Contract Law - Unit 2: Offer and Acceptance PDF

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W L Brown

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2.2.1 Method of communication Offeror may suggest particular method of communication is used but offeree can still validly accept using a different method (providing it does not cause a delay and still brings the acceptance to the knowledge of the offeror. Offeror to prescribe that an acceptance is only valid if communicated in a particular way, clear wording must be used. Offeror can then still not enforce this requirement, provided the offeree is not adversely affected. Illustrated in; 1. Tinn v Hoffman (1873) 29 LT 271 2. Manchester Diocesan Council for Education v Commercial and General Investments Ltd [1969] 3 All ER 1593. If no particular method required = appropriate form of communication depends on the nature of the offer and circumstances in which it was made. 2.2.2 Acceptance by silence General rule = silence does not constitute an acceptance. Illustrated by Felthouse v Bindley (1862) 11 CBNS 869. 2.2.3 Acceptance by Post General Rule = has been communicated as soon as it is put into the post by the offeree, regardless of whether it is actually received by the offeror. Set out in Adams v Lindsell (1818) 1 B & Ald 681, confirmed by Court of Appeal in Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879) 4 Ex D 216. Generally referred to as the ‘postal rule’. Gardner (1992) discusses a number of changes in the postal system that occurred at the time the postal rule was established, which may have influenced the attitude of the courts. These included the introduction of the penny post in 1840, enabling anyone to send a letter for a flat fee of one penny (around the cost of a cup of coffee at that time). Alongside this came the introduction of the first self-adhesive stamp. This meant a move from the addressee paying the postage on receipt to the addressor prepaying it. There was also the gradual use of railways, rather than mail coaches, to carry the mail and the introduction of letter boxes in people’s front doors; this meant that mail no longer had to be handed to the addressee in person. All of this arguably encouraged a public perception that posting was equivalent to delivery. 2.2.4 Acceptance by electronic means Recently the judiciary have had to deal with further shifts in methods of communication as the number of large businesses trading globally has increased. Electronic means of communication (telexes, faxes, emails and other web-based exchanges are now frequently used (Mulcahy, 2008, p. 63) Entores case - Court of Appeal had to consider whether the postal rule applied to telexes (similar to a fax machine where a message is typed in one machine and relayed instantaneously to another machine. Issue = whether contract between the parties formed in England or Holland.

If the acceptance by telex was viewed as communicated when it was sent (following postal rule), the contract would be formed in Holland. If it was not communicated until the telex was received, would be formed in England. Lord Denning stated (at pp. 334-5): “My conclusion is, that the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offeror: and the contract is made at the place where the acceptance is received.” Court of Appeal held that the contract was formed in England when the acceptance was received. House of Lords confirmed this approach to telees in the case of Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels GmbH [1983] 2 AC 34. However, it acknowledged that there may be different sets of circumstances (e.g telexes arriving outside normal office hours), which could not be covered by the one general rule. In these situations, Lord Wilberforce suggested (p.42): “... they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie.”

2.2.5 Email and the internet No. of academics have considered whether the postal rule should apply to acceptances sent over the internet. Activity 9 - The challenges of the ‘IT age’ Kadir, R.A. (2012) ‘Issues of contract formation in Internet contracting: when electronically mailed acceptance ought to be effective’, International Journal of Technology, Knowledge and Society, vol. 8, no.2, pp. 29-40.

a) Briefly explain each of the three theories on communication of acceptance, which Kadir discusses b) Based on Kadir’s summary, which approach appears to be most commonly used in e-commerce internationally? c) At p.38 Kadir states, ‘given the features of the medium, the dispatch theory, on balance, is a more desirable theory to govern the communication of acceptance via electronic mail’. Do you agree that the dispatch theory should be applied to email communications? Kadir refers to 3 different theories; 1. Information theory - acceptance is only communicated when the offeror has been notified of it. 2. Dispatch theory - acceptance is communicated when it is sent by the offeree (reflected in use of postal rule).

3. Receipt theory - acceptance is communicated once it has been delivered to the offeror’s address. Identifies several documents produced by international bodies, including the United Nations Convention on Contracts for the International Sale of Goods 1980, have a uniform rule that acceptance is communicated when it ‘reaches’ the offeror. Werner, J. (2001) ‘E-commerce.co.uk - local rules in a global net: Online business transactions and the applicability of traditional English contract law rules’, International Journal of Communications Law and Policy, vol. 6, winter 2000/2001, pp.1-10. a) How does Werner’s view on the point where acceptance is communicated differ from Kadir? b) Which viewpoint do you find the most convincing? c) What contractual issues does Werner raise in relation to web-click contracts? Werner argues that acceptance should be viewed as communicated when the email reaches the offeror’s place of business within office hours. He views emails as similar to instantaneous methods of communication and suggests that this would minimise uncertainty by requiring firms to check emails regularly during office hours. Question B - answer will depend on your analysis and evaluation of the arguments you have read. Werner discusses the issues of whether an electronic contract can be viewed as ‘in writing’ and ‘signed’ (and concludes that they can be). He also considers whether a ‘webvertisement’ should be viewed as an invitation to treat or an offer. In relation to the issue of when acceptance is communicated. He argues that these are an instantaneous form of communication so the postal rule does not apply. 3 Termination of an offer Until an offer is accepted it can be terminated at any time as no legal obligations have been created. Termination can occur in a number of ways. 3.1 Revocation Offer can be revoked (withdrawn) at any time before it has been accepted. Established in Payne case. This is the case even if the offeror has stated that it will be kept open for a specific time they can choose to revoke the offer prior to the end of that time period. Routledge v Grant (1828) 3 Car & P 267, stated by Lord Chief Justice Best (at para. 273) that: “Although the defendant gave the plaintiff six weeks to accept his offer, yet as there was no express stipulation that, for the chance of the plaintiff’s acceptance, the defendant should, during that six weeks, be bound not to retract, the defendant might retract at any time before the plaintiff accepted”.

Only exception = separate contract has been formed to specifically keep the offer open = but this contract would have to meet all the requirements for a valid contract. Revocation = only effective once communicated to an offeree Activity 10 - When is a revocation communicated? Byrne & Co v Leon Van Tienhoven & Co (1880) 5 CPD 344 a) Summarise facts of case (max. 200 words) b) Summarise the legal principles it sets out in relation to the communication of a revocation. (max. 300 words) ● ● ● ● ●

The defendant was based in Cardiff, the plaintiff in New York. The defendant offered to sell the plaintiff 1000 boxes of tinplate by a letter dated 1 October 1879. The plaintiff sent a telegram on 11 October stating it accepted and a letter on 15 October also referring to its acceptance. On 8 October the defendant had sent the plaintiff a letter withdrawing its offer of 1 October; this was not received by the plaintiff until 20 October. The plaintiff argued that the defendant was already bound by the plaintiff’s acceptance of 11 October and sought damages for the defendant’s failure to deliver the tinplate.

The following points in regard to legal principles of the case are key; ❖ Justice Lindley confirmed that an offer can be withdrawn at any time before it has been accepted, even if it was expressed to be open for a specific period of time (p.347). ❖ He upheld the argument ‘that an uncommunicated revocation is for all practical purposes and in point of law no revocation at all’ (p. 347); in other words, revocation must be communicated. ❖ He also held that the postal rule did not apply to the withdrawal of offers. This means that the withdrawal must be received by the offeree for it take effect. Not clear in case law = whether offeree will be taken to have received the revocation when it reaches their business or when they actually read it; BUT; Court of Appeal in Tenax Steamship Co Ltd v Owners of the Motor Vessel Brimnes (The Brimnes) [1975 QB 929, held that a notice of withdrawal sent by telex during ordinary business hours was effective when it was received on the telex machine. Court of Appeal in Dickinson v Dodds (1876) 2 Ch D 463, held that for revocation to be valid it does not have to be communicated by the offeror. It is valid if the offeree has heard about the revocation from a 3rd party....