Acceptance of Offers in Contract Law PDF

  What is an acceptance? ◦ S.2(b) Contracts Act 1950  How do you make an acceptance ◦ S.3 Contracts Act 1950  Conditions of an acceptance ◦ S.7 Contracts Act 1950  When is acceptance complete ◦ S.4(2) Contracts Act 1950...

  What is an acceptance? ◦ S.2(b) Contracts Act 1950  How do you make an acceptance ◦ S.3 Contracts Act 1950  Conditions of an acceptance ◦ S.7 Contracts Act 1950  When is acceptance complete ◦ S.4(2) Contracts Act 1950 © Dr Izura Masdina Zakri 2  S.2(b) Contracts Act When the person to whom the proposal is made signifies his assent thereto, the p ro p o s a l i s s a i d t o b e a c c e p t e d : a proposal, when accepted, becomes a promise” © Dr Izura Masdina Zakri 3  s.3 Contracts Act 1950: “The communication of … the acceptance … are deemed to be made by a ny a c t o r o m i s s i o n o f t h e p a r t y … a c c e p t i n g … by w h i c h h e i n t e n d s t o communicate the … acceptance … or which has the effect of communicating it” © Dr Izura Masdina Zakri 4 A. An ‘act’ 1. Expressly stated: s.9  Words  Spoken i.e. phone or face-to-face, through letters  Corresponding Issue: when is communication of acceptance complete? © Dr Izura Masdina Zakri 5 2. Via conduct: s.8 i. S.7(b) i.e. in the manner prescribed by the proposer  Holwell Securities Ltd v Hughes ◦ “it shall be exercisable by notice in writing to the [defendant]…”  Tinn v Hoffman ◦ Reply was to be ‘by post’ and Honeyman J: an equally expeditious method will suffice, eg. telegram ii. Fulfilling conditions in the offer ◦ Carlill v Carbolic Smoke Ball ◦ Brogden v Metropolitan Railway Co © Dr Izura Masdina Zakri 6 B. An ‘omission’  Not an ‘act’  However, does not mean ‘silence’ ◦ Felthouse v Bindley  But ◦ It can be interpreted as such in exceptional circumstances © Dr Izura Masdina Zakri 7  Re Selectmove Ltd Court of Appeal “Where the offeree himself indicates that an offer is to be taken as accepted if he does not indicate to the contrar y by an ascertainable time, he is undertaking to speak if he does not want an agreement to be concluded. I see no reason in principle why that should not be an exceptional circumstance such as that the offer can be accepted by silence” © Dr Izura Masdina Zakri 8  S.7 Contracts Act “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 …” © Dr Izura Masdina Zakri 9  “be expressed in some usual and reasonable manner” What does it mean, ‘usual’ and ‘reasonable’ manner if the proposer did not prescribe any method?  See: Lee Seng Heng & Ors v Guardian Assurance Co Ltd 1 MLJ 17 © Dr Izura Masdina Zakri 10 "Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as the means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted." © Dr Izura Masdina Zakri 11 Note:  Case on fire policy. Fire happened, policy said to not have been made (no acceptance).  Plaintiffs carried on business at Buloh Kasap (small village, 5 miles from the town of Segamat, Johore)  Insurance against fire with D (based in Singapore), and done through D’s agent in Malacca. © Dr Izura Masdina Zakri 12 The only point, therefore, left for me to decide is whether the post was properly used here as an agent by the Defendants in sending their letter of the 27th March. The Plaintiffs acted from Buloh Kasap five miles from Segamat which is some 125 miles from Singapore and some 50 miles from Malacca. It is difficult to see how they were ordinarily to communicate if not by post. © Dr Izura Masdina Zakri 13  “be absolute and unqualified” Situations when it is not an absolute and unqualified acceptance: i. Counter-offer ii. Terms of the offer amended iii. ‘ S u b j e c t t o c o n t r a c t ’ o r c o n d i t i o n precedent © Dr Izura Masdina Zakri 14  Malayan Flour Mills Bhd v Saw Eng Chee (Administrator of the estate of Saw Cheng Chor, deceased) & Anor “If while purporting to accept the offer as a whole, he introduces a new term which the offeror has not the chance of examining, he is in fact making a counter-offer” © Dr Izura Masdina Zakri 15 Not an acceptance AND a new offer is made. Original offer is destroyed. You cannot accept the ‘original’ offer any longer as it no longer exists. © Dr Izura Masdina Zakri 16   However, counter offer is NOT ‘request for more information’  Counter offer: a material variation of the terms of the offer  Request for more information: a mere enquiry  It is merely a question and the party is still free to accept the offer © Dr Izura Masdina Zakri 17 D offered to sell iron to P for “40s per ton, nett cash, open till Monday”. P telegraphed to D “Please wire whether you would accept forty for delivery over two months, or if not, longest limit you could give.” © Dr Izura Masdina Zakri 18  Brogden v Metropolitan Railway Co Terms of agreement drawn up by P’s agents and sent to D. He then filled in the blank parts, inserted name of the proposed arbitrator, wrote “approved” at the end of the page and signed it. Returned to P’s agent who put it in his desk. © Dr Izura Masdina Zakri 19  “Offer” “Acceptance” The arrangement we came We agreed to the terms and conditions of your offer and to was that … you have the the manner of payment that is right to buy the land for ◦ The price of $300,000 for all the $300,000 payable in abovementioned lots.. ◦ Payment will be made in ten $30,000 instalments over (10) instalments. Each instalment 10 years, starting February of $30,000 will be spread over a period of ten years 1, 1978 ◦ Transfer of the property to be m a d e o n p ay m e n t o f f i r s t instalment … ◦ Vacant possession to be given on first payment of the property. © Dr Izura Masdina Zakri 20  Common to have acceptance stating, “subject to contract”, “without prejudice”, “formal agreement would be prepared and executed”  Two meanings: ◦ There is no contract until the formal document is signed, or ◦ A binding contract is already entered into and the execution of the document is a formality. © Dr Izura Masdina Zakri 21  Daiman Development Sdn Bhd v Mathew Lui Chin Tech & Anor Appeal The purpose of the construction is to determine whether the parties intend to (i) be bound to each other or whether, no (ii) matter how complete their arrangement might appear to be, they do not so intend until the occurrence of some fur ther event … ◦ The questions is one as to be expressed intention and is not answered by … any particular form of words © Dr Izura Masdina Zakri 22  Kam Mah Theatre Sdn Bhd v Tan Lay Soon ◦ “subject to contract” gives rise to a strong presumption of the necessity of a further formal contract and it requires cogent evidence to displace this strong presumption  Lim Chia Min v Cheah Sang Ngeow & Anor ◦ “proposed that a formal agreement would be prepared and executed” means exactly that  Charles Grenier Sdn Bhd v Lau Wing Hong ◦ “subject to the sale and purchase agreement” did NOT mean no contract until then ◦ The parties, property & essential terms were identified with sufficient clarity © Dr Izura Masdina Zakri 23 Respondents (vendors) had properties which were being sold for them by estate agents. The letter to appellant (buyer) was marked ‘without prejudice and subject to contract’, confirming A’s interest in buying the property at RM215,000. Certain terms and conditions were laid out.: non- refundable RM3,000 payment and if plans approved by LA, 10% of sales price (minus deposit) to be paid, and balance within 3 months. However, after the said letter was sent, vendor informed the agent of certain condition changes. Properties were later sold off to 3P. © Dr Izura Masdina Zakri 24 Referred to Charles Grenier’s case: The phrase ‘subject to the sales and purchase agreement’ did not point to an intention that no contract was to come into existence until a formal sales and purchase agreement had been prepared and executed. Rather, when read in the context of the correspondence and the objective aim of the transaction : was it indication of an intention to merely formalize the agreement already concluded between the parties? © Dr Izura Masdina Zakri 25 Here:  Respondents never signed the building approval plans  No sales and purchase agreement entered into  The RM3,000 deposit had been refunded © Dr Izura Masdina Zakri 26  I t i s n o t e n o u g h t h a t yo u m a ke a n acceptance, but it has to be communicated before it is complete  Two different rules apply, depending on mode of acceptance: 1. Postal rule 2. Instantaneous communication © Dr Izura Masdina Zakri 27  Acceptance made through post / telegram  Contract Act 1950 applies S.4(2) The communication of an acceptance is complete – (a) as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; and (b) as against the acceptor, when it comes to the knowledge of the proposer © Dr Izura Masdina Zakri 28 © Dr Izura Masdina Zakri 29 It was agreed between the parties that communication would be by post. Letter of acceptance posted before offer lapsed, but it was at the Post Office. Held: Postal rule applied. © Dr Izura Masdina Zakri 30  Face-to-face, phone, telex  Case law applies  Bhagwandas Goverdhanda Kedia v Girdharlal Parshottamadas and Co ◦ Entores Ltd v Miles Far East Corporation 2 QB 327, CA “ contract only complete when the acceptance is received by the offeror…” © Dr Izura Masdina Zakri 31 Lord Denning: It is not until the message is received that the contract is complete. In all the instances I have taken so far, the man who sends the message of acceptance knows that it has not been received or he has reason to know it. So he must repeat it. © Dr Izura Masdina Zakri 32 But, suppose that he [acceptor] does not know that his message did not get home. He thinks it has. The offerror in such circumstances is clearly bound, because he will be estopped from saying that he did not receive it. © Dr Izura Masdina Zakri 33 But if the offeror without any fault on his part does not receive the message yet the sender of it reasonably believes it has got home - Then I think there is NO contract. © Dr Izura Masdina Zakri 34 1. Knowledge of offer 2. Motive of acceptor 3. Can acceptance be retrospective? 4. Is a cross offer an acceptance? © Dr Izura Masdina Zakri 35  Must a person know about the offer before an acceptance can be made?  Two seemingly opposing views: ◦ Gibbons v Proctor (1891)  (appears as if) knowledge not needed ◦ Fitch & Anor v Snedaker (1868)  Knowledge needed  Malaysia? © Dr Izura Masdina Zakri 36 Arguable? No mention of ‘knowledge’ required under S.2(b): When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted…  As long as he has ‘accepted’  All examples (cases) are based on there being offer was known  Issue no knowledge of offer never arose © Dr Izura Masdina Zakri 37 S. 4 ( 1 ) : C o m mu n i c a t i o n o f p ro p o s a l i s complete when it comes to the knowledge of the person to whom it is made A stretch? © Dr Izura Masdina Zakri 38  Williams v Cawardine ◦ Reward for information leading to the discovery of the murderer ◦ “ease her own conscience and in hopes of forgiveness”  R v Clarke ◦ Reward for information which lead to arrest and conviction for the murders ◦ Gave information to clear himself from the false charge of murder ◦ never was and never intended to be an informer © Dr Izura Masdina Zakri 39  Trollope & Colls Ltd v Atomic Power Constructions Ltd When the formal contract came into existence, there had been an intention to make a contract, there was agreement on all essential terms and a sufficiently clear acceptance of the offer, and that, therefore, a term should be implied to give business efficacy to the agreement to the effect that the terms applied retrospectively. Megaw J: "so far as he was aware, there was no principle of English law which provided that a contract cannot in any circumstances have retrospective effect… often the contract expressly so provides. I can see no reason why, if the parties so intend and agreed, such a stipulation should be denied legal effect.” © Dr Izura Masdina Zakri 40  No valid acceptance  Tinn v Hoffman ◦ Two offers, identical in terms, crossed in the post “The promise or offer being made upon each side in ignorance of the promise of offer made on the other side neither of them can be construed as an acceptance of the other” © Dr Izura Masdina Zakri 41