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Acceptance must be communicated
A simplify definition of a contract can be ‘a legally binding agreement between two parties’. Basically, Contract Act 1950 was governing the contractual transactions in Malaysia. If there are some cases which the law of contract unable to dealt with sufficiently, the English law can be applied. There are lots of contract is being offered, accepted or even rejected daily around the globe. All these contracts are made orally or in the written form. As the examples for orally made contract such as buying coffee at a shop, buying a reload coupon for mobile phone. Whereas contracts in written form such as buying a house or a contract of buying a car.
Definition of Contract
Contract is a written or spoken agreement between two or more parties, intended to be enforceable by law. Contracts are essential to commercial life. In order that the business community may regard contracts with a high degree of confidence, it is important ensure that the contracts are well regulated, and certain in form and effect.
Definition of Contract Act 1950
Generally, in Malaysia, the Contract Act 1950 regulates the law of contracts. In section 2(h) of the Contracts Act 1950 (CA), contract is an agreement enforced by law. It makes a contract legalized. If a particular subject, concerning the law of contract is not dealt sufficiently or not at all by the Contract Act or Malaysian decided cases, may the English law be applied.
A contract is formed when two parties with the correct mental intent, under the correct circumstances, within the boundaries of the law, and with some detriment to each of them agree to do certain acts in exchange for the other’s acts. This formation requires the presence of all these elements; the lack of one elements or presence of a problem, such as illegality, can invalidate the contract.
There essential elements or pre-requisites of a valid contract are offer, acceptance, consideration, intention to create legal relations, certainty and capacity.
The offer is the first part of a contract. The person who makes the offer is called the offeror, and the person to whom the offer is makes is called the offeror. Offer is a proposal offered by the offeror and offeree. In section 2(a) when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to the act or its abstinence, he is said to make a proposal. Therefore, a proposal or offer is something, which is capable of being converted into an agreement by its acceptance.
An offeror is people who are propose a contract or a person who make a contract while an offeree is a person who accepts the proposal made by offeror. The offer example is when A offers his Ferrari to B for the price of RM300,000. B is accepts to offer by buying the car from A. Therefore, A is the offeror and B is the offeree.
There are 2 types of offer; bilateral offer and unilateral offer. Bilateral offer is an offer made to a specific person or group of persons. On the other hand, unilateral offer is not made to any specific person rather it is made to the world at large.
There are five types of unilateral offer that are display of goods in shop, advertisement in the newspaper, auction sale, tenders and offer made to the world at large.
Auction sale is the auctioneer call for bids is only an invitation to threat. When there are someone calls his bid, he is considering making an offer and the auctioneer is free to accept or reject the bid.
Besides, tender is means that when the tenders are invited from the public for the highest price or the lowest price for the tendered items or services to having the required items or services. All this are regarded as mere invitation to treat.
The example of unilateral offer is Carlill v The Carbolic Smoke Ball Company  1 QB 525. The fact is the Carbolic Smoke Ball Company has made a product called smoke ball which claimed that it could protect the person from getting influenza. The company also advertised that they will offer £100 to anyone who still succumbed to influenza after using the products in a fixed period. Furthermore, the company also already deposited £1000 to the bank to show their genuine intention in the matter. The plaintiff; Mrs Carlill has bought the smoke ball and used it for a fixed period but she still contracted suffer from this influenza. While she asked for the reward the Carbolic Company claimed that there was no enforceable contract. Conclusion, the Court of Appeal that the plaintiff was gets the £100 as she had accepted the offer made to the world at large.
There are a few principles and rules of acceptance. According to S4 (1) CA 1950, the communication of proposal is complete when it comes to the knowledge of the person to whom it is made (offeree). Besides, communication of acceptance is complete when it is communicated to the offeror.
As the topic we are discussing, acceptance must be communicated to the proposer in order to make a contract valid. There are several rules dealing with the communication of acceptance that are the acceptance must be communicated. It was depending on the construction of the contract, the acceptance may not have to come until the announcement of the performance of the conditions in the offer but nevertheless the acceptance must be communicated.
Besides, the offeree who is the person to whom the offer is made can only accept an offer. Furthermore, an offeree is not limit if another person accepts the offer on his behalf without his approval. Moreover, if the offer specifies a manner of acceptance such as by post or fax, then we must accept it using a manner that is no less effective than the manner specified but it is an exception to the postal rule. Finally, silent is not considered as an acceptance. However, there is an exception for postal rule. In the case of Felthouse v Bindley, A make an offer to sell his house to B but B did not communicate to A to buy his house. Finally, B was bought the house under the pressure that given. It was held that silent cannot be implied as acceptance.
The definition of acceptance is looking at a situation an offeree agreed to the offer made by the offeror. In section 2(b) when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: a proposal, when accepted, becomes a promise. According to section 2(c), the person who making proposal is called the promisor and the person accepting the proposal is called the promise. The ‘promisor’ is also known as a ‘proposer’ or an ‘offeror’. A ‘promisee’ is also referred to as an ‘acceptor’ or ‘offeree’.
An acceptance must be differentiating with a counter offer. If the offeree denies and refuses the offer or changes the terms of the offer, the offer has been broken and cannot be accepted at a future time. In the case of Hyde v Wrench, the defendant offer to sell an estate to the plaintiff at a certain price. However, the plaintiff made an offer to buy at a lower price. This offer was refused. Subsequently, the plaintiff was willing to accept the initial offer. It was held that no contract was made as the initial offer did not exist at the time the plaintiff tried to accept it. Therefore, the offer has been terminated by the counter offer.
There are a few conditions of acceptance. Firstly, the acceptance must be absolute and unqualified. In section 7(a) in order to convert a proposal into a promise the acceptance must be absolute and unqualified. According to Oxford Advanced Learner’s Dictionary, absolute means definite and without any doubt or confusion, while unqualified means having the right knowledge.
Secondly, the communication of proposal is very important part. Of course, an offer or a proposal needs to be communicated to the intended ‘promisee’. In section 4(1), the communication of proposal is completed when it comes to the knowledge of the person to whom it is made. Similarly, the acceptance by the promisee needs to be communicated to the promisor. This is important because, the promisor can always revoke his or her offer before there is an acceptance, but no after.
Lastly, communication of acceptance is the last part of the offer and acceptance. In section 4(2), ‘the communication of acceptance is complete; as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of acceptor; as against the acceptor, when it comes to the knowledge of the proposer…’ So, for the promisor proposer, his offer is deemed to be accepted the moment the promise has transmitted the acceptance to the promisor and there is no possibility for him to retract it, even before the promisor has received it or comes to know about it. However, for the promisee or acceptor, the acceptance is considered to be communication to the promisor only when the promisor has received it to come to know about it. An offeror cannot stipulate in the offer that silence or no communication will deem to be acceptance.
Communication of acceptance
I agree with the statement of “A contract is not made until acceptance is actually communicated to the proposer."
Acceptance, whether by the words or conduct, is not effective until it is actually communicated to the offeror by the offeree or his authorized agent. The main reason for this rule is to protect the offeror who could otherwise find himself in the unenviable position of being bound to a contract without his knowing that his offer had been accepted.
An exception to this general rule is the acceptance, which sent by post. This exception is commonly known as the ‘postal rule’. The postal rule states that an acceptance by post takes effect when the acceptance is posted and not when the acceptance is actually received. The effect of this rule is that the acceptance is valid before it is actually communicated to the offeror. This is true even where the letter never reaches its destination.
However, the postal rule cannot be applied in all cases where the acceptance is by post. It can only apply where it is specified that acceptance may be by way of post or where it is reasonable to post the acceptance, such as where the offer itself was sent by post. Of course, where the terms of the offer itself exclude the postal rule, it will not be applicable. For instance, the terms of the contract may say expressly that the acceptance is effective only when received by or communicated to the offeror. If this is the case, then there is obviously no scope for the application of the postal rule. It should also be noted that the postal rule applies only to letters, which have been properly stamped and addressed.
The postal rule also does not apply where the acceptance is made by way of instantaneous communication, such as during a face- to-face conversation or a telephone conversation. However, with the advent of new modes of communication, for example facsimile, voice-mail or electronic mail messages, which are neither as delayed as post nor as instantaneous as an actual conversation, the precise scope of the postal rule’s application becomes more uncertain. The application of this rule can be crucial where disputes arise as to whether there has been valid acceptance in the event. The acceptance is transmitted but not necessary must be received by or communicated to the offeror.
The law in relation to this issue is still uncertain. There have been suggestions, however, that the answer should depend on each particular set of facts and whether it was possible in each case for the sender of the acceptance to be aware of the fact that the communication of acceptance had not been successful. Where it is possible for the sender to defect non-communication, the burden is on the sender to re-transmit the message and the postal rule would not apply. On the other hand, where detection is not possible, then the postal rule would apply to render the acceptance effective upon transmission. This reasoning would apply as well to voice-mail or electronic mail messages which are garbled or which go astray.
It is importance to realize that the postal rule only applies to the communication of acceptance. It does not apply to communication of an offer or the communication of a revocation of an offer or to the communication of a revocation of an acceptance.