Acceptance Transcript
Deveral Capps
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11 seconds
This lecture will examine the law relating to acceptance.
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15 seconds
By the end of this lecture you should have understood what acceptance is,
how acceptance can be made and when acceptance will be valid.
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36 seconds
We have already seen that in order to create a valid legally binding contract
certain elements are required. These are offer, acceptance, consideration
and an intention to create legally binding relations. This lecture will deal with
the second of these elements, acceptance. Before you listen to this lecture it
is important that you have covered the law relating to offer.
Track/Slide 4
18 seconds
Acceptance can be defined as the unconditional assent to all the terms of the
offer. Acceptance must therefore be complete and unequivocal.
Track/Slide 5
1 minute 34 seconds
It may be useful at this stage to point out two occasions where acceptance
may appear to have occurred, but in fact legally has not. These two
occasions are where the acceptance amounts to a counter-offer or the words
subject to contract are used. We shall look at each of these in turn.
The first is counter-offer. This, as you should already know, is where an
acceptance actually tries to alter the terms of the original offer. This is a
counter-offer and not acceptance. A counter-offer will terminate the original
offer. You should be aware of the leading case on counter-offer, which is
Hyde v Wrench.
The second is subject to contract. This term is used widely in contracts for the
sale of land and means that acceptance will not actually occur until the
contract has actually been signed. Therefore a verbal acceptance will not
suffice. Either the person making the offer or the person accepting the offer
can use the words subject to contract. Now we can turn to when acceptance
has actually occurred.
Track/Slide 6
1 minute 5 seconds
Acceptance can occur either expressly or impliedly. Where acceptance is
expressed, there are few problems. The express acceptance can come either
in words, gestures or in writing. Therefore a person when accepting an offer
could say verbally "I accept", or that person could accept in writing by sending
a letter to the offeror, that is the person making the offer with the words "I
accept your offer". Alternatively, you could even accept by using recognized
gestures signifying the affirmative, for example the thumbs up, by nodding
your head, or by merely handing over the money to pay for the item being
contracted for.
Where acceptance is implied, it will normally arise through the conduct of the
offeree. This is the person to whom the offer was made.
Track/Slide 7
2 minute 28 seconds
Let us look in detail at a House of Lords case. This case is Brogden v
Metropolitan Railway Company. The facts of this case are as follows.
Brogden had been a supplier of coal to the railway company for a number of
years without any formal agreement. The respondent eventually suggested
that a formal agreement be created and submitted a draft agreement to
Brogden detailing prices and delivery dates etc. .Brogden inserted several
new clauses into the draft document and in particular filled in a blank space
left for him to enter the name of an arbitrator who would settle any problems
that may arise over the course of the contract. Brogden then wrote approved
on the document and returned it to the company's agent. This document
remained on the agent's desk without any formal communication of
acceptance.
Coal was delivered to the company according to the quantities and the prices
mentioned in the document. After a while, the parties had a disagreement and
Brogden refused to deliver any further coal. The company sued for breach of
contract. Brogden argued in court that by entering the name of an arbitrator in
one of the blank spaces on the contract, this amounted to a counter-offer that
required the defendant's acceptance. As the document had remained in the
agent's desk and no formal acceptance had occurred, there was, according to
Brogden, no binding agreement.
The House of Lords held that, although the company had not formally agreed
to the new terms, both parties had agreed by conduct to the terms in the draft
document. The conduct had been the deliveries of the coal by Brogden and
the acceptance of these deliveries by the railway company from the time of
the draft agreement up until the time of the dispute. This conduct, the court
believed, had amounted to acceptance. Therefore we can see that
acceptance can be implied by conduct.
Track/Slide 8
2 minute 21 seconds
One thing that is certain with the law relating to acceptance is that there must
be some action, either verbally or physically, to indicate that acceptance has
been made. Silence cannot constitute acceptance and the following case
illustrates this – Felthouse v Bindley. The facts of this case are as follows.
The plaintiff wrote to his nephew offering to buy a particular horse for £30 15s.
The plaintiff wrote on the note "If I hear no more about him, I consider the
horse mine at that price". The nephew intended to sell the horse to the uncle
at the price, and, in accordance with note, did nothing.
At this time, the horse was in the possession of an auctioneer who was the
defendant in this case, and the nephew instructed the auctioneer not to sell
the horse in a forthcoming auction. However, due to a misunderstanding, the
horse was sold to another person. The uncle sued the auctioneer in the tort of
conversion, which is the wrongful disposal of another's property.
The uncle lost his case at trial. The court held that there could be no
acceptance by silence. An offeror cannot impose acceptance merely because
the offeree does not reject the offer. The intention to accept will not constitute
valid acceptance unless there has been communication of the acceptance in
some form. As the uncle had no title to the horse, an action complaining of the
wrongful disposal of his property must fail. Therefore, we can see that, if
silence cannot constitute acceptance, there must be some communication of
the acceptance for it to take effect. The fact that someone has decided to
accept an offer does not amount to acceptance in law. The acceptance must
be communicated to the offeror and acceptance will not be effective until this
is done.
Track/Slide 9
57 seconds
In Entores Ltd v Miles Far East Corporation Lord Denning said the
following about acceptance. "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".
What would happen in the situation where the person who accepted the offer
did so on the behalf of others, and what if this person did not actually have the
power to accept. This situation occurred in the case of Powell v Lee.
Track/Slide 10
1 minute 17 seconds
The facts of Powell v Lee are as follows. The defendants here were the
managers of a school. The managers interviewed the plaintiff for the position
of headmaster and by a narrow majority the plaintiff won the position on a
vote. One of the managers, a Mr. Dismore, without any instruction from the
rest, sent the plaintiff a telegram saying that he had been selected as the
headmaster. The next day another managers meeting was held, which
decided that the plaintiff was not the best person for the job and they
appointed somebody else. The court held that there was no contract in
existence as the acceptance was not from the whole body of the managers
and therefore was unauthorised.
In this case 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."
Track/Slide 11
22 seconds
We have seen therefore that in order for acceptance to be valid it must be:
1
2
communicated to the offeror and
made by a person who is authorised to accept if a body is
represented.
Track/Slide 12
24 seconds
Now that we have looked at the standard law as it relates to acceptance, we
should move on to examine the exceptions to the norm. These exceptions can
be found in relation to posted letters of acceptance and also acceptance of
unilateral contracts.
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1 minute 34 seconds
We shall now look at an unusual rule relating to acceptance of an offer when
the acceptance has been posted. This is known as the Postal Rule. It should
be made clear at the outset that the Postal Rule relates only to acceptance of
an offer. Often students become confused with the Postal Rule and try to
apply it to making an offer and revocation of an offer. The Postal Rule will not
apply in these cases.
Also, the Postal Rule only applies to instances where acceptance has been
posted. The Postal Rule does not apply to any other form of communication. It
does not therefore apply to either fax, telegram or email. The Postal Rule
states that acceptance of an offer when made by post will be deemed to be
effective from the moment the letter of acceptance has been posted, that is
dropped into a pillar box or some other postal collection point.
This is so even if the letter is subsequently delayed or even lost in the post. It
is important, however, that the letter has been properly addressed and the
correct amount of postage has been paid. Let us look at two cases.
Track/Slide 14
1 minute 12 seconds
The first of these is Adams v Lindsell. The facts of this case were as follows.
The defendants made an offer by letter to the plaintiffs on 2 nd September
1817, requiring an answer in the course of post. The letter of offer was
misdirected and slightly delayed. It reached the plaintiffs on 5 th September,
who immediately posted a letter of acceptance that reached the defendants
on 9th September. If the original offer had been properly addressed, the
defendants could have expected a reply by 7th September. As this acceptance
did not occur, the defendants believed the offer was not going to be accepted
and on 8th September they sold the goods to another person. The court held
in this case that the acceptance was effective as soon as it had been posted.
Therefore the contract was legally binding at this time.
Track/Slide 15
1 minute 23 seconds
When dealing with the law relating to offer, you would have looked at the case
of Byrne and Co v Van Tienhoven and Co. If you are unfamiliar with the
facts of this case, then you should familiarise yourself with them before you
continue with this lecture any further. In Byrne the offer was accepted on at
least 15th October when the letter of acceptance was posted, unless of course
the telegraphed acceptance had been communicated to the offeror by then.
Over the years the law has realised that the Postal Rule is a very powerful
rule indeed and judges have tried to limit the law in the following ways. Where
the offer stipulates that acceptance must be communicated by notice in
writing, the Postal Rule will not operate. Notice means the offeror must
actually be notified. If the Postal Rule applied here and the letter was lost in
the post, then the law would be overriding one of the conditions of the offer
and this cannot be allowed to occur. Let us look at a case to illustrate this
limitation to the Postal Rule.
Track/Slide 16
1 minute 10 seconds
The case is Holwell Securities v Hughes. The facts of this case are as
follows. An option to purchase certain property was granted to the plaintiff in
this action. An option to purchase means that a person has an opportunity to
purchase something should they wish to do so. Clause 2 of the agreement
stated that "the said option shall be exercisable by notice in writing". The
plaintiff's solicitors wrote a letter to the defendants exercising the option and
posted the letter, which was both prepaid and correctly addressed. This letter
was lost in the post. The court held that the words "notice in writing" meant
that notice must actually occur and that the letter must actually be delivered.
Therefore, the Postal Rule could not apply as notice of acceptance was not
actually given.
Track/Slide 17
57 seconds
In this case 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".
Track/Slide 18
20 seconds
Russell went on to say "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".
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2 minutes 1 second
The Postal Rule will also not apply if a letter is not posted but is in fact handed
to a postman, who later goes on to post the letter. This can be seen in the
case of Re London and Northern Bank ex parte Jones. The facts of this
case were as follows. One morning at 7.30 am a servant of Northern bank
took a letter along with many others addressed to Dr. Jones in Sheffield to the
General Post Office in London. This letter accepted Dr. Jones' offer to buy
shares from the bank. On the outer precincts of the GPO a postman came by
and offered to take the letters. The bank's employee handed over the letters
and the postman went into the building, returned to the bank's employee and
confirmed that the letters had been posted.
A letter was received by the bank at 8.30 that morning from Dr. Jones
withdrawing his offer to buy shares in the bank. Therefore we can see that the
Postal Rule is very important here, as one hour after the letter of acceptance
was posted the offer was withdrawn. The court held that handing the letter to
the postman outside the GPO was not posting a letter so as to amount to
acceptance by the Postal Rule, even though that letter was actually posted.
The postal guide expressly states that town postmen were not allowed to take
charge of letters other than from a post box. This case undoubtedly illustrates
the court's intention to take every possible opportunity to restrict the ambit of
the Postal Rule as far as possible.
Track/Slide 20
2 minutes 7 seconds
We shall now move on to look at prescribed modes of communication. There
is always the possibility that the person who has made the offer prescribes a
particular mode of acceptance, for example by letter or by fax. A failure to
comply with such a condition will mean that the offer will be terminated. The
courts, however, have taken the view that, unless it is stipulated in the offer
that only one particular method of acceptance will suffice, any other equally
advantageous form of acceptance will be valid.
Let us look at a case to illustrate this, Yates Building Co. v Pulleyn & Sons.
The facts of this case were as follows. The defendants granted the plaintiffs
an option to purchase land exercisable by notice in writing to be sent by
registered or recorded delivery post. The plaintiffs sent a letter exercising the
option by ordinary post. The defendants received this letter, but because it
wasn't sent by either registered or recorded delivery, they refused to accept it.
The Court of Appeal held that sending the letter by ordinary post was valid
and was no disadvantage to the offeror. The court said that by stating the
acceptance must be made by recorded or registered delivery , this implied
that the acceptance must be made by post. Registered or recorded post was
only to ensure delivery and, as this had happened, acceptance had occurred.
If the defendants had stated that the acceptance would only be valid if made
by registered or recorded delivery, then this may have altered the situation.
Track/Slide 21
1 minute 34 seconds
Unilateral contracts. A unilateral contract is an exception to the normal rules of
acceptance because the person who is making the offer does not require the
person who is accepting the offer to actually communicate the acceptance.
With unilateral contracts, a person promises to do something for another if
they carry our a particular task. With a unilateral contract, the acceptance
comes from the performance of the task.
The case of Carlill v Carbolic Smoke Ball Company, which you will already
be familiar with, illustrates this point. The Carbolic Smoke Ball Company
advertised that if anyone used the smoke ball and subsequently caught
influenza, the company would pay that person £100. The law does not expect
that acceptance in this case be communicated. The acceptance will arise by
conduct, here through the purchase and use of the smoke ball. It would be
ridiculous for every purchaser of the smoke ball to expressly accept the
company's offer. In cases where an offer is made to the world, it would be
absurd to require the communication of acceptance.
Track/Slide 22
1 minute 11 seconds
This draws us to the end of this lecture on acceptance. To summarise the
main points we have seen:
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.