CONTRACT

LAW
- LECTURE 2
ACCEPTANCE
 WHAT IS ACCEPTANCE?
S. 2(b) Contracts Act
“When a person to whom the proposal is made
signifies his assent thereto, the proposal is said
to be accepted; a proposal when accepted becomes
a promise”.

- Hence, acceptance is the offeree’s agreement to

be bound and to bind the offeror by the promise.
- It is the element that turns an offer into an
agreement.
REQUIREMENTS OF ACCEPTANCE
o S. 7 “ In order to convert a proposal into a
promise the acceptance must –
a) be absolute and unqualified;
b) be expressed in some usual and reasonable
manner…
1) Acceptance must be absolute and unqualified
- Must be unconditional assent to the terms
proposed in the offer.
- If there is any attempt to modify the contents of
an offer – it might be an implied rejection to the
offer (Hyde v. Wrench)
Case : Hyde v. Wrench (1840)
Facts :
D wrote to P on June 6 offering to sell his farm for
£1000. The D immmediately called on D and
offerd to purchase the farm for £950. On June 27,
D replied to P that he was unable to accept the
P’s offer. Upon receipt of the letter on June 29, p
immediately wrote to D accepting the D’s earlier
offer of £1000.
The question was whether a contract had been
concluded between the parties.

Held : No valid binding contract between the

parties because there exist a counter offer which
destroys the original offer & P cannot revive it by
tendering a subsequent acceptance.
 Case : Malayan Flour Mills Bhd v. Saw Eng Chee
& Anor. [1997] 1 MLJ 763
Held :
What constitutes an effective communication of
acceptance must necessarily depend on the
circumstances of the case. The offeree’s intention
to accept must be conclusive and he must not
treat the negotiation between the parties as still
open to the process of bargaining.
A counter offer by the offeree not only fails as an
acceptance, it also generally amounts to a
rejection of the original offer, which therefore
cannot be subsequently be accepted.
 However, a counter offer must be distinguished
from a mere request for information.

Case :
Facts :
The parties were negotiating for the sale of iron. D
wrote to P fixing 40s per ton- net cash And
stating that he will hold the offer till following
Monday. On that Monday morning, P
telegraphed to D stating “ Please wire whether
you would accept 40 for delivery over 2 months
or, if not, longest limit you could give”. D didn’t
reply and on the same day, sold the iron to
someone else and telegraphed the P at 1.25 pm
saying that he done so.
 Held :
There is no counter proposal. From the words
“please wire…..” , there is nothing specific by way
of offer or rejection, but a mere inquiry, which
should have been answered and not teated as a
rejection of the offer.
2) Acceptance must be communicated

o General rule : acceptance must be communicated

to the offeror. Hence the contract will only be
formed at the moment and the place where the
acceptance is completely communicated.
MODES OF COMMUNICATING
ACCEPTANCE
 S. 8 Contracts Act
“ Performance of the conditions of a proposal, or
acceptance of any consideration for a reciprocal
promise which may be offered with a proposal, is
an acceptance of the proposal”.
 S. 9 Contracts Act

“So far as the proposal or acceptance of any

promise is made in words, the promise is said to
be express. So far as the proposal or acceptance is
made otherwise than in words, the promise is
said to be implied”.
1) ACCEPTANCE BY POST/TELEGRAM
 Rule !
- Acceptance is complete when the letter
containing such acceptance is posted, or when the
telegram containing such acceptance is handed
in.

- Hence, the acceptance will be deemed to have

been effected at the very moment it is posted and
not when it is received.
 An offer made to one who is not in immediate
communication with the offeror remains open available for
acceptance until the lapse off such a time as is prescribed
by the offeror, or reasonable as regards the nature of the
transaction.
 During this time, the offer is a continuing offer and may
turned into a contract by acceptance.

 Case : Adams v Lindsell (1818)

Facts :
2 Sep – D (dealer of wool) wrote to P (woolen manufacturers)
offering to sell a number of fleeces, and added ‘receiving
your answer in course of post’. The letter was misdirected
by the D, and was not received by P until 5 Sep. On the
same evening, P wrote an answer, agreeing to accept the
offer on the terms proposed. The acceptance did not reach
the D until 9 Sep. But, on 8 Sep, D sold the wool to a third
party because they did not received any answer on 7 Sep as
they expected (which they would have, if their letter had
not misdirected). P sued for breach of contract.
 Held :
 -The acceptance is completed on 5 Sep, when P
posted the letter containing the acceptance.
- It was argued by the D that there was no
contract between the parties until the letter of
acceptance received by them.
- As to that, the Court held “If the rule was that
no contract could be formed until the acceptance
was actually received, no contract could ever be
completed; for if the D were not bound by their
offer till the answer was received, the P ought not
to be bound till after they had received the
notification that the D had received their answer
and assented to it, and so it might go on ad
infinitum.
 Case : Ignatius v. Bell (1913) 2 FMSLR 115
Facts :
D granted to P an option to purchase certain land he
owned. The option was to be exercised on or before
20/8/1912 by a notice in writing served on D at either
his estate or his residence. On 16/8, P sent a notice in
a registered letter addressed to D’s estate. The letter
was not delivered to D’s estate but remain in post
office until 25/8. D was away from estate from 14/8 –
22/8. He had obtained the P’s letter purporting to
exercise the option when he drove to the post office on
25/8 evening.

Issue : Whether the notice sent by the P to D was a

valid acceptance?
 Held : YES!
“ The option was exercised by P when the letter
was posted. The post office is just a means of
communicating the acceptance by the P. It was
clearly stated in the agreement that the option to
be exercised by a notice in writing, and D’s postal
address is given as the place to which the notice
was to be sent…”
2) ACCEPTANCE BY TELEX/TELEPHONE
 Considered as instantaneous communication
where parties are regarded to be in each other’s
presence and is complete only when it is received.

 Case : Entores Ltd v. Miles Far East Corporation

[1955]
Facts :
P, an English company and D, an American
corporation with agents all over the world.,
including a Dutch company in Amsterdam. P
wished to make a contract with the D’s Dutch
agent for the purchase of copper cathodes from
the D.
Cont..
They communicated through telex (P & Dutch),
whereby on 8/9/1954, P made counter offer and on
10/9/1954, P received in London, the acceptance of
that offer by Dutch on behalf of D (by telex also).
P then alleged that there had been a breach of contract
by D and applied for leave to serve notice of a writ on
the D in New York on the ground that the contract
was made in England. D contended that the contract
was made in Holland.

Held :
The communication through telex in this case was
instantaneous and the contract was made at the place
where the acceptance was received, in this case, in
London.
3) ACCEPTANCE BY CONDUCT
 An acceptor, may by his conduct indicate his
intention whether he has or has not accepted an
offer.
 i.e. When a person takes any item from a
supermarket shelf, puts it in his basket and
brings it to the cashier to pay, this person is
making an offer. This offer is accepted by cnduct
when the cashier takes the item, scans price tag
on the item and accepts the money for its price.
 Case : Woon Yoke Lin v. United Estate Projects
Berhad [1998] 4 AMR 4052

Held : D had accepted the P’s offer by conduct ;

1. D didn’t reply within 14 days (the booking form
stated that if P’s application was not accepted,
the deposit would be refunded within 14 days).
2. D accept the booking fees and paid it into their
own account
3. D didn’t return the money within 14 days as
provided in the booking form.
4. They could have rejected the tenancy agreement
and also the money upon receipt of those items.
5. Instead of rejecting, D negotiated with P to
relocate.
4) ACCEPTANCE BY PERFORMING
CONDITIONS STIPULATED IN OFFER

 Case : Carlill v. Carbolic Smoke Ball Co. [1892]

P had indicated her acceptance by performing the
conditions set out in the advertisement.

- This type of accceptance is clearly spelled out in

s.8 Contracts Act..”Performance of the conditions
of a proposal…is an acceptance of the proposal”.
5) ACCEPTANCE BY SILENCE
 Issue arise : Whether silence can amount to an
acceptance?

Case : 1. Fraser v. Everett [1889] 4 KY 512 (refer

attachment)
2. Felthouse v. Bindley (1862) 142 ER 1037
Facts :
Felthouse wrote to his nephew offering to buy his horse,
adding “ If I hear no more about him I shall consider
the horse mine at £40”. His nephew intended to sell
the horse to his uncle but did not reply to the letter.
He told Bindley, who was auctioning his farm, not to
include the horse in the auction as it was already
sold. Bindley sold the horse by mistake and Felthouse
tried to sue Bindley for conversion of his property.
-Issue :
Whether the offer could have been accepted by the
offeror stating that silence by the offeree would
be deemed to be consent.

Held :
The nephew’s acceptance had not been
communicated to the uncle. The horse did not
therefore belong to him.
The decision was supported by 3 grounds :
1. Silence is ambiguous and difficult to infer the
intention to accept.
2. Acceptance must be communicated so that we
may know when a contract binds both parties.
3. Prevents an offeror from exploiting an offeree’s
inertia by making him contractually liable unless
he takes the trouble to reject the offer expressly.

In contrary, the case Weatherby v. Banham(1832)

Facts :
P- publisher of a Racing Calendar and had supplied
Mr. Westbrook with the Racing Calendar for
some years. When Mr Westbrook died, D took
over his property and live in the house. P
continue to send the calendar without knowing
the death of Mr Westbrook. D received it and had
never tried to return them back to P. P sue to
recover the price of the calendar supplied.
Held :
- The D is liable for the action.
REVOCATION OF ACCEPTANCE

 S. 5(2) Contracts Act

“ An acceptance may be revoked at any time before
the communication of the acceptance is complete as
against the acceptor, but not afterwards”.

Example:
A proposes, by a letter sent by post, to sell his house to
B. B accepts the proposal by a letter sent by post.
A may revoked his proposal at any time or at the
moment when B posts his letter of acceptance, but not
afterwards.
B may revoked his acceptance at any time before or at
the moment when the letter communicating it reaches
A, but not afterwards.
 S. 4(3) Contracts Act
The communication of a revocation is complete –
a) as against the person who makes it, when it is
put into a course of transmission to the person to
whom it is made, so as to be out of the power of
the person who makes it;

b) as against the person to whom it is made,

when it comes to his knowledge.

Example :
A revokes his acceptance by telegram. A’s
revocation is complete as against A when the
telegram is despatched, and as against B when it
reaches him.
FORMATION OF ELECTRONIC CONTRACTS
 The main issue arise is in the area of offer and
acceptance.
 Whether an advertisement on a website
(Webvertisement) is an offer or merely an invitation
to treat.

--just like shop displays due to the interactivity of

websites where a product can be examined and an
offer made to buy the product without leaving the
virtual store.
-- So, Webvertisement is considered as an invitation to
treat unless it clearly indicates that the advertiser
intends to be bound upon acceptance.
 Another issue is about rule of acceptance.

- For electronic transactions, acceptance could be

made by either electronic mail (email) or on the
web page itself (click wrap contracts).
 Email  Click Wrap
- Digitally equivalent to Contracts (CWC)
a letter. - Using the link
- Sender type content, between server and
puts it into outbox client machines.
(postbox). - Order form to be filled
- Collected by mail out by customer.
server-forward to - At the end of the form,
recipient’s mail server there is a button
– then to recipient’s “Submit” or “ I Accept”
inbox (recipient’s or equivalent.
letter box) - Once the button
clicks, the order is
submitted to the
website operator.
 How to detect acceptances in email?
- Many opinions but mostly said that the postal
rules applies.
(Acceptance will be deemed to have been
effected at the very moment it is posted and
not when it is received)

 How to detect acceptances in click wrap contracts

(CWC)?
- Postal rule will not apply!
- The actions in CWC are considered
instantaneous.
- The client will know within seconds if there is a
breakdown communication.
- The receipt rules applies ( The acceptance
need to be received in order to be effected)