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Deveral Capps
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By the end of this lecture you should have understood what acceptance is,
how acceptance can be made and when acceptance will be valid.
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We have already seen that in order to create a valid legally binding contract
certain elements are required. These are offer, acceptance, consideration
and an intention to create legally binding relations. This lecture will deal with
the second of these elements, acceptance. Before you listen to this lecture it
is important that you have covered the law relating to offer.
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Acceptance can be defined as the unconditional assent to all the terms of the
offer. Acceptance must therefore be complete and unequivocal.
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It may be useful at this stage to point out two occasions where acceptance
may appear to have occurred, but in fact legally has not. These two
occasions are where the acceptance amounts to a counter-offer or the words
subject to contract are used. We shall look at each of these in turn.
The first is counter-offer. This, as you should already know, is where an
acceptance actually tries to alter the terms of the original offer. This is a
counter-offer and not acceptance. A counter-offer will terminate the original
offer. You should be aware of the leading case on counter-offer, which is
Hyde v Wrench.
The second is subject to contract. This term is used widely in contracts for the
sale of land and means that acceptance will not actually occur until the
contract has actually been signed. Therefore a verbal acceptance will not
suffice. Either the person making the offer or the person accepting the offer
can use the words subject to contract. Now we can turn to when acceptance
has actually occurred.
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One thing that is certain with the law relating to acceptance is that there must
be some action, either verbally or physically, to indicate that acceptance has
been made. Silence cannot constitute acceptance and the following case
illustrates this Felthouse v Bindley. The facts of this case are as follows.
The plaintiff wrote to his nephew offering to buy a particular horse for 30 15s.
The plaintiff wrote on the note "If I hear no more about him, I consider the
horse mine at that price". The nephew intended to sell the horse to the uncle
at the price, and, in accordance with note, did nothing.
At this time, the horse was in the possession of an auctioneer who was the
defendant in this case, and the nephew instructed the auctioneer not to sell
the horse in a forthcoming auction. However, due to a misunderstanding, the
horse was sold to another person. The uncle sued the auctioneer in the tort of
conversion, which is the wrongful disposal of another's property.
The uncle lost his case at trial. The court held that there could be no
acceptance by silence. An offeror cannot impose acceptance merely because
the offeree does not reject the offer. The intention to accept will not constitute
valid acceptance unless there has been communication of the acceptance in
some form. As the uncle had no title to the horse, an action complaining of the
wrongful disposal of his property must fail. Therefore, we can see that, if
silence cannot constitute acceptance, there must be some communication of
the acceptance for it to take effect. The fact that someone has decided to
accept an offer does not amount to acceptance in law. The acceptance must
be communicated to the offeror and acceptance will not be effective until this
is done.
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In Entores Ltd v Miles Far East Corporation Lord Denning said the
following about acceptance. "Suppose, for instance, that I shout an offer to a
man across a river but I do not hear his reply because it is drowned by an
aircraft flying overhead. There is no contract at that moment. If he wishes to
make a contract, he must wait until the aircraft is gone and then shout back
his acceptance so that I can hear what he says".
What would happen in the situation where the person who accepted the offer
did so on the behalf of others, and what if this person did not actually have the
power to accept. This situation occurred in the case of Powell v Lee.
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The facts of Powell v Lee are as follows. The defendants here were the
managers of a school. The managers interviewed the plaintiff for the position
of headmaster and by a narrow majority the plaintiff won the position on a
vote. One of the managers, a Mr. Dismore, without any instruction from the
rest, sent the plaintiff a telegram saying that he had been selected as the
headmaster. The next day another managers meeting was held, which
decided that the plaintiff was not the best person for the job and they
appointed somebody else. The court held that there was no contract in
existence as the acceptance was not from the whole body of the managers
and therefore was unauthorised.
In this case Channell J said "There must be notice of acceptance from the
contracting party in some way, and the mere fact that the managers did not
authorise such a communication, which is the usual course adopted, implies
that they meant to reserve the power to reconsider the decision at which they
had arrived."
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We have seen therefore that in order for acceptance to be valid it must be:
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2
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The first of these is Adams v Lindsell. The facts of this case were as follows.
The defendants made an offer by letter to the plaintiffs on 2 nd September
1817, requiring an answer in the course of post. The letter of offer was
misdirected and slightly delayed. It reached the plaintiffs on 5 th September,
who immediately posted a letter of acceptance that reached the defendants
on 9th September. If the original offer had been properly addressed, the
defendants could have expected a reply by 7th September. As this acceptance
did not occur, the defendants believed the offer was not going to be accepted
and on 8th September they sold the goods to another person. The court held in
this case that the acceptance was effective as soon as it had been posted.
Therefore the contract was legally binding at this time.
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When dealing with the law relating to offer, you would have looked at the case
of Byrne and Co v Van Tienhoven and Co. If you are unfamiliar with the
facts of this case, then you should familiarise yourself with them before you
continue with this lecture any further. In Byrne the offer was accepted on at
least 15th October when the letter of acceptance was posted, unless of course
the telegraphed acceptance had been communicated to the offeror by then.
Over the years the law has realised that the Postal Rule is a very powerful
rule indeed and judges have tried to limit the law in the following ways. Where
the offer stipulates that acceptance must be communicated by notice in
writing, the Postal Rule will not operate. Notice means the offeror must
actually be notified. If the Postal Rule applied here and the letter was lost in
the post, then the law would be overriding one of the conditions of the offer
and this cannot be allowed to occur. Let us look at a case to illustrate this
limitation to the Postal Rule.
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The case is Holwell Securities v Hughes. The facts of this case are as
follows. An option to purchase certain property was granted to the plaintiff in
this action. An option to purchase means that a person has an opportunity to
purchase something should they wish to do so. Clause 2 of the agreement
stated that "the said option shall be exercisable by notice in writing". The
plaintiff's solicitors wrote a letter to the defendants exercising the option and
posted the letter, which was both prepaid and correctly addressed. This letter
was lost in the post. The court held that the words "notice in writing" meant
that notice must actually occur and that the letter must actually be delivered.
Therefore, the Postal Rule could not apply as notice of acceptance was not
actually given.
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In this case Russell LJ said "The relevant language here is 'the said option
shall be exercisable by notice in writing to the intending vendor' a very
common phrase in an option agreement. There is, of course, nothing in that
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Russell went on to say "The answer might well be that in the circumstances
the defendant had impliedly invited communication by use of an orifice in his
front door designed to receive communications".
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The Postal Rule will also not apply if a letter is not posted but is in fact handed
to a postman, who later goes on to post the letter. This can be seen in the
case of Re London and Northern Bank ex parte Jones. The facts of this
case were as follows. One morning at 7.30 am a servant of Northern bank
took a letter along with many others addressed to Dr. Jones in Sheffield to the
General Post Office in London. This letter accepted Dr. Jones' offer to buy
shares from the bank. On the outer precincts of the GPO a postman came by
and offered to take the letters. The bank's employee handed over the letters
and the postman went into the building, returned to the bank's employee and
confirmed that the letters had been posted.
A letter was received by the bank at 8.30 that morning from Dr. Jones
withdrawing his offer to buy shares in the bank. Therefore we can see that the
Postal Rule is very important here, as one hour after the letter of acceptance
was posted the offer was withdrawn. The court held that handing the letter to
the postman outside the GPO was not posting a letter so as to amount to
acceptance by the Postal Rule, even though that letter was actually posted.
The postal guide expressly states that town postmen were not allowed to take
charge of letters other than from a post box. This case undoubtedly illustrates
the court's intention to take every possible opportunity to restrict the ambit of
the Postal Rule as far as possible.
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registered or recorded delivery post. The plaintiffs sent a letter exercising the
option by ordinary post. The defendants received this letter, but because it
wasn't sent by either registered or recorded delivery, they refused to accept it.
The Court of Appeal held that sending the letter by ordinary post was valid
and was no disadvantage to the offeror. The court said that by stating the
acceptance must be made by recorded or registered delivery , this implied
that the acceptance must be made by post. Registered or recorded post was
only to ensure delivery and, as this had happened, acceptance had occurred.
If the defendants had stated that the acceptance would only be valid if made
by registered or recorded delivery, then this may have altered the situation.
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