Transcript (2) Contract-Acceptance

Prepared by: Norazla Abdul Wahab
1
Acceptance
Definition
S2(b) CA
Distinction Between Acceptance &
Counter Offer
Revocation of acceptance
Communication of acceptance
Electronic contract
Communication by post/ Postal Rule
2
Definition of acceptance
• An assent to the terms of a proposal.
• S2(b) of CA provides:
“when a person to whom a proposal is made signifies
his assent thereto, the proposal is said to be accepted;
a proposal, when accepted becomes a promise”
3
Cont…
The person accepting the proposal is called the
‘promisee’ or the ‘acceptor’.
acceptance can be made in writing, or orally or
by conduct or by a combination of these
methods.
4
Condition of acceptance
S 7(a)- be absolute
and unqualified
Hyde v
Wrench
S 7(b)- be expressed in
some usual and reasonable
manner
Ramsgate
Victoria v
Montfiore
5
S. 7(a) absolute & unqualified
•
Accepts the term of the contract on
exactly the same term or without any
addition, qualification or alteration.
( mirror image rule)
6
S. 7(a) absolute & unqualified
Example :
If A makes a proposal to B on term x, y, and
z then B accepts on term x and y only or
w, x, y, z the term is not absolute and it
amount to counter offer.
7
Counter Offer?
•
•
Where the acceptance is made with
any addition or alteration
Any modification or variations of an
offer does not constitute an
acceptance.
It known as Counter Offer
. It is also a rejection of the original offer.
8
Counter Offer
•
A person who makes a counter offer = not
making an acceptance but an offer.
–
–
–
A offer to sell a house at RM 250K=
offeror
B made a CO at RM 200K = B rejects the
offer and making counter offer. He is
now an offeror
A = acceptor or promisee.
9
Hyde v Wrench (1840) 3 Beav
334
•
The D offered to sell his property to the
P at 1000 pound.
• However, P agrees to buy it at 950
pound. D refused to accept it.
• 2 days later, P agree to buy the property
at 1000 pound.
• Again, D refused to accept and P sued
for Specific performance.
10
Hyde v Wrench (1840) 3 Beav
334
•
The court held that:
There was no contract created
•
no acceptance because the P’s offer to
buy at 950 had rejected the original
proposal.
11
However...
However, further communication is still
permissible.
Thus, there is differences between Counter
Offer and mere request for information.
12
Stevenson Jaques & Co. v
McLean (1880) 5 QBD 346
•
•
Saturday- D wrote to the P offering to sell the iron
at 40s per tonne nett cash. He hold the offer until
Monday.
Monday- the P telegraphed the D at 9.42 am
requesting to know whether the D would accept
40s per tonne iron to be paid over two months or ,
if not, the longest limit the D would give.
13
Cont...
•
•
•
10.01 am: D received P’s letter and subsequently
sold the said iron to a third party.
1.25pm: the D telegraphed and informed the P
that he has sold the iron (revoking the offer).
1.34: But, the P having had no reply from D, he
telegraphed again and accepting D’s offer.
14
Cont...
•
The P sued for breach of contract and D
pleaded that the telegram sent by P on
Monday (9.42 am) was a rejection of the his
offer .
15
Cont...
The court held:
•
the D was in breach of contract as the
telegram by P was meant only for
further information and does not
constitute a counter offer.
16
7(b) accepts in usual and reasonable
manner.
S. 7 (b) of CA:
...Based on reasonable time and
reasonable method/manner ; UNLESS
the proposal prescribes the manner in
which it is to be accepted.
17
Ramsgate Victoria Hotel Co. v
Montefiore (1866) LR 1 Ex Ch 109
8 June- The D applied for shares in the P’s
company and had paid a deposit.
He received no further news from P until 23
November when he has been informed that the
shares had been allotted to him and that he
should pay the balance due on them.
18
Ramsgate Victoria Hotel Co. v
Montefiore (1866) LR 1 Ex Ch 109
The court held that:
there was no valid binding contract
because acceptance was not made within
reasonable time.
(June- November)
19
Fraser v Everett (1889) 4 Ky 512
(other case)
20
Eliason v Henshaw
The A offered to buy flour from R. He further
requested that the acceptance of the same
should be sent to him at Harper’s Ferry within
the prescribed time.
The R then sent his letter of acceptance by mail
and thinking that it would reach the A faster.
Unfortunately, the letter arrived after the
prescribed date.
21
Eliason v Henshaw
The issue :
Whether the said acceptance is valid?
22
Eliason v Henshaw
Court held that:
A entitled to reject the acceptance made since it
not follow the prescribed mode of acceptance.
23
Western Electric v welsh Development
Agency
24
COMMUNICATION OF ACCEPTANCE
25
Communication of Acceptance
• General Rule:
acceptance must be communicated to the
proposer.
26
Communication of Acceptance
• s. 4(2) of the Contracts Act 1950
(a) against the OFFEROR : put in the course of
transmission to him.
• i.e.: Offeree post the LOA to Offeror.
(b) against the ACCEPTOR : comes to the knowledge
of the offeror.
• i.e.: Offeror received the LOA from Acceptor.
Communication of Acceptance
• Illustration (b) of s4 stated :
– B accepts A’s proposal by a letter sent by post. The
communication of the acceptance is complete as
against A, when the letter is posted.
28
General rule:
SILENCE DOES NOT AMOUNT TO ACCEPTANCE.
29
Felthouse v Bindley (1826) 11 CB
(NS) 869
• D who is an auctioneer, is under duty to auction
J.Felthouse’s property. P, who is J.Felthouse’s uncle is
interested to buy a horse that is supposed to be
auctioned.
• He then, wrote a letter to his nephew that reads, “ If I
receives no news from you, I will consider that the said
horse to be mine at the price of 30 pound.
• J felthouse does not answer the letter but has
instructed the D to pull away/withdraw the horse from
being auctioned.
• Unfortunately, by mistake the D sold the horse. Then, P
filed a claim.
30
Felthouse v Bindley (1826) 11 CB
(NS) 869
• The court held that:
• No contract between J. Felthouse & his uncle.
• No communication of acceptance.
silence NOT amount to an acceptance.
31
EXCEPTION:
SILENCE will amount to
communication OF ACCEPTANCE!
EVEN if the acceptance yet come to the
knowledge of the offeror, contract is still
created.
(s. 4 (2) (a) & (b) of CA)
32
EXCEPTION:
SILENCE will amount to
communication OF ACCEPTANCE!
A) if there are other facts like the conduct
of the offeree to indicate the acceptance.
33
Erington v Erington
A father promised his son & daughter in
law that if they paid off the installments
on a house, he would transfer the house
to the son .
They paid the said installment . But then ,
the father died and the widow (father's
wife) claim for the house.
34
Erington v Erington
The court held that:
Even, the father’s promise is unilateral and
the son not communicated his acceptance
verbally.
But, the act of the son of paying the said
installment can be considered as an
acceptance.
35
EXCEPTION:
SILENCE will amount to
communication OF ACCEPTANCE!
B) where the offeror allows the offeree to
FULFILL the condition of the said offer.
36
Carlil v Carbolic Smoke Ball Co. [
1893] 1 QB 256
The court held that:
There is an acceptance even if the
acceptance is not verbally communicated.
Furthermore, Carlil has fulfilled the
conditions of the said offer.
37
EXCEPTION:
SILENCE will amount to
communication OF ACCEPTANCE!
C) Acceptance made through POSTAL
RULE.
38
POSTAL RULE
• where the parties have used the post as a mean
of communication.
39
POSTAL RULE
• s. 4(2)(a) of the Contracts Act 1950
 against the OFFEROR : put in the course of
transmission to him.
• i.e.: Offeree post the LOA to Offeror.
• Illustration (b) of s4 :
– B accepts A’s proposal by a letter sent by post. The
communication of the acceptance is complete as
against A, when the letter is posted.
40
Example:
•
A wants to sell his house for B for RM200,000.
– 1July 2000: A sent an offer letter to B
– 4 July 2000: B received the offer letter
– 6 July 2000: B put acceptance in a post
Box.
4 July 2000: Offer complete
6 July 2000: Acceptance complete as against A
41
Cont...
• It is NOT NECESSARY comes to the knowledge of
the Offeror.
At the moment when the LOA was posted by
Offeree
• Communication of acceptance is complete
(POSTAL RULE).
42
Cont...
• Thus,
It binds the offeror from the time the said LOA IS POSTED.
The offeror BOUND by the Offeree’s acceptance
eventhough he has NO knowledge of the acceptance
being made.
• The transaction is binding irrespective of any delay, lost
or disappearance in the course of transit.
43
Entores Ltd v Miles Far East
Corporation [1955] 2 QB 327
The PRINCIPLE laid down:
When a contract made by post, the
acceptance is complete as soon as the
letter of acceptance is put into the post
box.
44
Ignatius v Bell (1913) 2 FMSLR 115
•
•
•
•
The D give option to P to buy his estate
before or on 20 August and an acceptance
must be in writing.
16 August - P wrote the acceptance letter and
post it
25 August- D received the said LOA
P sued the D as D refused to honour the
contract.
45
Ignatius v Bell
(Reasonable Manner)
•
The court held that:
the contract is valid as the parties agree to
use postal service as a manner of
acceptance and it complete at the
moment the said LOA was posted
despite the facts that the letter was
reached late.
46
Household Fire Insurance v Grant
•
•
•
•
The D has made an offer to buy shares in P ‘s
company.
P accepted the offer and sent the acceptance
letter by post.
The acceptance letter is lost in post.
When P asked the money from D, D refused to
pay and claims that there was no acceptance.
47
Household Fire Insurance v Grant
•
The court held :
there was acceptance as it completes when the
acceptance letter is posted.
48
 Postal Rule: Isn’t FAIR to
Offeror???
POSTAL RULE:
acceptance is complete against offeror as
soon as the letter of acceptance is put
into the post box regardless of lost, delay
etc.
49
What might Offeror Does???
Pre-caution.
Put adequate protection for himself.
By inserting certain terms in the LO.
i.e. : …Acceptance is complete, upon
received the said LOA by the offeror.
50
Holwell Securities Ltd v Hughes
The D offered to P an option to purchase
certain property.
In the said offer it was be put in writing that
“ the said option shall be exercisable by
notice of writing to the D”.
The P then post his LOA to the D.
Unfortunately, it NEVER reached the D.
51
Holwell Securities Ltd v Hughes
P argued that the said acceptance is VALID
based on the Postal Rule.
Court held that:
D already put the said clause which meant
the said acceptance must come to the
knowledge of the D.
52
 What about an Instantaneous
Communication?
• Postal rule does not apply in cases of
instantaneous communications as it is governed
by general rule.
• Eg: Shouting, telephone, Telex, Fax.
• Acceptance has no effect unless it is
communicated to the offerror.
53
What about an Instantaneous
Communication?
• i.e. : if a phoneline "went dead" just before the
offeree said "yes", it would be absurd to assume
that the contract was formed and the parties
would not have to call each other back.
54
Revocation of acceptance
• S5(2) of CA :
“ An acceptance may be revoked at any time
before the communication of the acceptance is
complete against the acceptor, but not
afterwards”.
55
Revocation of acceptance
• Illustration of S5(2) of CA :
“B may revoke his acceptance at any time before
or at the moment when the letter reaches A ,
but not afterwards”.
It may be revoked before notice of revocation of
acceptance comes to the knowledge of Offeror.
56
Revocation by post (When Complete)
S4(3)(a) CA
S4(3)(b) CA
• As against the person who makes it (offeree)), when it is
put into a course of transmission to the person to whom it
is made, so as to be out of the power of the person who
makes it,
• As against the person to whom it is made (offeror), when it
comes to his knowledge
Illustration (d) of Section 4 of CA.
B revokes his acceptance by telegram.
B’s revocation is complete as against B when the
telegram is despatched, and as against A when it reaches
57
him
Communication of Revocation of
acceptance
• S4(3) (a) of CA :
Acceptor: when he put in the course of
transmission to the offeror.
(B sent LOROA to A).
Offeror: come to the knowledge of offeror.
(A received the LOROA from B ).
58
Example:
•
•
•
A propose to sell his house to B via
letter which sent by post
B accepts the proposal by a letter sent
by post
B may revoke his acceptance at any
time before or at the moment when
the letter communicating it reaches A
not afterwards.
59
Dunmore v Alexander
• the court laid down the principle that:
if the revocation letter delivered together with the
acceptance letter, the revocation is effective.
60
Note: This Notes and Copyright therein is the property of
Madam Norazla Abdul Wahab and is prepared for the benefit of
her students enrolled in the MGM 3351 course for their individual
study. Any other use or reproduction by any person WITHOUT
CONSENT IS PROHIBITED.
61