prepared by Norazla abdul Wahab 1 Acceptance

prepared by: Norazla abdul Wahab 1

Acceptance Definition S 2(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. • S 2(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… v The person accepting the proposal is called the ‘promisee’ or the ‘acceptor’. v 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 250 K= offeror B made a CO at RM 200 K = 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 Mc. Lean (1880) 5 QBD 346 • • Saturday- D wrote to the P offering to sell the iron at 40 s per tonne nett cash. He hold the offer until Monday- the P telegraphed the D at 9. 42 am requesting to know whether the D would accept 40 s 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. 25 pm: 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 Ø (a) against the OFFEROR : put in the course of transmission to him. • i. e. : Offeree post the LOA to Offeror. Ø (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 s 4 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 Ø against the OFFEROR : put in the course of transmission to him. • i. e. : Offeree post the LOA to Offeror. • Illustration (b) of s 4 : – 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 RM 200, 000. – 1 July 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

v 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? ? ? q. Pre-caution. q. Put adequate protection for himself. q. 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

v 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 • S 5(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 S 5(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) S 4(3)(a) CA S 4(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 • S 4(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