CONTRACT LAW - ACCEPTANCE OF OFFERS

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 Bofferor can do 1 of 4 things

IF what B does

amounts to a

A counter-offer ‘counter-offer’

can do 1 of 4 things 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 1877Confetti 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 communication2. When the offeree simply remains silent3. Acceptance and unilateral contracts4. When the mode of acceptance is specified5. 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