English Law of Contract
Offer, Acceptance etc.
(Part II)
September 14th 2007
Research Fellow Herman Bruserud
V. Communication
Communication of Offer
Communication of Acceptance
• Communication of offer
– Actual communication required for the offer to take effect
• Communication of acceptance
– Starting point: The acceptance must be actually
communicated to take effect – “receipt rule” (Entores Ltd
v Miles Far East Corporation)
“Suppose, for instance, that I shout an offer to a man across a courtyard 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 till the
aircraft is gone and then shout back his acceptance so that I can hear what he says.
Not until I have his answer am I bound (…).”
(Denning LJ in Entores Ltd v Miles Far East Corporation)
Q3
V. Communication
(cont.)
Communication of Offer
Communication of Acceptance
• Communication of acceptance (cont.)
– Exceptions
• Implied waiver of communication in unilateral
contracts
– Performance of the condition constitutes the
acceptance – no need to communicate that you are
attempting to perform the condition
“In the advertisement cases it seems to me to follow as an inference
to be drawn from the transaction itself that a person is not to notify
his acceptance of the offer before he performs the condition, but if he
performs the condition notification is dispensed with.”
(Bowen LJ in Carlill v Carbolic Smoke Ball Co.)
Q3
V. Communication
(cont.)
Communication of Offer
Communication of Acceptance
• Communication of acceptance (cont.)
– Exceptions (cont.)
• Silence as acceptance in bilateral contracts?
– General rule: The offeror can not waive the need for
communication to that effect that silence will constitute
acceptance (Felthouse v Bindley)
– Exceptions
» The offeree’s silence where there has been a
previous course of dealing where the offeree has
taken the benefit of services offered
» May be if it is the offeree who is attempting to
hold the offeror to the offeror’s waiver of
communication (Estoppel basis)
Q3
V. Communication
(cont.)
Communication of Offer
Communication of Acceptance
• Communication of acceptance (cont.)
• Silence as acceptance in bilateral contracts? (cont.)
– Exceptions (cont.)
» If it was the offeree who initiated that the
offeree’s slience would constitute acceptance
(Re Selectmove Ltd (obiter))
Q3
V. Communication
(cont.)
Communication of Offer
Communication of Acceptance
• Communication of acceptance (cont.)
• The postal rule
– The offeror bears the risk of delay and loss of the
acceptance – the contract is concluded as soon as the
letter is sent (Adams v Lindsell)
– The rule only applies where it is reasonable in all the
circumstances for the offeree to use the post
(Henthorn v Fraser)
– Can be avoided
» Stipulating that an other means of acceptance
than by post is required
» To stipulate that actual communication is
required (Holwell Securities Ltd v Hughes)
Q3
V. Communication
(cont.)
Communication of Offer
Communication of Acceptance
• Communication of acceptance (cont.)
• The postal rule (cont.)
– Is retraction of a postal acceptance possible?
» No clear authority on the question
• Distinction:
Instantaneous
methods of
communications
Receipt rule:
The acceptance has
no effect unless
actually
communicated,
but…
Non-instantaneous
methods of
communications
Applies at least to oral
communication and
communication by telephone,
telex and fax
The postal rule
applies at least
to acceptances
(legitimately)
made by post
and telegram
Q3
V. Communication
(cont.)
Communication of Offer
Communication of Acceptance
Q3
• Communication of acceptance (cont.)
• Distinction: (cont.)
– (…) but…
» Non-instantaneous communications using
instantaneous methods
“But suppose that he does not know that his message did not get home. He thinks it has. This may
happen if the listener on the telephone does not catch the words of acceptance, but nevertheless
does not trouble to ask for them to be repeated: or if the ink on the teleprinter fails at the
receiving end, but the clerk does not ask for the message to be repeated: so that the man who
sends an acceptance reasonably believes that his message has been received. The offeror in such
circumstances is clearly bound, because he will be estopped from saying that he did not receive
the message of acceptance. It is his own fault that he did not get it. But if there should be a case
where the offeror without fault on his part does not receive the message of acceptance – yet the
sender of it reasonably believes it has got home when it has not – then I think there is no contract.”
(Denning LJ in Entores Ltd v Miles Far East Corporation)
V. Communication
(cont.)
Communication of Offer
Communication of Acceptance
• Communication of acceptance (cont.)
– Non-instantaneous communications using
instantaneous methods (cont.)
Any general principle?
Suggestion from Poole:
”(…) if the offeree has done all that he might reasonably
be expected to do to get his message through, that
acceptance should take effect when the offeree might
reasonably expect it to be communicated”
Q3
V. Communication
(cont.)
Communication of Offer
Communication of Acceptance
• Communication of acceptance (cont.)
» Non-instantaneous communications using
instantaneous methods – authority
Acceptances left during or outside ordinary office hours:
Opening
Closing
The offeree can reasonably
expect the acceptance to
be received
Opening next
ordinary office day
The offeree can not reasonably expect
the acceptance to be received until the
opening of the next ordinary office day
– When it comes to e-mails and internet contracting – see
Poole pp. 72ff.
Q3
V. Communication
(cont.)
Communication of Offer
Communication of Acceptance
• Communication of revocation of offer
– Must be actually communicated (Byrne v van Tienhoven)
• Exception: Unilateral offers made to whole world
– Probably sufficient to give the same notoriety to the
revocation that was given to the offer (Shuey v United
States)
– The revocation needs not to be authorized by the offeror
(Dickinson v Dodds)
Q3
VI. What needs to be apparent to
constitute an agreement – the
non-traditional approach
• The traditional approach (offer and
acceptance) might be to rigid
– Some case law supporting the finding of the existence of
agreement on another basis, but…
”there may be certain types of contract, though I think they are
exceptional, which do not fit easily into the normal analysis of a contract
as being constituted by offer and acceptance.”
(Lord Diplock in Gibson v Manchester City Council)
– Especially relevant when performance under the
(alleged) contract has been rendered
VII. Intention to create legal
relations
• A criterion which must be met for a(n
enforceable) contract to come into existence
– Objectively determined:
”(…) the court does not try to discover the intention by looking into the
minds of the parties. It looks at the situation in which they were placed
and asks itself: Would reasonable people regard this agreement as
intended to be legally binding?”
(Lord Denning in Merritt v Merritt)
VII. Intention to create legal
relations
• Agreements divided into two types:
Social/Domestic
agreements
Presumed to be
no intention
Commercial
agreements
Presumed to be
intention
Presumption of
intention, or lack
of intention, can
however be
rebutted
VII. Intention to create legal
relations (cont.)
• What constitutes a social/domestic
agreement?
” (…) as a rule, when arrangements are made between close relations, for
example, between husband and wife, parent and child or uncle and nephew in
relation to an allowance, there is a presumption against an intention of
creating any legal relationship. This is not a presumption of law, but of fact. It
derives from experience of life and human nature which shows that in such
circumstances men and women usually do not intend to create legal rights and
obligations, but intend to rely solely on family ties of mutual trust and
affection. (…) There may, however, be circumstances in which this
presumption, like all other presumptions of fact, can be rebutted.”
(Salmon LJ in Jones v Padavatton)
VII. Intention to create legal
relations (cont.)
• Presumption applies to agreements between
people in close relationships – typically within
families and between friends
• Rebutting the presumption of no intention to
create legal relations
– Factors
• Express statements unlikely to be conclusive
• Certainty of terms
Especially close connection
• Seriousness
between these factors
• Reliance
• Policy considerations
VII. Intention to create legal
relations (cont.)
• Commercial agreements
• Rebutting the presumption of intention to
create legal relations
– Very hard to rebut
• Some especially important instances
– Advertising (Carlill v. Carbolic Smoke Ball Co., Esso
Petroleum v Commissioners for Customs and
Exercise)
– Comfort letter or guarantee? (Kleinewort Benson Ltd v
Malaysia Mining Corporation Bhd)
VII. Intention to create legal
relations (cont.)
• Some especially important instances (cont.)
– Honour clauses an other express terms:
“Honourable Pledge Clause
This arrangement is not entered into, nor is this memorandum written, as a
formal or legal agreement (…) but is only a definite expression and record of the
purpose and intention of the … parties concerned to which they each honourably
pledge themselves with the fullest confidence … that it will be carried through by
each of the … parties with mutual loyalty and friendly co-operation”
(Rose and Frank Co. V Crompton Bros.)
• A contextual approach (Sadler v. Reynolds,
Edmonds v Lawson)
VIII. Shortly on certainty of
agreements
• The courts will not enforce agreements which
does not reach a certain level of certainty:
Important terms
not agreed upon
Term(s) are
to vague
VIII. Shortly on certainty of
agreements (cont.)
• The willingness of the courts to “intervene” to
“find” a contract
• Agreements where essential terms are vague
–
–
–
–
Ambiguity
Objective basis for determining meaning
Where performance has been rendered
Severance of meaningless clauses
VIII. Shortly on certainty of
agreements (cont.)
• Agreements where essential terms are
missing
– General principle: Needs to be agreement on all
important terms to reach the sufficient level of certainty
– Agreements to agree
• Generally
• Agreements to agree a price
– Mechanisms for determining the price (see Poole pp.
95ff.)
VIII. Shortly on certainty of
agreements (cont.)
• Availability of restitutionary remedy where
there is no contract