Lecture 6 - Contract Law, Ryan Murray PDF

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Contract Law, Ryan Murray...

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LAW OF CONTRACT | LECTURE 6

ACCEPTANCE COMMUNICATION OF ACCEPTANCE - The general rule of an acceptance is that acceptance must be effective when it is communicated to the oferor - ENTORES CASE. An acceptance is effective when it is communicated to the offeror, but this is not an absolute law, it is a general rule but there are exceptions. This is because there can be situations, when an acceptance will be effective, the parties will be bound in a contract even though strictly the acceptance hast been communicated to the oferor, it hasn't been brought to the actual attention of the offeror. The first of these exceptions that we will consider, Is 'THE IMPORTANCE OF FAULT: Offeror's fault that acceptance isn't communicated. For example, it seems that the offeror may be barred (ESTOPPED) from denying the existence of a contract where it is his fault that he did not receive it. E.g If the offeror, on the phone, does not catch the words of acceptance, but does not ask for them to be repeated. (Per Lord Denning, Obiter in the Entores Case). - The fault can be one factor which can cause the court to depart from the general rule of communication of acceptance within a contract. EXAMPLE 1: Principles come from the case Entores. E.g Telephone conversation. Imagine two aprties are entering into a contract over the telephone, the oferor makes the offer, the oferee the responds with 'I Accept'. So the acceptanre is sent through, but the example in tores, which Lord Denning points out is that what if the offeror knew that the offeree had said something but did not catch the precise words but also did not ask for them to be repeated, would there be a contract in this situation? The oferee (The person sending the acceptance is unsware their acceptance hasnt got through). In this case, Llord denning says, the oferee believes that hs acceptance has gone through, but it is the fault of the oferor as to whhy it hasnt, they could hae ased for the words to be repeated thus = The offeror may be prevented by denying the existence of a contract, so there may be A CONTRACT even though the acceptance wasn't properly communicated.

EXAMPLE 2: What would happen if the two parties are contracting, the offeror makes the offer over the telephone but the line goes dead before the acceptance is heard. What would happen in this situation? Would there be a contract? In this case there would be NO CONTRACT because: 1. Both parties are aware that the acceptance has not gone through. 2. Acceptance will only be effective when communicated. It is the responsibility of the offeree to re-send their acceptance. e.g re dial to the offeror so that the acceptance can be communicated properly in order to be effective. 7:53 Lord Denning then goes on to mention another example: To imagine that there are two parties contracting not over the telephone, but across the river. What would happen if one party shouts their Offer from one river bank to the offeree, the offeree just about to shout their acceptance, but as they do, a plane flies by and drowns out the acceptance so that it is nearer heard by the offeror. What would happen in this situation? Denning say this is akin to the phone line going dead, the oferee knows the acceptance hasn't gone through because of the place. therefore, it would be the offeree's responsibility to

communicate their acceptance. Until it is communicated, there will be no contract between the parties. 14:13 ACCEPTANCE IN UNILATERAL CONTRACTS. - In unilateral contracts you don;t need to communicate the fact of acceptance, your acceptance is the performance of the required act, Reward cases: Performance = Acceptance. Remember Carlill, there was no need to communicate acceptance. The use of the ball as prescribed was the acceptance. E.g the reward cases, communication of acceptance is generally dispersed with and the performance of the act is sufficient to indicate acceptance. In the example of the Carbolic Smoke-ball case, the argument was that it was not bound because Carlill failed to notify them of her acceptance and was rejected. Acceptance took place by Carlill fulfilling the conditions of the offer. What if the offeror indicated that the party should accept using a particular method? so they prescribe a method of acceptance, what would happen then if you depart from that prescribed method? If the offeror makes clear that a particular method of acceptance should be used and no other method will suffice then = There may be no contract i another method is used. CASE: Eliason V Henshaw (1819) - Eliason offered to buy flour from H, requesting that an answer should be sent to him at Harper's Ferry by the Wagon which brought the offer. essentially, that the acceptance should be sent by the same method that the offer was sent. Henshaw however, sent a letter (post) of acceptance by post to Georgetown, thing that this would reach Eliason more speedily. He was wrong. It took a lot longer so the court HELD that it was clear there was a prescribed method which was by Harper's Ferry by the wagon and the offeree departed from that by using post so there was NO CONTRACT. 16:42 In some cases, parties may indicate that there is a preferred method, but other methods will also be accepted. The difference here will = difference in the outcome. 20:35 CASE: YATES BUILDING CO V PULLEYN (1975). There was a stipulation to reply to an offer by 'registered post, but this was not mandatory and acceptance by ordinary post was sufficient. The offeree accepted by post but didn't use the registered method. The courts said that in this situation the method of registered post was a mere method of preference, not a mandatory system, the acceptance was effective in this case. If there is no prescribed exclusive means of acceptance, an equally advantageous method will suffice. So long as the offeree uses an equally expeditious method of acceptance, then this will be ok. CASE: Tinn v HOFFMAN (1873) 21:14 Generally, acceptance is effective when it is communicated, but the "POSTAL RULE" is a big exception. The postal rule says that the Acceptance is effective when posted. Not when the letter arrives, or when the letter is read, acceptance is accepted as soon as it enters the postal system. 24:50 The two leading authorities for the postal rule are: ADAMS V LINDSELL (1818) The defendants wrote to the claimants offering to sell wool and requested a reply "In the course of post". The letter containing the post was wrongly addressed; because of this the letter of acceptance was posted and received 2 days later than the defendants would

have reasonably expected. The day before receiving the letter of acceptance, the defendants sold the wood to a third party, but the letter of acceptance had been posted before the day on which the wood was sold. The claimants sued for breach of contract because the claimants posted their acceptance. HELD: In this case, The courts had to resolve when was the contract formed. If it was when the letter arrived, then there would be no breach of contract, but if it was when it was posted then there would be a breach of contract. The courts said the claimants acceptance was effective when it was posted. The defendants therefore were in breach of contract when they sold the wool to a 3rd party. 25:53 CASE: HOUSEHOLD FIRE INSURANCE CO V GRANT (1879) - he acceptance of Grant's offer to buy shares in the plaintiff company was posted to him but he never received it. He refused to pay for the shares when the company was wound up. The court HELD that ; The contract was formed upon the posting of the acceptance. 31:06 POSTAL RULE: QUALIFICATIONS TO THE POSTAL RULE; LIMITATIONS. 1. The letter of acceptance must be properley posted. In other words, it must enter the ROYAL AIL postal system and it only applies to this, it doesnt apply to independent couriers or prvate compaies, only Royal mail. CASE: Re LONDON AND NORTHERN BANK (1900), The letter was handed to the postman who was only authorized to deliver; Postal acceptance rule did not apply. 2. The letter must be correctly addressed in order to take advantage of the postal rule. CASE: CONTIMAR'S CASE (1953) - A misaddressed communication should not take advantage of the postal rule. We do have a recent authority that confirms this approach, so if the postal rule here doesn't apply, when does it? - In the case of a misaddressed letter of acceptance Professor Treitel (Law of contract) suggests there should be no absolute rule. Academic Opinion: In the case of a misaddressed letter of acceptance, Professor Treitel (law of contract) suggests that there should be no hard and fast rule. He indicated that the contract should come into being, at the time least favorable to the party responsible for misdirection. This approach was accepted (Obiter) in Korbetis V Transgrain Shipping (2005 - - 31:46 The next requirement in order for the postal rule to apply is that - It was to be reasonable to post as a method of acceptance. This could be traced back to the case of HENTHORN V FRASER (1982), the fact that the parties lived some way from one another justified postal acceptance of an oral offer. - The postal rule does not apply to modern or 'Instantaneous' methods of acceptance, e.g telephone, telex, fax. CASE: ENTORES V MILES AR EAST corpn (1955) = The claimants had offices in London, the defendants in Amsterdam. The parties entered into an agreement by means of Telex, whereby each company had in its office a teleprinter connected by the post office to a teleprinter in the other office so that a message typed on one machine was automatically typed out by the other. The defendants acceptance was received by the claimants in London. The contract was broken and the question arose as to where the contract had been ace, London or Amsterdam? would the UK law apply or the dutch law? HELD: The courts decided that the contract was made where the acceptance was received which was in London, therefore English law would govern the performance of the contract. Entores was confirmed by House of Lords in the case of BRINKIBON V STAHAG STAHL

(1983) - i.e, in the case of Instantaneous modes, the contract will come into being wen and where the acceptance is received. Lord Wilberforce: "No universal rule can cover all such cases, they must be resolved by: - The intention of the parties. - Sound business practice - On a judgement as to where the risk would lie. Further .. Lord Fraser says "Once a message is received on the offeror's telex machine, not unreasonable to treat it as delivered to the offeror as it is his responsibility to arrange the prompt handling of messages in his own office" ... For example, if someone sends an offer by email, and we send our acceptance by email and the offeror's don't check their email, they cant say there is no contract until they've checked their email. It is their fault that they haven't checked their emails, so there still may be a contract. 37:58 5) Exclusion of the postal rule by the express or implied wording of the offer. Case: HOLWELL SECURITIES V HUGHES (1974) - An offer to sell land required acceptance "By notice in writing". A letter of acceptance was posted, but it never arrived. HELD: The courts, The postal rule would not apply because by requiring notice of acceptance, that wording had displaced the postal rule. The requirement of notice had displaced the application o the postal rule. 48:30 6) The 6th issue, is revocation of postal acceptance possible? What if you send an acceptance by post, how would one withdraw their offer? A Scottish case WENCKHEIM V ARNDT (1873) SUGGESTS that it may be possible. As long as the acceptance hasn't entered the postal system, then you ca withdraw your offer, but the postal rule doesn't apply to the withdrawal, the withdrawal only takes effect when it arrives and is communicated to the offeree. So if someone sends a letter of acceptance, ans then send a letter of revocation and the revocation arrives before the letter of acceptance then there is no contract, but if the letter of acceptance enters the postal system before the revocation letter arrives then there is a contract. 50:21 ACCEPTANCE BY EMAIL: Communications by email bear some resemblance to postal communications in the sense that the message is sent on an online server and is similar to an electronic sorting office, and may not be immediately received. If the postal rule applied, the contract would come into being at the moment the offeree's mouse clicked the 'send' button. However, since the sender will generally know if his message has not been sent, it seems preferable to apply the rule relating to instantaneous modes. i.e - that the contract will not come into being until the acceptance has been received. - The principle established in Entores and confirmed by HL in Brinkibon v Stahag Stahl (1983), are likely to apply to such cases, In particular Lord Wilberforce's comments highlight that key factors should be taken into account when deciding the issue of acceptance, such as the intentions of the parties, sound business practice and on a judgement as to where the risk would lie....