk would not amount to communication of the acceptance. However, the House of Lords held that by virtue of the course of dealings of the parties in the ordering and supply of the coals, such conduct amounted to an acceptance.

The communication of an offer and an acceptance, which are the requirements of a valid agreement, is stated in Section 3 of the Contracts Act 1950. It was described that the communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting, or revoking, by which he intends to communicate the proposal, acceptance, or revocation, or which has the effect of communicating it. Communication of an acceptance is also illustrated in the Contracts Act 1950.

It was described in Section 4(2) of the Contracts Act 1950 when the communication of acceptance will be complete. It was stated in Section 4(2)(a) that the communication of acceptance against the proposer is complete, when it is put in the course of transmission to him, so as to be out of the power of the acceptor. It was stated in Section 4(2)(b) that the communication of acceptance as against the acceptor is complete when it comes to the knowledge of the person whom it is made to who is the proposer.

This is further explained in Illustration (b) that the communication of the acceptance is complete as against A, the proposer, when the letter is posted; and as against B, the acceptor, when the letter is received by A, the proposer. Besides that, Section 9 of the Contracts Act also describes the mode of acceptance. It provides that as far as an acceptance is made in words, the promise is said to be express. If the acceptance is made otherwise than in words, the promise is then said to be implied. Thus, an acceptance can be made through conduct.

Section 8 of the Contracts Act provides for such acceptance where it is through the performance of conditions in a proposal. This can be seen in the case of Carlill v Carbolic Smoke Ball Co [1892] 2 QB 484; [1893] 1 QB 256. In this case, , the defendant, a proprietor of a medical preparation called “The Carbollic Smoke Ball” issued an advertisement offering to pay a sum of money to person who contracted influenza even after using the ball in the prescribed manner and time. Defendant banked in a sum of money to gain the confidence of the public.

Plaintiff bought and used the ball in the manner prescribed and caught influenza. She claimed for the compensation but the defendant refused to compensate her. She then sued the defendant. Defendant contended that the advertisement was a mere puff and was not intended to create a binding obligation. Court of Appeal held that an offer can be made to the world and it becomes a contract when any person performs the condition. It was also mentioned in Section 7(b) of the Contracts Act that where the mode of cceptance is specified in the offer, the acceptor must communicate his acceptance in that mode. If no mode is specified, acceptance by any usual and reasonable manner which shows the acceptor’s intention to accept is sufficient. There are a few types of communication of acceptance. First is via post or telegram. There is a difficulty in this type os communication of acceptance due to the time lag between sending and receiving and in situations where the acceptance is not received by the offeror without the fault of either party.

The general rule at common law is that acceptance is complete when it is brought to the notice of the offeror. But it was stated in the postal rule that an acceptance is complete when the letter containing such acceptance is posted, or when the telegram containing such acceptance is handed in. This can be seen in the case of Household Fire and Carriage Accident Insurance v Grant (1879) 4 EX D 216; 41 LT 298, CA.

In this case, the defendant made an application for shares in the plaintiff’s company under circumstances from which it must be implied that he authorised the company, in the event of their allotting to him the shares applied for, to send the notice of allotment by post. The company did allot him the shares, and posted a letter duly addressed to him containing the notice of allotment, but it was found as a fact that the letter never reached its destination. The defendant never paid the price of the shares as stated in the application.

Subsequently, the company went into liquidation and the official liquidator applied for the unpaid price of the shares from the defendant. The defendant declined to pay on the ground that he was not a shareholder. The Court of Appeal affirmed the judgment of Lopes J and held that the defendant was liable as a shareholder. In this case, the Court applied the postal rule. Thus, the communication of the company’s acceptance of the defendant’s application for, and allotment of shares which was sent by post was complete once it was posted.

Thesiger J explained the rationale of the postal rule as follows: “I see no better mode than that of treating the post office as the agent of both parties … But if the post office be such common agent, then it seems to me to follow that, as soon as the letter of acceptance is delivered to the post office, the contract is made as complete and final and absolutely binding as if the acceptor had put his letter into the hands of a messenger sent by the offerer himself as his agent to deliver the offer and receive the acceptance.

I am not prepared to admit that the implication in question will lead to any great or general inconvenience or hardhip. An offerer, if he chooses, may always make the formation of the contract which he proposes dependent upon the actual communication to himself of the acceptance. If he trusts to the post he trusts to a means of communication which, as a rule, does not fail, and if no answer to his offer is received by him, and the matter is of importance to him, he can make inquiries of the person to whom his offer was addressed.

On the other hand, if the contract is not finally concluded, except in the event of the acceptance actually reaching the offerer, the door would be opened to the perpetration of much fraud, and, putting aside this consideration, considerable delay in commercial transactions, in which despatch is, as a rule, of the greatest consequence, would be occasioned; for the acceptor would never be entirely safe in acting upon his acceptance until he had received notice that his letter of acceptance had reached its destination”.

The application of the postal rule can also be seen in the case of Adams v Lindsell (1818) 1B & Ald 681. In this case, the defendants, who were dealers of wool, had on September 2, written to the plaintiffs, woollen manufacturers, offering to sell to them a number of fleeces. They required an answer “in course of post”. The letter was misdirected by the defendants, and consequently was not received by the plaintiffs until September 5. On the same evening, the plaintiffs wrote an answer, agreeing to accept the offer on the terms proposed.

The acceptance did not reach the defendants until September 9. On September 8, the defendants, not having received an answer on September 7, as they had expected, sold the wool, to a third party. The Court applied the postal rule of acceptance and held that the acceptance was complete as against the defendants on September 5. For example, prior to the revocation of their offer through the sale of the wool to the third party on September 8.

The Court held that if the rule was that no contract could be formed until the acceptance was actually received, no contract could ever be completed; for if the defendants were not bound by their offer till the answer was received, the plaintiffs ought not to be bound till after they had received the notification that the defendants had received their answer and assented to it, and so it might go on ad infinitum. An acceptance should be made in the usual and reasonable manner. It can be seen in the case of Henthon v Fraser[1892] 2 Ch 27.

In this case, the claimant received a note from the defendant with an offer to purchase a certain property within 14 days. The claimant responded to the offer with an acceptance posted the next day via mail. The defendant withdrew the offer before receiving the acceptance, but after the acceptance was posted. Court of Appeal inferred that both parties would have contemplated that the letter be sent by post. Lord Herschell stated: “In the present case an authority to accept by post must be implied.

Although the Plaintiff received the offer at the Defendants’ office in Liverpool, he resided in another town, and it must have been in contemplation that he would take the offer, which by its terms was to remain open for some days, with him to his place of residence, and those who made the offer must have known that it would be according to the ordinary usages of mankind that if he accepted it he should communicate his acceptance by means of the post where the circumstances are such the acceptance is complete as soon as it is posted”.

In the case of Holwell Securities Ltd v Hughes [1974] 1 WLR 155. In this case, the defendant issued a grant to sell a property at 571 High Road, Wembley. It contained a clause stipulating that there must be notice in writing within six months in order to exercise the option. The claimants sent a letter exercising the option. It was lost in the mail and was never received by the defendant. The Court placed much emphasis on the meaning of notice which must mean that it must be known or intimated to the vendor who never was since the letter carrying the information went astray.

Lawton Lj referred to the postal rule but held that it would not apply if the offer expressly specifies that the acceptance must reach the offeror and if application of the rule causes “manifest inconvenience and absurdity”. In the case of Lee Seng Heng & Ors v Guardian Assurance Co Ltd [1932] MLJ17. In this case, the plaintiffs insured their stock in trade with the defendants against fire. Subsequently, a fire broke out on the insured premises and the plaintiffs made a claim under the policy.

The defendants’ solicitors wrote to the plaintiffs saying that on the date of the fire, the policy had ceased to exist as they had previously written to the plaintiffs cancelling the policy. This letter was never received by the plaintiffs as there was no post office at Buloh Kasap. The nearest post office was at the town of Segamat and the practice at Segamat was to send a postman to Buloh Kasap only when the amount of correspondence justified a special journey. The letter in question had been kept at Segamat and had only been brought to Buloh Kasap by the postman after the fire.

As the plaintiffs’ premises had been burnt down, the addressee could not be found. Munson CJ stated that “The only point, therefore, left for me to decide is whether the post was properly used here as an agent by the Defendants in sending their letter of the 27th March. The Plaintiffs acted from Buloh Kasap five miles from Segamat which is some 125 miles from Singapore and some 50 miles from Malacca. It is difficult to see how they were ordinarily to communicate if not by post … I hold as Farwell J. did in Bruner v.

Moore, that “the parties in this case contemplate that the post might be used as a means of communicating on all subjects connected with the contract. ” In these circumstances it is clear that the sender of the letter is not responsible for any delay in the post I hold, therefore, that the rescission of the policy was effected at the moment that the letter of the 27th March was posted, that is on the 27th March, 1931, and that the policy was non-existent at the date of the fire”. The second mode of communication is via telex or telephone.

Communications through the telex and telephone are different from posting and the postal acceptance rule does not apply. They are considered instantaneous communication where parties are regarded to be in each other’s presence and is complete only when it is received. It can be seen in the case of Entores Ltd v Miles Far East Corporation [1955] 2 QB 327. In this case, the plaintiffs were an English company and the defendants were an American corporation with agents all over the world, including a Dutch company in Amsterdam.

The plaintiffs wished to make a contract with the defendants’ Dutch agents for the purchase of copper cathodes from the defendants. A series of communications passed by telex between the plaintiffs and the Dutch company, the material one being a counter-offer made by the plaintiffs on September 8, 1954, and an acceptance of that offer by the Dutch agents on behalf of the defendants received by the plaintiffs in London by telex on September 10, 1954. The plaintiffs later alleged that there had been a breach of contract by the defendants.

They applied for leave to serve notice of a writ on the defendants in New York on the ground that the contract was made in England and, therefore, fell within the Rules of the Supreme Court. The defendants contended that the contract was made in Holland. The Court ruled that the communication through telex in this case was instantaneous and the contract was made at the place where acceptance was received, in this case, in London. Denning LJ considered the matter in stages.

First is, when a contract is made by post it is clear law throughout the common law countries that the acceptance is complete as soon as the letter is put into the post box, and that is the place where the contract is made. But there is no clear rule about contracts made by telephone or by telex. Second is communications by these means are virtually instantaneous and stand on a different footing. The problem can only be solved by going in stages. Let me first consider a case where two people make a contract by word of mouth in the presence of one another.

The communication of telex acceptances was also applied in Brinkibon Ltd v Stuhag Stahl [1983] 2 AC 34, HL. In this case, Brinkibon was a London company that purchased steel from Stahag, a seller based in Austria. Brinkibon sent their acceptance to a Stahag offer by Telex to Vienna. Brinkibon later wanted to issue a writ against Stahag and applied to serve an out of jurisdiction party. They would only be able to do so if the contract had been formed in England. The question at issue was where the contract was formed.

The House of Lords held that the contract was made in Vienna. The next mode of communication is acceptance by conduct. In the case of Taylor v Allon [1966] 1 QB 304 , the appellant’s motorcar had been insured by an insurance company called “The Federated Employers Insurance Association Ltd”, the policy expiring on April 5, 1964. He obtained a temporary cover note for 30 days from a new insurance company on April 16. It was found as a fact that on the expiration of the old policy he never intended to renew it with the old insurance company.

His old insurance company sent him a temporary cover note for 15 days from April 6. Where parties conduct themselves in a manner which indicates that they consider themselves bound by an agreement between them, a contract will be held to have come into existence. In the case of Woon Yoke Lin v United Estate-Projects Berhad [1998] 4 AMR 4052, the High Court held that the defendants, had accepted the plaintiff’s offer to rent a kiosk in Subang Parade which was owned by the defendants.

The Court referred to the following five expressions of conduct of the defendants: first, they did not reply within 14 days (the booking form stated that if the plainitif’s application was not accepted the deposit would be refunded within 14 days); secondly, they accepted the booking fees and paid this sum into their own account; thirdly, they did not return this sum of money within 14 days as provided in the booking form; fourthly, they could have rejected the tenancy agreement and the money which accompanied it upon receipt of these items, but they kept it; and fifthly, instead of rejecting the plaintiff’s offer, they negotiated with the plaintiff to relocate. In EMS Bowe (M) Sdn Bhd v KFC Holdings (M) Bhd & Anor [2000] 1 AMR 677, the plaintiffs submitted a tender for some works to the defendants. Subsequently, the second defendant issued to the plaintiffs a draft letter of award for the works and had also instructed the plaintiffs to order in advance materials for the works.

The plaintiffs ordered the materials but the award was given to another contractor. The High Court held that a draft offer acted upon by one party with the knowledge and concurrence of the other party has converted it into a written agreement and thus there was a valid and binding contract in this case. The next mode of acceptance is acceptance by performing conditions stipulated in offer. In Carlill v Carbolic Smoke Ball Co [1892] 2 QB 484; [1893] 1 QB 256, the Court of Appeal held that Mrs Carlill had indicated her acceptance by performing the conditions set out in the advertisement. In this case, Mrs Carlill had contracted influenza after using the smoke balls in the manner specified in the advertisement.

The defendants’ submission that Mrs Carlill did not inform them of her intention to accept their offer of the reward was rejected by the Court. It was held that Mrs Carlill had accepted the offer by performing the conditions stated in the offer. This mode of acceptance is recognised in s 8 of the Contracts Act that “performance of the conditions of a proposal … is an acceptance of the proposal”. There is also acceptance by silence. An issue that arises is whether silence can amount to an acceptance. In Fraser v Everett (1899) 2 SLJ 81; (1889) 4 Ky 512, the Court held that the defendant who had contracted for the transfer of scrip was entitled to obtain what he had bargained for and could not be compelled to accept a bearer-warrant.

It was the plaintiff’s contention that, by not replying to the broker’s letter of April 25 informing him that the certificates were being exchanged for bearer-warrants, the defendant must be taken to have waived this objection. The Court held that there is rule of law like the saying “Silence gives consent” applicable to mercantile contracts. In this case, the omission to reply does not constitute a waiver. In the case of Felthouse v Bindiey (1862) 11 CBNS 869; 142 ER 1037, the plaintiff wrote to his nephew offering to buy the nephew’s horse and adding that “If I hear no more about him, I consider the horse is mine at 301. 15s”. The nephew did not reply and no money was paid. The horse remained in the nephew’s possession.

Six weeks afterwards, the defendant, an auctioneer who was employed by the nephew to sell his farming stock, was directed by the nephew to reserve the horse in question, as it had already been sold, but by mistake had put it up with the rest of the stock and sold it. The plaintiff sued for conversion of the horse and the issue arose whether there was -a concluded contract between the plaintiff and his nephew for the sale of the horse. The Court held that there was none. Although the nephew had intended to sell the horse to the plaintiff at the price at which the plaintiff had named, this was not communicated and silence did not amount to an acceptance. Willes J stated “It stood an open offer … he nephew in his own mind intended his uncle to have the horse at the price which he had named 15s but he had not communicated such intention to his uncle, or done anything to bind himself ”. In the case of Re Selectmove Ltd [1995] 2 All ER 531, CA the Court of Appeal gave its view that silence could be interpreted as acceptance in exceptional circumstances. Peter Gibson LJ stated where the offeree himself indicates that an offer is to be taken as accepted if he does not indicate to the contrary by an ascertainable time, he is undertaking to speak if he does not want an agreement to be concluded. I see no reason in principle why that should not be an exceptional circumstance such that the offer can be accepted by silence. But it is unnecessary to express a concluded view on this point”.

Lastly is the mode of acceptance stipulated by the offeror. An offeror may prescribe the mode of acceptance. In Manchester Diocesan Council for Education v Commercial & General Investments Ltd, [1970] 1 WLR241, Buckley J laid guidelines on this matter. If an offeror stipulates by the terms of his offer that it may, or that it shall, be accepted in a particular manner a contract results as soon as the offeree does the stipulated act, whether it has come to the notice of the offeror or not. In such a case the offeror conditionally waives either expressly or by implication the normal requirement that acceptance must be communicated to the offeror to conclude a contract.

If an offeror, who by the terms of his offer insists on acceptance in a particular manner, he is entitled to insist that he is not bound unless acceptance is effected or communicated in that precise way, although if the other party communicates his acceptance in some other way, the offeror may by conduct or otherwise waive his right to insist on the prescribed method of acceptance. In the case of in Manchester Diocesan Council of Education was referred to in Yates Building Co Ltd v RJ Pulleyn & Sons (York) Ltd. In this case, the respondents granted the appellants options to purchase three portions of land. The option clause “shall be exercisable by notice in writing … such notice to be sent by registered or recorded delivery post to the registered office of Pulleyns or the offices of their said solicitors”. However, this notice was sent by ordinary post and not by registered or recorded delivery post.

It arrived before the expiry date but the respondents’ solicitors replied that the requirement that the notice be sent by registered or recorded delivery post had not been- fulfilled and returned the cheque. Lord Denning MR held that where the offeror has prescribed a particular method of acceptance, but not in terms insisting that only acceptance in that mode shall be binding, acceptance communicated to the offeror by any other mode which is no less advantageous to him will conclude the contract. In conclusion, acceptance should be communicated and there are various modes of communication of an acceptance. This is to ensure that the communication of acceptance is complete and there is a valid contract between two parties.