CONTRACT LAW - ACCEPTANCE OF
OFFERS
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At the end of this lecture you should
have an understanding of:
the ‘mirror-image’ rule of acceptance
the operation of ‘counter-offers’
the effect of ‘requests for information’
other issues surrounding acceptances
of offers
Acceptance - basics
Generally for ‘bilateral’ contracts an
acceptance of an offer must be:
• in response to an offer
• an acceptance of the offer without any
modifications - ‘mirror image’ or
unconditional acceptance
• communicated to the offeror
Warning about the ‘rules’ of
acceptance
Cheshire, Fifoot and Furmston’s ‘Law of
Contract’ 14th edition page 40:
‘It must again be emphasised that the
phrase “offer and acceptance” though
hallowed by a century and a half of
judicial usage, is not to be applied as a
talisman…revealing the presence of a
contract… (PTO )
The rules which the judges have
elaborated from the premise of offer and
acceptance are … only presumptions…
drawn from experience, to be applied IN
SO FAR as they SERVE THE ULTIMATE
OBJECT of establishing the phenomena
of AGREEMENT’.
When an offer has been made by the
offeror, the offeree may do either of 4
things:
Accept the Offer Make what amounts Make a request Do
nothing
exactly - the
to a ‘counter-offer’ for ‘further
‘mirror image’
information’
rule
Counter-offers
If the offeree in any way modifies the offer
and tries to say that this is an acceptance,
then it is NOT. Such behaviour has 2 effects:
• it actually CANCELS OUT or REVOKES the
original offer such that it cannot be accepted
later on, and
• it represents a ‘counter-offer’ to the original
offer
A
offer
offeror
B
can do 1 of 4 things
IF what B does
amounts to a
A
can do 1 of 4 things
counter-offer
‘counter-offer’
because it is not a
‘mirror image’
acceptance
Hyde v Wrench 1840
In this case when the defendant offered to
sell his farm to the plaintiff for £1000, the
plaintiff replied that he would give £950 for
the farm. The defendant refused this and
when the plaintiff then replied that he would
give the £1000, the defendant refused to sell.
It was held that there was no contract
between the two because when the plaintiff
had stated that he would give £950 for the
farm, this amounted to a counter-offer and
cancelled out the original offer.
Counter-offers: acceptance by
behaviour
The original offeror may ‘impliedly’ accept
a counter-offer by his ‘behaviour’ as
was determined in the cases of:
Brogden v Metropolitan Railway Co 1877
Confetti Records and others v Warner
Music UK Ltd 2003
Counter-offers: covering letters
What if A makes an offer to B who
accepts it according to the mirror-image
rule, BUT, B attaches a ‘covering letter?
This question arose in The Society of
Lloyds v Twinn 2000.
How can the judge decide if the offeree
has made a counter offer or merely
ASKED FOR MORE INFORMATION,
thus leaving the original offer still open?
This is not an easy task as shown in
STEVENSON v McLEAN 1880.
The effect of common phrases
often used in acceptances:
- ‘subject to contract’ - Confetti Records
v
Warner Music UK Ltd 2003
- ‘provisional agreement’- Branca v
Cobarro 1947
The effect of other phrases
Here we can see the attitude of the
courts to phrases in contracts in the
contrasting cases of:
• Hillas and Co Ltd v Arcos Ltd 1932
• Scammell v Ouston 1941
Now we can consider
acceptances with meaningless
phrases in them.
The case of NICOLENE LTD v SIMMONDS
1953 demonstrates how judges will IGNORE
MEANINGLESS PHRASES in contracts if the
2 parties are in agreement on the
ESSENTIALS in the contract.
Acceptance - Battle of the Forms
When businesses trade on their own
Standard Form Contracts which set of
terms and conditions is to prevail - that
of the buyers or the sellers?
A key case is
Butler Machine Tool Co Ltd v Ex-Cell-O
Corporation (England) Ltd 1979
Battle of the Forms continued
In the Court of Appeal Lord Justices
Lawton and Bridge took the ‘traditional’
approach and analysed the case in
terms of offer and acceptance.
Lord Denning however took a different
approach and used the ‘Battle of the
Forms’ method of analysis.
Communication of the
acceptance
Can be considered under 5 broad headings:
1. With respect to electronic communication
2. When the offeree simply remains silent
3. Acceptance and unilateral contracts
4. When the mode of acceptance is specified
5. The postal rule of acceptance
Electronic methods of
communication
For these methods of communication, the
general receipt rule applies. Key cases are:
Entores v Miles Far Eastern Corp 1955
Brinkibon v Stahag Stahl und Stahl Waren
Handels GMBH 1983
Tenax Steamship Co Ltd v The Brimnes 1975
When the offeree remains silent
The general rule here is that silence by
the offeree does not amount to
acceptance of an offer. Key cases are:
Felthouse v Bindley 1862
Re Selectmove Ltd 1995
Unilateral contracts and
acceptance
In a unilateral contract the performance
of the act specified may be seen as the
acceptance of the offer. However, there
are issues regarding:
1. When the acceptance comes into
effect
2. The point at which the offer can be
revoked
Where the offeror specifies the
mode of acceptance
To enforce one method only of
acceptance the offeror must use very
specific language.
A key case is:
Manchester Diocesan Council for
Education v Commercial & General
Investments Ltd 1969
The postal or dispatch rule of
acceptance
The postal rule is basically the opposite
of the receipt rule. Key cases are:
Henthorn v Fraser 1892
Adams v Lindsell 1818
Holwell Securities v Hughes 1974
Yates Building Co Ltd v Pulleyn & Sons
Ltd 1975