ACCEPTANCE MUST BE ABSOLUTE AND QUALIFIED PDF

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In order to form a valid contract, there must be an offer and acceptance. According to Section 2(a) of the Contract Acts 1950, an offer is a promise to do or not to do something to another party, with the intention that his promise would be accepted while acceptance is defined as “when a person to whom the proposal is made signifies his assent, the proposal is said to be accepted, a proposal when accepted becomes a promise” as provides in Section 2(b) of the Contract Acts 1950. One of the conditions for the acceptance to be valid is the acceptance must be absolute and unqualified as stated in Section 7(a) of the Contract Acts 1950. However, there are several situations where the acceptance will not be absolute and unqualified. Firstly, the offer will be not absolute and unqualified when there is a counter-offer by the offeree. As far as we know, there is a mirror image rule in acceptance which means the offeree must accept the offer without changing it. If the attempted acceptance mirrors the offer, a contract is formed, and the terms are those of the offer. Counter-offer occurred when the attempted acceptance does not mirror the offer and is treated as a rejection of the offer. If the rejection meets the requirement of an offer, it would be considered a counter-offer, and it would be up to the original offer where the original offeror becomes the offeree to accept the offer. This can be seen in the case of Hyde v Wrench. In this case, on 6th of June, the defendant wrote to the plaintiff on offering to sell his farm that worth $1,000. The plaintiff then agreed to buy the farm but with the price of $950. The defendant replied to the plaintiff on 27 th of June that he rejected the plaintiff’s offer. Upon receipt of the letter on June 29, the plaintiff immediately wrote to the defendant accepting the defendant’s earlier offer of $1,000. The court held that there is no existing contract between them. In the case of Malayan Flour Mills Bhd v Saw Eng Chee (Administrator of the estate of Saw Cheng Chor, deceased) & Anor where there are relevant portions have been reproduced such as the acceptance must be communicated to the offeror by an external manifestation of assent, some word spoken or act done by the offeree. A mere request for information is not a counter-offer. As compared to the letter, the former does not destroy an offer. The original offer stands, and the offeree must accept or reject the offer. This term is well-represented in the case of Stevenson, Jacques & Co v McLean where Lush J explained that a mere inquiry should have been answered and not to treat it as a rejection to the offer. To conclude, counter offer destroys the original offer and we cannot revive it by tendering a subsequent acceptance and the acceptance must be absolute an unqualified in order for it to be valid.

Secondly, the situation where acceptance is not absolute and qualified is when acceptance is made subject to contract. This means that, although the offer has been accepted, both parties should negotiate a formal, usually a written contract based on the offer. They are not legally binding until it is agreed to by all parties. There are two approaches in answering the question on whether these qualified statements are a valid acceptance. First, there is no contract until the formal document is signed. It means that signing the document is a must before a valid binding contract can be formed. In the case of Daiman Development Sdn Bhd v Matthew Lui Chin Teck & Anor Appeal, the Privy Council analysed that, ‘subject to contract’ will preclude the present assumption by the parties of contractual obligations. However, in this case, the Court held that the purchases contained in the booking pro forma were not made “subject to contract”. The requirements mean towards obligations presently accepted rather than suspension of obligations until some further agreement has been made. Furthermore, in the case of Ayer Hitam Tin Dredging v YC Chin Enterprise, the respondent negotiated to carry out a turnkey project for the construction of low houses and shop houses for the appellant. The appellant later sent a letter to the respondent which stated that they agreed to the proposals, subject to certain terms and conditions. In reliance of the letter, the respondent appointed architects, engineers and surveyors and executed preliminary works on site. Following a dispute, the appellant instructed the respondent to cease work and the respondent claimed that there is a contract between them. The Supreme court held that when an arrangement is made subject to contract, the court will take it to mean that negotiations are still on going and they do not intend to be bound by the contract until a formal contract is exchanged. The second approach stated that signing the document is a mere formality and the parties had entered a legal binding contract. It means that, signing a contract is just to show a formality that both parties enter a contract, while they have already entered a valid contract when the acceptance occurred. For example, in the case of Prism Leisure v Lumut Marine Resort, the court held was different from the case of Ayer Hitam Tin Dredging v YC Chin Enterprise which stated that even though the parties contemplated the execution of a formal contract that would not prevent a binding contract from being in force. In this case, the court says, “Even in the absence of a ‘formal agreement’...the courts have on numerous occasions found that the parties were at consensus ad idem even though the formal agreements have yet to be executed. In the context of this case, the requirement of a ‘formal agreement’ was merely intended as a solemn record of an already complete, valid legal and binding contract…”. The Court held that there was a binding contract and the defendant had breached the contract.

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The next situation where acceptance is not absolute and unqualified is when terms of offer is amended at time of acceptance. If the acceptance contains clauses adding on or amending the terms of the offer, it is not absolute and unconditional and there is no valid acceptance and can amount to a counter-offer. This falls squarely under Section 7(a) of the Contracts Act 1950 where it states that in order to convert a proposal into a promise, acceptance must be absolute and unqualified. Any amendment made to the terms of the offer constitutes to an acceptance which is not absolute and qualified. This can be illustrated in the case of Jones v. Daniel [1894] 2 Ch 332. In this case, the defendant made a verbal offer to purchase the plaintiff ’s land for £1450. After some correspondence, the defendant repeated his offer in writing. The solicitor of the plaintiffs wrote back, stating that the plaintiff accepted the offer and enclosing a copy of the contract for the defendant to sign. This contract contained several terms which the defendant had not mentioned in his offer. The letter stated that once the solicitors had received the signed version of the contract, they would send the defendant the version which the plaintiff had signed. The defendant initially did not respond to this letter, despite the solicitors sending several followup letters. Eventually, he wrote to the solicitors declining to purchase the land. The claimant sought specific performance of sale, arguing that the letters between the solicitors and the defendant constituted a completed contract. The issue that arose in the Court was whether there was a valid acceptance made by the plaintiff even after there was amendments made to the offer by the plaintiff. The Court held that by the addition of a new document (the enclosed contract), the acceptance was not absolute but amounted a counteroffer which was never accepted by the defendant. In the light of the case of Jones v. Daniel, it can be summed up that the letter purporting to accept the defendant’s offer did not mirror the terms of that offer as it had several new terms. The amendments made to the offer have made the acceptance no longer absolute and now a qualified acceptance. This meant that it was not an acceptance, but it was a counter-offer. Since the defendant had not accepted this counter-offer, there was no completed contract. Therefore, it is evident that the amendment of terms in an offer by the acceptor contradicts the prerequisites for a valid acceptance as enumerated under Section 7 (a) of the Contracts Act 1950 which states that a valid acceptance is an acceptance that is absolute and unqualified. In conclusion, there are situations where the acceptance are not absolute and unqualified such as counter offer, acceptance subject to contract, and terms of offer amended at time of acceptance which will not constitute a binding contract between two parties.

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