Acceptance in Contract Law - Lecture

Overview of Basic Principles

The purpose of this chapter is to grasp the concept of acceptance, which is in simple terms the acceptance of the offer.  This is of course a deceptively simplistic overview of acceptance, as there are many different forms of acceptance, and a variety of scenarios within which acceptance may be found.  However, in brief terms: in order for a contract to be formed, the offer must be accepted, e.g. I accept your offer of £1,000 in exchange for my car.  Acceptance represents the agreement of the parties, judged objectively from their words and conduct - both agree to exchange something for the other (payment, services, goods, etc.).  it is important that you are able to distinguish between the different rules and principles governing acceptance, and under which circumstances each rule will apply. 

Principle 1: Acceptance must be unequivocal

This essentially means that the offeree must assent to the offer without making agreement conditional on further negotiation. The parties can still be bound if they leave a non-essential detail for later.  This is a simple principle, which in fact ties in with Principle 2 below.

Principle 2: Acceptance must mirror the offer

The acceptance must correspond exactly with the offer in order to be valid and form a binding contract.

The offeree cannot accept an offer and add further terms while accepting.  For example, A offers to sell 100 books to B for £1000.  B accepts the offer but adds that A must deliver the books at no extra cost.  This does not mirror the offer because it did not initially include the free delivery.  This is not valid acceptance because it does not mirror the offer.  It is a counter offer which can then be accepted or rejected by the original offeror, or met with a further counter offer.  The parties can continue to make counter offers until a consensus has been reached.

Hyde v Wrench [1840] 3 Beav 334 - Wrench offered to sell a farm to Hyde for £1000.  Hyde responded that he would pay £950 for the farm.  Wrench rejected.  Hyde later tried to accept Wrench’s original offer of £1000.  Wrench rejected again.  It was held that there was no agreement between the parties, as Hyde had rejected the original offer by submitting the counter offer of £950.  

A mere request for information is not a counter offer.  If the offeree asks the offeror for more information, the original offer stands and the offeree has neither accepted or rejected the offer.  Referring back to the above example, if B merely asks A if the £1000 includes delivery of the books, this would be classed as a mere request for information, not a counter offer.

Stevenson Jaques & Co. v McLean (1880) 5 QBD 346 - Mclean (M) offered to sell Stevenson (S) iron. S asked whether he would accept delivery over 2 months, and if not, what his longest time limit for delivery would be.  M did not respond and later claimed that the original offer had not been accepted because S’s telegram was a counter offer.  It was held that the telegram was a mere request for information, not a counter offer, or a rejection of the original offer. 

It is important to understand the difference between a request for information and a counter offer.  If you compare Hyde v Wrench and Stevenson Jaques & Co v Mclean, you will be able to observe that, while in Hyde the offeree responded with a completely different price, the offeree in Stevenson simply requested information on delivery terms.  A counter offer is the offeree’s adding of terms (“I accept but you must also deliver the books for free” or “I will pay £900 rather than £1000”) whereas a request for information is simply a question about the original offer (“does the price include delivery?” or “will the goods be ready for collection in one week?”).   

Consider the justifications that underlie the distinction between a counter offer and a request for information.  Would it be fair for an offeree to try to negotiate better terms, and then to revert back to the original offer?  Think about the aim of the courts.  Does it create certainty?  For whom?  Should an offeror be required to negotiate with one party when another is ready to accept the original offer?  The attempt here is to achieve both certainty and an equal playing field for both offeror and offeree.  The same applies to a request for information, which protects the offeree’s position.  In the book example, imagine that C has approached A, accepting his offer.  If A is in the middle of negotiations with B and is required to continue such negotiations, would it be fair? 

You may be given a scenario in which the parties make a cross offer.  An example of this could be when A sends B a letter offering him 100 books for £1000 and B independently writes offering to buy the same books for that price.  If the letters cross in the post, then there is no agreement - Tinn v Hoffman (1873) 29 LT 271. 

Principle 3: Acceptance must be communicated to the offeror

This is a logical requirement, and should not be too difficult to grasp because acceptance must generally reach the offeror.  If B accepts A’s offer to sell 100 books for £1000, but does not communicate his acceptance, A cannot fulfil his part of the bargain and give the books to B.

When acceptance is by post, potential problems arise.  For example, B accepts A’s offer, and communicates such acceptance by post.  How does B know when the letter will arrive?  At what point does the posted acceptance form a binding contract?  The postal rule for communication of acceptance is therefore different to the usual rule that posted communication is legally valid once it has arrived.  Where the postal rule applies, acceptance takes effect once the letter has been properly posted:

Henthorn v Fraser [1892] 2 Ch 27 - Where the circumstances are such that the parties would reasonably contemplate acceptance by post, acceptance normally takes effect on posting.    

Consider the legal reasoning behind the postal rule.  To require that the letter of acceptance actually arrive at the offeror’s address places a considerable burden on the offeree to ensure that it arrives, which is not fair.  Therefore, in order to balance the positions of the offeror and offeree, it is accepted that the offeree has fulfilled his obligation by posting the letter.  He can assume that it will arrive and should not be expected to do anything more.  The offeror, in accepting to communicate by post, therefore accepts responsibility for the potential that the letter may not arrive.  

This rule applies even if the letter has been destroyed, delayed or lost.

Adams v Lindsell (1818) 1 B & Ald 681 - The sellers misdirected their offer of wool. The buyers posted their acceptance as soon as it reached them, but the sellers sold the wool elsewhere before the reply arrived.  A valid contract had been formed at the moment that the letter of acceptance had been placed in the post box.  The rule applies when it is reasonable to use the post and the offer does not require receipt, and when the letters have been correctly addressed and stamped.

The postal rule can be excluded by the offeror - he can state that acceptance must be communicated in a specific way (fax, telephone etc.), or that postal acceptance must arrive in order to be binding.  This gives the offeror the freedom to require that acceptance actually come to his notice.  It also relates to the above section on the legal reasoning behind the postal rule.  The fact that the offeror is free to exclude the postal rule means that it would be unfair to require that the offeree take extra steps to ensure that the letter has arrived.  The offeror, in declining to exclude the postal rule, accepts that the letter may not arrive. 

Household Fire and Carriage Accident Insurance Co v Grant (1879) 4 Ex D 216 - The acceptance letter was lost in the post.   The postal rule was applied, and hence acceptance was binding once it had been posted.  Thesiger LJ opined that using the postal service as a method of communicating is the same as putting the letter in the hands of the recipient oneself.  Thesiger LJ also explained that an offeror could insist on actual receipt. Bramwell LJ dissented: he would have required receipt in this case.  

However, should the offeree use a different form of communication to that which was specified by the offeror, this may be acceptable if the offeror has not insisted on that method alone and the alternative is no less advantageous to him.

Holwell Securities v Hughes [1974] 1 WLR 155 - Hughes granted an option to Holwell Securities (HS) to purchase his house for £45,000.  The option was exercisable within 6 months by “notice in writing to” Hughes.  5 days before the offer was to expire, HS posted a letter of acceptance to Hughes.  Hughes never received the letter and HS sought to enforce the agreement by relying on the postal rule.  It was argued that, since the letter had been posted before the offer expired, the agreement was valid and binding.  It was the requirement of notice to Hughes that made receipt necessary. A requirement of writing alone would not have had that effect.  He had effectively excluded the postal rule by placing this requirement in his offer.

The postal acceptance rule is not absolute, however.  It only applies in cases in which the parties could reasonably contemplate that communication would be by post.  The aim is to achieve fairness, as has been addressed.  But it could also prove unfair for the offeror, because the offeree could omit to reveal acceptance if, for example, the prices of goods they would have bought falls.  This illustrates that the law cannot be completely fair, but only seek to strike a balance between the position of offeror and offeree. 

Even where the offeror specifies post, the terms may still require receipt.  Moreover, and quite logically, if the offeree has incorrectly addressed the letter of acceptance, or been careless in some other manner which causes delay or failure to communicate, then the offeree cannot rely on the date of posting. A wrongly addressed notice of appeal similarly failed in Getreide-Import GmbH v Contimar SA Compania Industrial, Comercial y Maritima [1953] 1 WLR 207.

LJ Korbetis v Transgrain Shipping BV [2005] EWHC 1345 (QB) - A fax agreeing to a proposed sole arbitrator was sent to the wrong number. By the time the mistake was discovered, the offer had lapsed.  Toulson J held that there was no acceptance because it would be unfair to bind B to an agreement that he was not aware of due to the fault of A. 

Thus far, you will have recognised certain core principles surrounding the postal rule.  These may seem confusing and difficult to remember, but they are in fact simple.  The list below outlines the core principles:

• It must be reasonable to accept the offer by post (Henthorn v Fraser).
• The letter must be correctly addressed and properly posted.
• The offeror can exclude post as a valid form of communicating acceptance.
• If the offeror prescribes a specific method of acceptance, then the postal rule may be excluded (Manchester Diocesan Council for Education v Commercial and General Investments Ltd).
• The postal rule will not apply if it will create an absurd result (Holwell Securities v Hughes).

There are problems with the postal rule, and also with the use of post to communicate offer and acceptance.  Consider, for example, that B posts his acceptance of A’s offer of 100 books for £1000.  Before A receives the letter of acceptance, he tries to revoke his offer and sells the books to C.  He then receives B’s letter of acceptance. If the postal rule applies, he was already bound when B posted it and will be in breach if he fails to supply the books when due.  Refer back to Holwell Securities v Hughes above, in which the court accepted that the offeror could exclude the postal rule by stipulating that he must receive acceptance in order for a contract to be formed between them.  Contracting parties are therefore free to determine the method of communication of acceptance, and to avoid the problems posed by the postal rule altogether.

As technological advancements have made methods of communicating more instantaneous, the postal rule has lost its original force and scope.  The postal acceptance rule has therefore not been extended to include instantaneous communication such as fax and email.  The rule in such cases is that acceptance is binding at the time and place of receipt.  Actual reading is not always necessary. In the case of a withdrawal notice, a telex received during ordinary business hours took effect when it could reasonably have been read - Tenax Steamship Co v Owners of the Motor Vessel Brimnes [1974] EWCA Civ 15.

Brinkibon Ltd v Stahag Stahl [1983] 2 AC 34 - When instantaneous communication is used, the acceptance is binding when it is received.  The rationale behind this is that, particularly in a business context, acceptance may be sent out of business hours, or it may be read by others, or not read by the recipient at the time it arrives.  The rule is therefore based on principles of good business practice.  Consider the underlying justification here, and the importance attached to fairness once again.  For email, when a message can reasonably be expected to be read depends on the parties’ dealings. There is no fixed cut-off at the end of office hours (Thomas v BPE Solicitors [2010] EWHC 306 (Ch), [90]).  The fairness here is based on balancing the position of both offeror and offeree.  It would be unfair to require that the offeror actually read or hear the acceptance, because he could fail to do so purposely if he finds another buyer, which would be unfair for the offeree.  On the other hand, it would be unfair to the offeror to state that acceptance is binding once it is sent, because many different events could occur (an email could be put into offeror’s spam folder, message could be deleted by another in the office, etc.). 

Entores v Miles Far East Corp [1955] 2 QB 327 - A in England sent offer by telex to B in Holland to purchase 100 tons of goods.  B accepted via telex.  The court was required to consider the point at which a binding contract had come into existence to decide whether the contract was made in England for the purpose of serving proceedings abroad.  It was held that acceptance had to be actually communicated to the offeror.  The contract was made in London, where the acceptance had been received.  The court reasoned that telex messages are almost instantaneous, similar to a telephone conversation.  The postal rule did not therefore apply.  This is an important case because it establishes three categories of acceptance via instantaneous communication.

(1) - Offeree is aware that acceptance has not been received, but neither party is at fault.  There is no contract because this would produce an absurd result that neither of the parties could reasonably have contemplated and should therefore not be bound to it.  An example of this would be if A communicates acceptance to B over the telephone, but the line drops before he accepts.  It would be absurd to bind the parties to an agreement.

(2) - Offeree reasonably believes that acceptance has been received, although it has not, but neither party is at fault.  There is no contract because an absurd result would again arise.  It would not be fair to bind the parties to the agreement. 

(3) - Offeree reasonably believes that acceptance has been received, although it has not, and the offeror is at fault. The offeror may be prevented from denying receipt if his own fault led the offeree reasonably to believe the acceptance had arrived.  An example of this would be that the telephone line is unclear, and the offeror does not hear the offeree’s acceptance, but does not ask him to repeat.  It would be unfair to not hold the parties to the agreement, because the offeree could not know that the offeror did not receive the message, and the offeror is at fault for not stating as such.

You will see that the principle of fault serves to distinguish between these three categories.  It is unfair to disadvantage party A due to the fault of party B.  Fault was developed further in Brinkibon, in which Lord Wilberforce emphasised the need for the law to be sufficiently flexible to account for many different potential scenarios.  The concept of sound business practice plays a core role here, because the courts will consider whether the facts of the case indicate usual business practice (sending emails inside of usual office hours, using the company’s official email address, etc.).   

The offeror cannot state that the offeree’s silence qualifies as acceptance.  It must be communicated.

Felthouse v Bindley [1862] EWHC CP J35 - An offeror cannot impose a contract by treating silence alone as assent.

However, silence can qualify as acceptance if it is accompanied by conduct.  This is a form of implied acceptance, which is gathered by examining the whole course of conduct of the parties.  The question is what that conduct conveyed to a reasonable person in the offeror’s position.  It would be unfair to overlook the fact that a party was acting as though an agreement existed, and to then allow him to go back on it simply because a problem has arisen. 

Brogden v Metropolitan Railway(1877) 2 App Cas 666 -The companies had been dealing with each other on a long-term and informal basis, and without any written contract.  They agreed that they should write up a formal agreement.  The railway did not expressly accept Brogden’s amended draft, but it ordered and took coal on the terms of the draft.  A valid contract was found because acceptance was inferred from the continued performance of the contract without any objection as to its terms.   

A unilateral offer may dispense with the need for separate notice of acceptance.   Acceptance in such cases can be by conduct, or performance.  This is because unilateral contracts feature an offer to pay another if a certain act is performed.  Acceptance of the offer takes place through performance of the specified act - there is no need to communicate acceptance.  For example, A puts an advertisement in the local shop window offering £50 to anyone who finds his dog.  Knowing of the reward, B searches for and finds A’s dog.  He has accepted the offer by performing the act that A requested - he need not have communicated to the offeror that he has accepted the offer.  In searching for (and eventually finding) the dog, he has accepted the offer by performance.  Refer to chapter 1 for the legal principles and case law on this principle.   

Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 CA -On the terms of this offer, the offeree did not have to give advance notice of acceptance. Performance of the specified conditions sufficed.

The communicated acceptance, whether it is by words or conduct, must allow one to objectively conclude that the offeree is consenting to the terms of the offeror.  This is an overarching rule that can apply to all cases.  It will also help you to examine problem questions in order to determine, overall, whether a contract can be said to have been formed.

Day Morris Associates v Voyce [2003] EWCA Civ 189 - Voyce (V) asked Day Morris Associates (DMA) to value the property she owned with her husband. DMA later sent her terms for marketing it.  To the knowledge of V, DMA listed the particulars of and marketed the property.  The property was sold, but V refused to pay commission to DMA, arguing that she had not communicated acceptance.  It was held that V had acquiesced to the marketing of her property, and was thereby held to have accepted DMA’s offer to market it on terms which provided for commission on a sale to a purchaser introduced by the agents.  The court stated that the test for determining whether an agreement has been formed is objective - a reasonable person observing the conduct of the parties would assume that V had accepted DMA’s offer through conduct.

Scammell and Nephew v Ouston [1941] AC 251 HL - Scammell (S) negotiated the sale of a van to Ouston (O), with the balance to be paid on hire-purchase terms over 2 years.  Ouston also agreed to trade his old van for £100.  A dispute arose between the parties and S refused to sell the van to O.  The court held that there was a lack of certainty regarding the terms of the agreement.  Although the price had been agreed, the expression “hire-purchase terms” did not settle the proposed financing arrangements, including who would provide the finance and on what terms.  It could therefore not objectively be concluded that an agreement had been formed.  

Sudbrook Trading Estate v Eggleton [1983] AC 444 HL - The leases granted the tenants, Sudbrook, options to purchase at prices to be determined by two valuers, one appointed by each side. Sudbrook sought to exercise the options, but the landlord declined to appoint a surveyor, claiming that the clause did not specify a price and was therefore too vague to constitute an offer.  The court again adopted an objective approach towards the facts of the case, holding that the parties had agreed on a fair and reasonable price. The valuation process was machinery for finding that price, so the landlord could not defeat the options by refusing to appoint a valuer.

Principle 4: The battle of the forms

It is not uncommon for the parties to negotiate the terms of the contract, which they do by going back and forth with different terms and stipulations.  The ‘battle of the forms’ term arises from the fact that the parties keep changing the standard terms of the agreement.  For example, A offers B 100 books for £1000, and his standard terms apply that delivery costs are to be paid by the buyer.  B responds, accepting the offer, but adding his own terms and conditions, which state that the seller must organise and cover the costs of delivery.  In such cases it can get confusing to determine what the terms of the agreement are, and what the parties have actually agreed to, because of the back and forth addition and alteration of the terms of the agreement.  This is common in commercial agreements because the parties often have their own standard terms, which are then either altered or met with other standard terms. The parties go back and forth, amending the standard terms of the agreement. 

Ordinary offer and acceptance often mean that the last shot wins, in that the last party to send the form which is then acted upon and not explicitly rejected provides the basis for the contract.  The last set of terms must itself have been accepted. In TRW Ltd v Panasonic Industry Europe GmbH [2021] EWCA Civ 1558, the buyer had already signed up to the seller’s terms for future transactions. Its later purchase orders did not displace them. 

BRS v Arthur V Crutchley Ltd [1968] 1 All ER 811 - A delivered a consignment of whisky to B to be stored at B’s property.  The delivery driver gave B a delivery note which incorporated A’s conditions of carriage.  In the parties’ usual course of dealing, B stamped the delivery note to say that the goods were received on B’s own conditions.  The whisky was then given to B.  The last shot rule was applied by the court.  B’s stamp on the note constituted a counter offer which had been accepted by A through conduct, as in, the handing over of the consignment of whisky.     

Butler Machine Tool v Ex-Cell-O Corporation [1979] 1 WLR 401 (CA) - Ex-Cell-O (E) approached Butler (B) with the intention of purchasing a machine.  B offered E the machine for £75,535, and sent the offer along with a copy of their standard terms of sale.  Included in the terms was a price variation clause, as well as the stipulation that B’s terms would override any terms submitted by E.  E ordered the machine at the offered price and sent their own set of terms which did not include B’s price variation clause.  Accompanying the order was a slip stipulating that the contract would be subject to E’s terms, and which required that B sign it and return it to E.  B signed and returned the slip, and the machine was delivered.  B sought to enforce the price variation clause, which demanded that E pay an additional sum, which E refused to pay.

It was held that E, in responding to the original offer with its own terms, had responded to the original offer with a counter offer.  The price variation clause contained in B’s original terms of sale was therefore not a part of the contractual agreement.  E’s counter offer had been accepted by B’s act of signing the acknowledgement slip accompanying and referring to E’s terms. 

It is appreciated that this is a somewhat complex case and it can indeed get confusing.  However, it is merely necessary to recognise the points at which an offer, a counter offer, and an acceptance of the counter offer took place.  This is best achieved (and will aid in deconstructing problem questions) by breaking the scenario down into a timeline as follows:

1. B offers E machine for £75,535, with B’s terms of sale (original offer).
2. E placed order with its own terms of sale and acknowledgment slip (counter offer).
3. B signed acknowledgement slip (acceptance of counter offer).

Recognise that stage 2 represents a counter offer because E’s terms of sale were different to B’s terms of sale.  Remember that only acceptance of exact terms qualifies as acceptance, whereas the changing of terms qualifies as a counter offer.  This case also demonstrates the ‘battle of the forms’ principle explored below.  When each party submits their own terms, identify the last set of terms that the parties actually accepted by words or conduct.

Principle 5: end of acceptance period

An offer does not last forever, and an offeree does not have an unlimited time frame within which he may accept an offer.  The valid period of an offer may end in a variety of situations. If no time for acceptance is fixed, an offer lapses after a reasonable time (Ramsgate Victoria Hotel Co v Montefiore (1866) LR 1 Ex 109).

If the offeror changes his mind and communicates revocation before acceptance.

Routledge v Grant [1828] 4 Bing 653 - A offered to purchase B’s house and gave him 6 weeks to accept the offer.  Before the 6 weeks had passed, A withdrew his offer.  B sought to accept the offer, claiming that the 6 weeks’ time limit had not passed and was therefore still valid. It was held that A was free to withdraw his offer because there was no contract.

Offord v Davies(1862) 12 CBNS 748 - D guaranteed payment of bills discounted for a third party over 12 months. D could withdraw the guarantee for future bills, but remained liable for bills already discounted under it. It was further emphasised that the withdrawal of an offer must be communicated.

If the offeror stipulates a specific deadline for acceptance of the offer, the offeree cannot accept it once the deadline has passed (Hare v Nicoll [1966] 1 All ER 285). Unlike an ordinary offer, a binding option cannot be withdrawn during the option period. 

As has been stated above under Offord v Davies, revocation of an offer must be communicated in order to be validly withdrawn.

Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344 - Van Tien Hoven (VTH) posted letter from Cardiff to Byrne (B) in New York, on 1 October offering to sell 1000 boxes of tinplates.  B received the letter on 11 October and sent acceptance of the offer via telegraph on the same day.  On 8 October, VTH had sent a further letter to B, withdrawing the offer.  It was held that revocation of an offer must reach the offeree before acceptance.  The postal rule does not therefore apply to revocation of offer, as it is only valid once it is received by the offeree.

The offeror himself does not need to communicate revocation - it can be achieved through a third party or other reliable source: Dickinson v Dodds(1876) 2 Ch D 463.  See chapter 1 on offer for elaboration on this issue, as it is more relevant to  offer.

The offeree’s rejection of the offer will cause it to expire: Hyde v Wrench [1840] 3 Beav 334.

If the offeree changes his mind, problems can arise. For example, B accepts A’s offer of 100 books for £1000, and posts a letter of acceptance.  However, before the letter arrives at A’s address, B telephones A and rejects the offer.  Which method of communication applies first in such a scenario?  Whether an offeree can withdraw an effective postal acceptance by a faster message remains unsettled in English law.  It is worth considering cases decided in other jurisdictions, although they are of course not binding in England. 

Dunmore v Alexander (1830) 9 S 190 - In this Scottish case the two letters arrived together and the court found no contract. Whether the first letter was itself an acceptance is disputed.  This case should not be relied on as an authoritative decision - it is merely an example of the approach that can be taken in such cases.

Wenkheim v Arndt (1873) 1 NZ Jur 73 - A New Zealand case in which a letter of acceptance was sent, and a revocation of the acceptance letter was communicated by telegram.  The court held that the revocation by telegram was not valid.  Again, this is not binding in the UK, but it is interesting to observe a different approach to that adopted in Dunmore v Alexander.

You may refer to the above cases to determine what may be the case if such a situation was to arise in England.  The argument against withdrawal is that the contract was already formed on posting. The argument for it is that an offeror who receives the withdrawal first has not relied on the acceptance.

An offer will terminate if a condition of the offer is absent or unfulfilled.  For example, if the offer to sell 100 particular books is conditional on their remaining in substantially the same condition until acceptance, and they are badly damaged before B accepts, no contract is formed -  Financings Ltd v Stimson [1962] 3 All ER 386.

The death of the offeror does not always end an offer. An offer requiring the offeror’s personal performance cannot be accepted after his death. In Bradbury v Morgan (1862) 158 ER 877, the creditor continued supplying goods without knowing that the guarantor had died. The estate remained liable under the continuing guarantee. An offer made to an offeree personally cannot ordinarily be accepted by his representatives after his death.

Learning Outcomes - You should be able to:

• Explain and distinguish between valid and invalid acceptance.
• Distinguish between a counter offer and an invitation to treat.
• Determine when acceptance has been communicated.
• Explain what happens when the offeror stipulates the method of communicating acceptance.
• Demonstrate the importance of communicating acceptance.
• Recognise when the need to communicate acceptance does not apply.
• Describe the postal acceptance rule and when it applies.
• Recognise when the postal acceptance rule does not apply.
• Recognise when the parties are free to withdraw from negotiations.
• Distinguish between instantaneous and non-instantaneous forms of communicating acceptance, and when they are valid.
• State how and when an offer expires.

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