Review: Law of Contract – Offer and Acceptance Semple Piggot Rochez/Consilio http://www.spr-consilio.com

The following extract will concentrate on the principles relating to the communication of offers and acceptances.

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The most frequently asked questions usually involve communication of acceptance but, remember that an offer must be communicated too. If you’re answering a problem question, don’t forget to identify the claimant and what s/he is suing the defendant for. That established – define your terms:

> The Offer An offer is an expression of willingness to contract made with the intention that it shall become binding on the person making it as soon as it is accepted by the person to whom it is addressed. The offer must be communicated. In WILLIAMS v CARWARDINE (1833) information was given by the plaintiff ‘to ease her conscience’. In R v CLARKE (1927), the information was given by the defendant to clear himself from a false accusation. In the former case, the provider of the information recovered the reward whilst in the latter case he did not. If the claimant was ignorant of the offer at the time when the information was given, then, in principle, he should not be allowed to recover. Assuming you find an offer, to form a valid contract we next look for an acceptance. The acceptance must be final, unconditional and unqualified.

> Communication of acceptance (i) Communication means, according to Treitel, that the acceptance is actually brought to the notice of the offeror. The general rule is that the law requires the offeree positively to communicate assent. In FELTHOUSE v BINDLEY (1862), the plaintiff offered to buy a horse from his nephew for £30.15s, adding ‘If I hear no more about him, I shall consider the horse mine at £30.15s’. In an ensuring action, what was the court to infer from the defendant’s silence? It refused to regard the defendant’s silence as assent, even though the nephew intended to accept the offer. Despite the purpose behind the decision,

namely that the offeree should not be put to the trouble of rejection, the decision seems hard to support if one takes seriously the court’s claim to be merely giving effect to the intentions of the parties. (ii) In RUST v ABBEY LIFE ASSURANCE 1979, one explanation for there being a contract, was inaction or silence. This case was referred to by Lord Steyn in VITOL SA v NORELF 1996, where he said “our law does in exceptional cases recognise acceptance of an offer by silence”. The Unsolicited Goods and Services Acts 1971 and 1975, as amended by the Consumer Protection (Distance Selling) Regulations 2000, reinforce the common law principle that silence does not mean assent. The Acts are designed to counter a form of selling known as ‘inertia’ sales. Goods are dispatched to customers with a statement that if they are not wanted they should be returned, and that failure to return them within a specified period will be treated as acceptance. The Acts make demanding payment for such goods a criminal offence. After a period of thirty days, unsolicited goods may be kept by the recipient as though they were a gift if notice is given by the recipient or after six months if no notice is given.

> Exceptions 1. Unilateral Contracts The need to inform the offeror is implicitly waived. See CARLILL v CARBOLIC SMOKE BALL CO where Mrs Carlill’s use of the smoke ball amounted to the acceptance. She was not required to inform the Smoke Ball Company that she had accepted their offer. 2. Offeror’s Negligence If the failure of communication can be laid at the door of the offeror then he may be prevented or, to use a technical word, estopped, from denying communication of the acceptance (see the discussion in ENTORES v MILES FAR EAST CORPORATION (1955)). In the BRIMNES [1975], an acceptance was sent during business hours but was simply not read by anyone in the offeror’s office. (Compare GALAXY ENERGY INTERNATIONAL LTD v NOVOROSSIVSK SHIPPING (1999) where a notice

was deemed to be ‘tendered’ when those hours began.)

3. Use of Post If the post is the proper means of communication between the parties, then acceptance is deemed complete immediately the acceptance is posted, provided, of course, that it is properly stamped and addressed. In ADAMS v LINDSELL 1818 the rule was applied, but with little justification save for too many confirmatory letters needed if the acceptance had to be communicated. In HOUSEHOLD FIRE INSURANCE v GRANT 1879 Thesiger LJ did suggest that the Post Office is viewed as the agent of the offeror.

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This has been criticised because the Post Office has no authority to contract on behalf of the offeror. Another explanation is that the offeror initiated the dealings using the post. But this is not always the position, it might have been the offeree who initially requested information from the offeror. Whatever the justification, the postal rule will only operate when it is reasonable to use the post, not for example, during a postal strike. In HENTHORN v FRASER 1892 it was reasonable to use the post where the parties lived and worked in different towns. Note: the “postal rule” applies to telegrams and telemessages. But note that the courts will not invoke the postal rule if the terms show the parties did not intend it to be applied. In HOLWELL SECURITIES v HUGHES [1974], Hughes granted Holwell Securities an option to purchase property. The option was capable of being exercised by giving ‘notice in writing to the Intending Vendor’ by a certain date. Holwell Securities sent a letter exercising the option which was never delivered. It was decided that, on the construction of the offer, actual notice was required. Thus since the letter never arrived, there was no valid acceptance. 4. Communication to Offeror’s Agent It is necessary to examine the nature of the agent’s authority. It may be the case that the agent does have the authority to receive the acceptance, which would mean that it would take effect at that moment. If, on the other hand, the agent is only authorised to transmit the acceptance to the offeror, it will not take effect until it is passed on to the offeror.

> Instantaneous Communications The postal rule does not apply to telex, telephone or fax communications. (Nor presumably, to e-mail.) In ENTORES v MILES FAR EAST CORPORATION 1955, Denning LJ held that the telex acceptance had to be received by the offeror, in this case, in London. This decision was approved by the House of Lords in BRINKIBON LTD v STAHAG STAHL UND STAHLWARENHANDESGESELLSCHAFT MBH 1983. Lord Wilberforce said, however, “it was not a universal rule”. Business and office practices had changed since 1955; he added that problems could be resolved “…by reference to the intentions of the parties, by sound business practice and in some cases by a judgement where the risks should lie…”. In THE BRIMNES 1975 a revocation of offer was held by the Court of Appeal to take effect when received on the telex machine during ordinary office hours, even though nobody was there to read it. It is likely that this principle would be applied to a telexed acceptance. The same principle holds true for fax communications, i.e. they must be received. See ASHER v GOLDMAN SACHS 1991.

> Method of acceptance The offeror may stipulate a mode of acceptance (ELIASON v HENSHAW (1819)), e.g. ‘by return of post’, ‘by telegram’. However, if the offeree uses a different method, provided it is as quick and efficient as the stated method, it will be effective. This is the position unless the offeror uses clear language to stress that ONLY one method of acceptance will suffice. See for example, MANCHESTER DIOCESAN COUNCIL FOR EDUCATION v COMMERCIAL AND GENERAL INVESTMENTS LTD (1969); YATES BUILDING v PULLEYN 1915.

> Revocation of offer The general rule is that an offer may be revoked or withdrawn by the offeror at any time before it is accepted. But the revocation must be communicated. See DICKINSON v DODDS 1876, Dodds offered to sell his house to Dickinson. The offer was expressed to be ‘left open till Friday’. On Thursday afternoon, Dickinson heard from a third party that Dodds had sold the property to someone else. On the Friday morning, Dickinson delivered a formal acceptance to Dodds, then brought an action for specific performance against Dodds. The court held that the offer made to Dickinson had been withdrawn on the Thursday and was no longer capable of acceptance.

But note postal revocations take effect when communicated to the offeree. This contrasts sharply with the rules on postal acceptances, i.e. it must be received. The ‘so-called’ postal rule only applies to postal acceptances. See BYRNE v VAN TIENHOVEN 1880 where an offer was posted on 1 October. A revocation of offer was posted on 8 October. Offeree telegraphed an acceptance on 11 October and subsequently confirmed the acceptance in a letter posted on 15 October. Revocation of offer was received on 20 October. Held there was a contract on 11 October or at latest on 15 October.

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> Revocation of acceptance? To date, at common law, only the troublesome case of DUNMORE v ALEXANDER 1830 is authority for the proposition that a postal acceptance can be revoked. There have been statutory provisions giving consumers the right to cancel, or a “cooling off” period since The Consumer Credit Act 1974. A recent example can be found in the Consumer Protection (Distance Selling) Regulations 2000 which came into effect on 31 October 2000. A consumer, under these regulations may cancel in several different ways. But under Regulation 10(b) a consumer may send their cancellation by post, and the effective date of cancellation is the date on which the letter is posted.

26 January 2001 H Panford

Consilio is an interactive magazine for law students published by Semple Piggot Rochez: www.spr-consilio.com LLB/LLM/CPE Programmes online: www.spr-law.com

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