3. Acceptance Flashcards
(21 cards)
(Knowledge of offer) A reward having been offered for information leading to the discovery of a murderer, the plaintiff gave the relevant information. She had been attacked and severely beaten by the individual in question, and believing she did not have long to live, she gave the information in order to ease her conscience. The jury found that her motive in giving it had not been the offer of a reward, but the judge at first instance nevertheless directed a verdict in her favour. Held, as far as one can tell from the report, that a panel of appeal judges decided the plaintiff’s knowledge of the offer was to be deduced from the circumstances, and that her motivation in responding to it was irrelevant.
Legal principles:
- Motivation in responding to an offer = irrelevant –> knowledge of its existence is what counts (and this can be deduced from the circumstances)
Q. From your reading of this decision, how would you decide a case in which there was the relevant knowledge, but it had been forgotten?
Williams v Carwardine
(Knowledge of offer) The parties corresponded by post about the sale and purchase of 800 tons of iron. One offered to sell for 69 shillings a ton. Before that letter arrived, the other wrote offering to buy at the same price. In fact the second letter was interpreted by the majority of the court as a counter offer, because it also referred to obtaining more iron at a lower price, but the problem of identical offers crossing in the post was dealt with, obiter, by the majority. They decided that such cross-offers did not form a contract. A further communication would be needed by way of response to one of the two offers.
Legal principles:
- Cross-offers don’t form a contract.
Q. If offer and acceptance should mirror each other to constitute agreement, why would identical offers not have the same effect?
Tinn v Hoffman
(Knowledge of offer) The Government of Western Australia offered a reward for information leading to the arrest of suspected murderers, and a pardon to an accomplice who gave the information. Clarke did give the information, but later admitted that his only reason for doing so had been to clear himself of a charge of murder. He later sued the Crown for the reward, although he conceded that he had not had it in mind at the time he came forward with the information. Held that he had not validly accepted the offer of the reward. He had been unaware of the existence of the offer; to have forgotten about it was the same as never knowing of it.
Legal principles:
- Knowledge of an offer is required before it can be validly accepted. To have forgotten about an offer is the same as never knowing of it.
- Motive is irrelevant, providing there is knowlegde of the offer.
Q. Treitel continues to suggest that to do the accepting act but without acceptance as part of one’s motive is invalid, but is he right?
R v Clarke
(Acceptance in unilateral contracts) The appellants owned two cinemas, which they wished to sell. They arranged with the respondent that if he introduced a purchaser who did indeed go on to purchase the cinemas, they would pay him £10,000 commission. The respondent did introduce a willing purchaser, but the appellants disposed of the cinemas to another party. The respondent claimed the commission, or alternatively damages, arguing that a term should be implied into the contract that the appellants would “do nothing to prevent the satisfactory completion of the transaction so as to deprive the respondent of the agreed commission”. The House of Lords found for the appellants, denying that commission was payable unless the respondent’s client bought the cinemas, and rejecting the proposed implied term.
Legal principles:
- On its facts, this case can be taken as deciding that there is no acceptance of the offer of a unilateral contract until the condition is fully performed, so that until that time the offeror can withdraw the offer or render its acceptance impossible.
Q. Would the result have been different if the vendor’s sole motive had been to deprive the agent of commission?
Luxor v Cooper
(Acceptance in unilateral contracts) A father bought a house for his son and daughter-in-law to live in, and promised them that he would transfer it into their names if they paid off the mortgage on it. They began to pay the mortgage in instalments, but before it was fully paid off, the father died and his widow brought an action for possession of the house against the daughter-in-law. The action failed; the offer to transfer the house was an offer of a unilateral contract which was accepted by the couple as soon as they began to pay off the mortgage. The father (later, his estate) would not be bound to transfer the house until the condition of paying off the mortgage had been fully performed, but once performance of that condition had already begun it was too late for the offer to be withdrawn.
Legal principles:
- Once performance of a condition attached to the offer has begun, it is too late for the offer to be withdrawn.
Q. Can you explain this result in terms other than that the beginning of performance constitutes acceptance?
Errington v Errington
(Acceptance in unilateral contracts) The plaintiffs alleged they had been promised that if they attended the defendants’ offices at a given time with a deposit and their part of a contract for the sale of land duly signed, the defendants would sell them a portfolio of properties. They attended on time with the required documents, but the defendants refused to exchange contracts, asserted that exchange was part of the condition of the contract, and thus argued that they had validly withdrawn their offer before completion of its condition. Held that there was complete performance of the stated condition, so that the attempted withdrawal came too late. However, if that were wrong, the defendants were at any event not free to prevent fulfilment of the condition. There was an implied, subsidiary promise that once performance of the condition had begun, its completion would not be prevented. This implied promise was accepted by embarking on performance.
Legal principles:
- General principle: The offeror is entitled to require full performance of the condition he has imposed and short of that he is not bound.
- Qualification: Implied obligation on the part of the offeror not to prevent the condition becoming satisfied (i.e. by revoking his offer).
Q. How are the status and validity of this obiter analysis to be assessed?
Daulia v Four Millbank Nominees
(Acceptance by conduct) The defendants placed an advertisement in the Pall Mall Gazette, inviting people to purchase their product, the Y. This was a medical preparation which, as the advertisement explained, would protect its users against contracting influenza. The advertisement also stated that a reward of £100 would be paid to any person who caught influenza despite using the Y as directed, and that the company had deposited £1000 with their bankers “shewing our sincerity in this matter”. The plaintiff duly used the Y, caught influenza, claimed the reward, and was refused it. The Court of Appeal, affirming the judgment at first instance, held that the Company was contractually obliged to pay.
For present purposes it is enough to recall that X never informed Y that she was accepting their offer of the £100 reward. On appeal, counsel for the company took this point to argue that there had been no acceptance. It was rejected by the court.
Legal principles:
- In the context of a unilateral contract, it will be sufficient to act on the proposal without communicating acceptance of it to the offeror; performance of the condition is a sufficient acceptance without notification.
Q. How would you explain and justify the fact that communication of acceptance was not required here?
Carlill v Carbolic Smoke Ball Co
(Acceptance by conduct) X, a coal merchant, had supplied coal to Y for two years without a formal contract. In order to regularise the situation, the company sent X a draft contract. X filled in various gaps in the contract, added the name of an arbitrator, and returned the form (this was regarded as the making of a counter-offer). The company’s manager put the form in his desk. Coal was then ordered and supplied in accordance with the draft contract, until X denied any obligation to make further supplies. The company sued for breach of contract. Held by the House of Lords that a valid contract had come into existence; X’s counter-offer had been accepted by the conduct of the company in placing orders for coal on its terms.
Legal principles:
- Acceptance by conduct can also occur in a bilateral contract. What is required is some extraneous act which clenches the matter.
- An incomplete negotiation can be overtaken by the parties’ subsequent conduct in acting as if they had reached agreement.
Q. If this is acceptance, can you deduce from it what broader concepts lie behind the “communication of acceptance”?
- The courts are generally unwilling to undo bargains upon which the parties have acted.
Brogden v Metropolitan Railway Co
(Acceptance by conduct) X received a letter of intent from Y which led them to believe that a contract for the manufacture of steel components would shortly be agreed between the two companies. The letter included a request that X would begin to manufacture the components in the interim, which they did. The parties continued to negotiate, but failed to reach agreement on various matters including the question whose standard terms were to govern. X eventually claimed that no contract had arisen, but that they were entitled to recover reasonable remuneration on a quantum meruit basis for the work which they had done. Y argued that a contract had come into being, under which they counter-claimed damages for late delivery of the components (claimed to be greater than X’s expenses). It was held that there was no contract, and that the restitutionary quantum meruit claim succeeded.
Legal principles:
- Parties who choose to act as if they had a contract, when in reality they are still negotiating, take a risk.
Q. Can you identify factors not strictly related to contract formation which might arguably influence disputes like this one?
*British Steel Corporation v Cleveland Bridge and Engineering Co *
(Acceptance by silence / inactivity) Learning that he and his uncle had been at cross-purposes over price while discussing the sale and purchase of a horse, X wrote to his uncle to point out the misunderstanding. In reply, his uncle wrote proposing that they split the difference (a small amount), adding “If I hear no more about him, I consider the horse mine at £30 15s”. Vitally, X did not reply, and no money was paid, but he did instruct an auctioneer employed by him to sell his farming stock at auction that the horse should be kept out of the sale, since it was already sold. In spite of this the horse was sold at auction to a third party. An action in the tort of conversion was brought against the auctioneer by X’s uncle, but failed. An acceptance by X of his uncle’s offer did not appear on the facts. No title to the horse had vested in the uncle, since no contract had been concluded between him and X.
Legal principles:
- Silence does not constitute acceptance.
Q. Had X not accepted by conduct?
Felthouse v Bindley
(Acceptance by silence / inactivity) A dispute had arisen in connection with a charterparty, and had been referred to arbitration. Following the appointment of two arbitrators, nothing happened for five and a half years. At the end of that period, the shipowners argued (inter alia) that the arbitration agreement had been mutually abandoned by an agreement to be inferred from the parties’ inactivity. The Court of Appeal held that the circumstances did not permit that inference to be made.
Legal principles:
- Silence and inaction by both parties are not capable of giving rise to an offer by one, and to an acceptance by the other communicated in response to that offer.
Q. Why, in principle, might a court be slow to draw that inference?
The Leonidas D
(Acceptance by silence / inactivity) The intending buyers of a cargo of propane sent a telex to the sellers in which they recorded that since the vessel would complete loading outside the contractually agreed period, they were repudiating the contract. The sellers made no response to this message. An arbitrator later held that the sellers’ silence and failure to take further steps to perform the contract had amounted to an acceptance of the buyers’ repudiation. This decision was upheld by the House of Lords.
Legal principles:
- Law does in exceptional cases recognise acceptance of an offer by silence. In the field of repudiation, a failure to perform may sometimes be given a colour by special circumstances and may only be explicable to a reasonable person in the position of the repudiating party as an election to accept the repudiation.
Q. Why, in principle, might a court feel driven to reach this conclusion?
Vitol v Norelf
(Acceptance by silence / inactivity) Y owed the Inland Revenue large amounts of tax. At a meeting on 15 July, the company’s managing director proposed to the collector of taxes that the company should pay tax in future as it fell due, and pay off its arrears in instalments starting in February of the following year. The collector said that he would seek the approval of his superiors, and no more was heard until October, when the Inland Revenue threatened to wind up the company. The company, appealing against the grant of a winding-up petition at first instance, argued (inter alia) that an agreement had come into existence based on the proposal made on 15 July, and the Inland Revenue’s prolonged silence in response to it. The company lost the appeal on other grounds, but the Court of Appeal accepted that an agreement could be formed in the way stated.
Legal principles:
- Where the offeree himself indicates that an offer is to be taken as accepted if he does not indicate to the contrary by an ascertainable time, he is undertaking to speak if he does not want an agreement to be concluded.
Q. Who, on these facts, was the offeror, and who was the offeree?
Re Selectmove Ltd
(The transmission of acceptance) An offer to purchase flour was made by letter. The letter was carried by a waggoner employed by the offeree to haul flour. It included a postscript: “Please write by return of wagon whether you accept our offer”. The offeree instead posted a letter of acceptance to the offeror at Georgetown, which took longer to arrive than would a reply conveyed by wagon. The offeree failed in an action for damages in respect of the offeror’s refusal to accept the flour. The purported acceptance, made in this way, had not been valid and therefore no contract had come into existence.
Legal principles:
- If the offeror chooses to place restrictions on what is to constitute a valid acceptance, they will be upheld.
- Otherwise, timing is important, whereas the manner of communication of acceptance is not.
Q. What do you take the stipulation “by return of wagon” to amount to in legal terms?
Eliason v Henshaw
(The transmission of acceptance) This case turned on whether a contract had been made in Holland, from where a telexed message of acceptance had been sent, or in London, where it had been received. The Court of Appeal therefore had to decide at what point the acceptance took effect. It held that acceptance occurred on receipt of the message in London, so that the contract had been made within the jurisdiction.
Legal principles:
- Place where acceptance is received = place where the contract is made.
- Where attempts to communicate are disrupted and the disruption is apparent to the maker of the acceptance, it will not be valid until it has been repeated.
- Where the message of acceptance fails to reach the offeror as a result of his own fault, the offeror is bound.
- Where the offeror without any fault on his part does not receive the message of acceptance, yet the sender of it reasonably believes it has gone home when it has not, then there is no contract.
Q. On this narrow point would any rule be as good as another provided the law is certain?
Entores v Miles Far East Corporation
(The transmission of acceptance) The case turned on whether a notice withdrawing a ship from service had been received before or after an instalment of hire was paid. The notice of withdrawal had been sent by telex between 17.30 and 18.00, but had not been seen by the defendants until the following morning. It was held to be the defendants’ own fault that they had not seen the withdrawal at or shortly after the time it was sent, since they must either have left the office early or failed to pay attention to their telex machine. The withdrawal was therefore deemed to have been communicated between 17.30 and 18.00, since it would have been received then in the ordinary course of events. The case admittedly concerns the termination of a contract rather than its formation, but the issue in both instances is legally valid communication.
Legal principles:
- A posted letter of acceptance takes effect at the moment it is posted.
Q. Is there ever a real distinction to be drawn between deciding a case on the ground of culpability, and deciding it on the ground of fairness?
The Brimnes
(The postal rule) The usual authority given for the postal rule is X v Y, where the rule is applied in passing, really, but the court nevertheless takes the opportunity to buttress it on the grounds of finality. The justification is this; if the normal rule requiring actual communication were to apply to acceptance by post, so that the offeror became bound only when he knew of the offeree’s acceptance, then it could equally be maintained that the offeree should only be bound when he learnt that his acceptance had reached the offeror, and so on ad infinitum.
Legal principles:
- A posted letter of acceptance takes effect at the moment it is posted.
Adams v Lindsell
(The postal rule) A written offer to sell some houses was handed to the plaintiff. The next day, a letter withdrawing the offer was posted to him. Before the withdrawal arrived, the plaintiff wrote a letter accepting the offer. The withdrawal reached the plaintiff’s house just over an hour later, but was not opened until the next day. The plaintiff applied for specific performance of the contract of sale; its refusal by the judge at first instance was overturned on appeal. The acceptance had bound upon posting, so creating an enforceable contract. Lord Herschell stated a general test for the applicability of the postal rule: “Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might by used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted”.
Legal principles:
- Posted acceptance takes effect upon posting, posted revocations upon communication.
Q. Do you think that this decision tends to increase or decrease the applicability of the postal rule?
Henthorn v Fraser
(The postal rule) The defendant made an offer to buy shares in a company, and paid a deposit on the shares. The company secretary, by way of acceptance, made out a letter of allotment and posted it to the defendant in Swansea, but it never arrived. The company later went into liquidation, and the liquidator sued the defendant for the balance of the price of the shares. The Court of Appeal held that a contract had come into existence upon the posting of the share allotment, despite the fact that it never reached the defendant. Thesiger LJ suggested that this ruling would not cause great hardship, since the post generally did not fail, the offeror could choose to stipulate that acceptance would only bind him upon communication (ousting the postal rule), and if he did not hear from the offeree, he could make enquiries of him.
Legal principles:
- Confirmation of the postal rule
- The offeror can choose to stipulate that acceptance will only bind him upon communication (thus outsting the postal rule)
Q. Can you construct an argument that this rule, at least in the context of this case, is better than arbitrary?
Household Fire Insurance Co v Grant
(The postal rule) An option (an irrevocable offer) to purchase property was granted to the plaintiffs. It provided that “the said option shall be exercisable by notice in writing to the Intending Vendor at any time within six months from the date hereof”. During that period, the plaintiffs wrote to the defendant to exercise the option, but the letter never arrived. The plaintiffs sought an order of specific performance. It was refused at first instance and on appeal. On the true construction of the offer, nothing less than actual communication of acceptance would bind the defendants to a contract of sale.
Legal principles:
- There are three situations in which the postal rule does not apply:
- Where it is not sensible to use the post as a means of communication.
- Where the postal rule is expressly (or impliedly) ousted by the language of the offer
- If its application would produce manifest inconvenience and absurdity.
Q. Is this case authority for a putative principle that an arbitrary rule may be arbitrarily disapplied?
Holwell Securities Ltd v Hughes
(The postal rule) In response to a fax offering to appoint one of three nominated arbitrators, a shipowner’s agent sent a fax to accept the offer, but made a mistake entering the international dialling code so that the fax never reached the intended recipient. Toulson J, distinguishing Adams v Lindsell and Henthorn v Fraser, held that those cases did not govern the misdirection of a letter (or fax) of acceptance, and that the postal rule should not apply to a misdirected communication.
Legal principles:
- The postal rule should not apply to a misdirected communication.
Q. To which types of communication should the postal rule be applied, and what is the rationale for your proposed distinctions?
Korbetis v Transgrain Shipping
