LECTURE 3
THE FACT OF AGREEMENT - THE ACCEPTANCE
If an offer has been made and it has not been terminated, an agreement will come into
being if the offer is accepted. Acceptances are usually expressed in some way, but on
occasion can be implied.
What is meant by the Latin expression consensus ad idem?
Acceptance must be Unequivocal
The requirement that acceptance must be unequivocal means that by accepting an
offer it is clearly understood that there is nothing left to be negotiated by the parties.
Acceptance must be in Reliance upon the Offer
What is meant by reliance upon the offer? See R v Clarke (1927) 40 CLR 227.
Acceptance must Correspond with the Offer
Can an acceptance be on terms different to the offer? See Turner Kempson & Co Pty
Ltd v Camm [1922] VLR 498; Dunlop v Higgins (1848) 9 ER 805; Carter v Hyde
(1923) 33 CLR 115; Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32.
Acceptance can be Express or Implied
Most acceptances are by means of some express statement made by the offeree to the
offeror.
Can an offeror cannot stipulate that no response to an offer will be treated as an
acceptance? See Felthouse v Bindley (1862) 142 ER 1037; Empirnall Holdings Pty
Ltd v Machon Paul Partners Pty Ltd (1988) 14 NSWLR 523.
Acceptance must be Communicated
As a general rule an acceptance is only effective once it has been communicated to
the offeror: Tinn v Hoffman & Co (1873) 29 LT 271 at 278. What is rationale for
communication requirement? See Carlill v Carbolic Smoke Ball Co [1892] 2 QB 484
at 269.
As to when communication can be said to have occurred, the principles here are the
same as with the requirement for communication of revocation of offers. The
requirement of communication of acceptance is not universal. It can be dispensed
with by the offeror. Furthermore, it is not required in cases where the postal
acceptance rule applies.
Dispensing with the need for communication
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What constitutes acceptance if communication is dispensed with? See Carlill, at 269.
The postal acceptance rule
A commonly cited statement of the postal acceptance rule is found in Henthorn v
Fraser [1892] 2 Ch 27 at 33. The postal acceptance rule also applies to telegrams:
Cowan v O’Connor (1888) 20 QBD 640.
Does the rule apply to telex, fax, or telephone communications? See Entores v Miles
Far East Corporation [1955] QB 327; Brinkibon Ltd v Stahag Stahl und
Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34; Reese Bros Plastics Ltd v
Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106; Eastern Power Ltd v
Azienda Communale Energia & Ambiente (1999) 178 DLR (4th) 409 at 415-8.
In the operation of the postal acceptance rule a number of points need to be noted:
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The rule only applies if it is reasonable, contemplated or authorised that
acceptance be by letter or telegram. See Tallerman & Co Pty Ltd v Nathan’s
Merchandise (Vic) Pty Ltd (1957) 98 CLR 93.
The letter or telegram must be properly addressed, have appropriate postage or
other fees paid, and actually be deposited with the post office.
Does the letter or telegram have to reaches its destination? See Household Fire &
Accident Insurance Company (Limited) v Grant (1879) LR 4 Ex D 216 at 223,
227.
Can the offeror exclude the operation of the rule at the time the offer is made? See
Household Fire & Accident Insurance Company v Grant, Bressan v Squires
[1974] 2 NSWLR 460, Manchester Diocesan Council for Education v
Commercial & General Investments Ltd [1969] 3 All ER 1593.
If the rule applies and the offeree sends a letter or telegram of acceptance but,
before it is received by the offeror, the offeree changes his or her mind and by
some speedier means of communication to the offeror advises the offeror that he
or she (the offeree) does not want to accept the offer, is the letter or telegram of
acceptance binding? See Dunmore v Alexander (1830) 9 SH (Ct of Sess) 190;
Wenkheim v Arndt (1873) 1 JR 73; Nunin Holdings Pty Ltd v Tullamarine Estates
Pty Ltd [1994] 1 VR 74.
On the operation of the postal acceptance rule and its interplay with the rule as to
revocation of offers see Stevenson Jacques & Co v McLean (1880) 5 QBD 346.
Acceptance and the Date and Place of Contract
What is the date of a contract? What is the place of the contract? See Entores and
Brinkibon.
ALTERNATIVES TO OFFER AND ACCEPTANCE
In Gibson v Manchester City Council [1979] 1 All ER 972 at 974, Lord Diplock
opined that there might be some cases, which he thought would be ‘exceptional’, that
would not be readily amenable to resolution by the application of the rules of offer
and acceptance. Is this the view taken by Australian courts? See Brambles Holdings
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Ltd v Bathurst City Council (2000-2001) 53 NSWLR 153 at 176. An example of a
case with difficulties in applying offer and acceptance analysis is Butler Machine Tool
Co v Ex-cell-O Corp (England) Ltd [1979] 1 All ER 965.
In Goodman v Cospak [2004] NSWSC 704 at [46]-[53], Master Macready identified
three approaches that have been used in the battle of the forms cases. The first
approach is the so-called ‘last shot’ doctrine. See British Road Services Ltd v Arthur V
Crutchley & Co Ltd [1968] 1 All ER 811. The second approach is the so-called
‘higher status’ doctrine. See Transmotors Ltd v Robertson, Buckley & Co Ltd [1970] 1
Lloyd’s Rep 224. The third approach is the co-called ‘global or ‘synthesis’ approach.
See Toyota Motor Corporation Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106;
Brambles Holdings; Clarke v Dunraven [1897] AC 59.
THE REQUIREMENT OF CERTAINTY & COMPLETENESS
INTRODUCTION
So far the principles applicable to the question of whether parties have entered into an
agreement have been examined. However, for any agreement to amount to a contract
it must also be sufficiently certain and complete. These two related, but distinct,
concepts refer to the requirement that the agreement’s words be sufficiently precise
and clear so that the scope of obligations can be ascertained (certainty) and that the
key or important parts of the agreement have been set out (completeness): Thorby v
Goldberg (1964) 112 CLR 597 at 607. Does the law does not demand absolute
certainty and completeness? See Fletcher Challenge Energy Ltd v Electricity
Corporation of New Zealand Ltd [2002] 2 NZLR 433.
In addition to the issues of completeness and certainty, we will also deal with
situations in which parties have reached an informal agreement on all the terms of the
contract but contemplate that a further formal contract will be subsequently be
prepared and executed by the parties. These ‘subject to contract’ cases give rise to the
question of whether the informal agreement is enforceable even if no subsequent
formal agreement is executed.
COMPLETENESS
At the very minimum an agreement must contain all the essential terms. Hat are
essential terms? See In Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 at
619; Foley v Classique Coaches Ltd [1934] 2 KB 1. How can incompleteness be
overcome? See Booker Industries Pty Ltd v Wilson Parking (Qld) Ltd (1982) 149
CLR 600; George v Roach (1942) 67 CLR 253.
CERTAINTY
Once the essential terms have been established, it is then to be determined if they are
uncertain. If they are uncertain then the agreement is void. See Upper Hunter County
District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at
436; Fitzgerald v Masters (1956) 95 CLR 420; Whitlock v Brew (1968) 118 CLR 445;
G Scammell & Nephew Ltd v Ouston [1941] AC 251; Allcars Pty Ltd v Tweedle
[1937] VLR 35.
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Agreements to Negotiate in Good Faith
A particular aspect of uncertainty is ‘an agreement to agree’. Such an agreement is
void for uncertainty. However, is an agreement to negotiate in good faith also void for
uncertainty? See Walford v Miles [1992] 2 AC 128; Coal Cliff Collieries Pty Ltd v
Sijehama Pty Ltd (1991) 24 NSWLR 1; Wellington City Council v Body Corporate
51702 (Wellington) [2002] 3 NZLR 486 at 491.
SUBJECT TO CONTRACT
In cases where parties have reached an informal agreement recording the essential
terms of their bargain between, but also envisage formal contracts being prepared and
executed at a later date, the question that arises is whether the earlier informal
agreement creates an enforceable contract or whether an enforceable contract only
arises upon execution of the formal contract.
How did the High Court categorise such cases in Masters v Cameron (1954) 91 CLR
353? See also Branca v Corbarro [1947] KB 854; Godecke v Kirwan (1973) 129 CLR
629.
In relation to the categorisation of cases in Masters v Cameron, what was held in
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR
622? See also ASIC v Edwards [2005] NSWSC 831 at [68]. How has Baulkham Hills
been received in Australia? See Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd
(2000) 22 WAR 101; Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA
235 at [69].
On Masters v Cameron see also GR Securities Pty Ltd v Baulkham Hills Private
Hospital Pty Ltd (1986) 40 NSWLR 631 at 634; Geebung InvestmentsPty Ltd v Varga
Group Investments No 8 Pty Ltd (1995) 7 BPR 97578 at 14,569-70; Chalik v Wales
[2005] NSWSC 877 at [15]-[17].