Acceptance Notes PDF

Acceptance: A Comprehensive Note Definition of Acceptance Section 2(b) Contracts Act 1950 (CA 1950): Acceptance occur when the person to whom a proposal is made signifies their assent to it. Thus, when a proposal is accepted, it b...

Acceptance: A Comprehensive Note Definition of Acceptance Section 2(b) Contracts Act 1950 (CA 1950): Acceptance occur when the person to whom a proposal is made signifies their assent to it. Thus, when a proposal is accepted, it becomes a promise Requirements of a Valid Acceptance in order to convert a proposal into a promise, the accepatnce must be- 1. Absolute and Unqualified Acceptance Section 7(a) CA 1950 Section 7(a) CA 1950: Acceptance must be absolute and unconditional. Meaning, you have to agree with it completely without making any changes or deviation which will constitutes a counteroffer and destroys the original offer. Key Case: The Ka Wah Bank Ltd v Nadinusa Sdn Bhd : The court held that acceptance must be final and unqualified. Any reply that introduces qualifications, modifies the terms of the offer, or seeks to accept on new terms does not constitute a valid acceptance. But When Does Acceptance is Not Absolute and Unqualified? Acceptance is not valid if it falls into any of the following three situations: a. Counteroffer A counteroffer happens when the offeree does not accept the offer as it is but instead proposes new terms. This destroys the original offer. Key Case: Malayan Flour Mills v Saw Eng Chee Hyde v Wrench: The defendant wrote to the planitiff offering to sell his farm for £1000. The plantiff wrote the D and offered to purchase the farm for £950. Then D replied saying that he was unable to Acceptance: A Comprehensive Note 1  accept the offer. Upon receiving the letter from D, the plaintiff wrote to D accepting the initial offer of £1000. The court held that, by proposing a new offer, the original offer was destroyed. The offeree cannot later accept the original offer. Note: A request for more information is not a counteroffer (see Stevenson, Jaques & Co v McLean). b. Terms of Offer Amended at Time of Acceptance If acceptance introduces new terms or changes the original ones, it is treated as a counteroffer rather than acceptance. Key Case: Brogden v Metropolitan Railway Co, two parties who had been doing business for a long time decided to formalize their relationship with a written contract. One party drafted the agreement but left some sections blank. The other party filled in the blanks, made changes, wrote “approved,” and signed it before returning it. However, the first party received the amended agreement, didn’t review it, and simply put it in a drawer. Initially, the court ruled no contract existed because the terms were changed and not formally agreed upon. Later, it was decided that a contract was formed through the parties’ continued business dealings, showing acceptance by conduct rather than through the unsigned agreement. Jones v Daniel: Adding a new document with extra terms meant the acceptance was not absolute, but a counteroffer. c. Acceptance Made “Subject to Contract” or Conditions Precedent When the words “subject to contract” are used, it implies that acceptance is conditional on signing a formal contract. Two Views: 1. No Contract Exists: Acceptance depends on signing a formal document (Kam Mah Theater Sdn Bhd v Tan Lay Soon). 2. Binding Contract Already Exists: The formal contract is a mere formality (Charles Grenier Sdn Bhd v Lau Wing Hong). 2. Acceptance Corresponds to the Offer Acceptance: A Comprehensive Note 2  Must be made in response to the offer and not to any other proposal. Key Cases: Tinn v Hoffman & Co: Cross-offers (identical offers made in ignorance of each other) do not constitute a valid acceptance. 3. Knowledge of the Offer Before Acceptance Contradictory Decisions: Gibbons v Proctor: Allowed claim despite lack of knowledge of the reward offer. Fitch v Snedaker: Knowledge of the offer is essential for acceptance. The court held that an offer cannot result in a contract unless it is acted upon or expressly assented to. How can someone agree to an offer if they are unaware of its existence? 4. Motive of the Acceptor Key Case: Williams v Carwardine: The acceptor’s motive is immaterial if the terms of the offer are fulfilled. Modes of Communicating Acceptance 1. General Rule Section 3 CA 1950: Communication of acceptance can be made by any act or omission that effectively conveys acceptance. 2. When Communication is Complete Section 4(2) CA 1950: (a) Against the proposer Section 4(2) (a) CA 1950: Acceptance is complete as soon as the acceptor sends it (e.g., posts a letter or sends a message). At this point, the proposer is bound by the contract, even if they haven’t received the acceptance yet. (b) Against the acceptor Section 4(2) (b) CA 1950: Acceptance is complete only when the proposer knows/acknowledges about it (e.g., when they read the letter or hear the message). This ensures Acceptance: A Comprehensive Note 3  the acceptor isn’t bound until the proposer is aware of their acceptance. Mode of Acceptance 1. Postal Rule: Acceptance through post/telegram Section 4(2) applies. Acceptance is complete once the letter is posted. Ignatius v Bell: Acceptance was binding upon posting. The parties communicated by post, and acceptance was required to be in writing and sent by letter. The acceptor sent the letter by registered post, but the proposer was not around to collect it, and it remained at the post office past the deadline. The court confirmed that posting a letter was a proper and reasonable method of acceptance, so the postal rule applied. Under this rule, acceptance is complete for the proposer as soon as the letter is posted, making the proposer bound by the contract. However, the acceptor is not bound until the proposer receives or acknowledges the letter, meaning the acceptor can revoke their acceptance before it is received. In this case, once the letter was posted, the proposer could not withdraw their offer without breaching the contract. 2. Instantaneous Communication: phone and telex: When Is the Contract Complete? The contract is completed only when the offeror (the person making the offer) receives the acceptance. This is different from the postal rule, where acceptance is complete when the letter is sent. scenario: If you are on the phone and accept an offer, the general rule is that a contract is formed only when the proposer (the person who made the offer) hears your acceptance. You, as the acceptor, must ensure the proposer hears you. However, there are exceptions: 1. If the proposer didn’t hear because of their own fault (e.g., they got distracted): Acceptance: A Comprehensive Note 4  The contract is still valid because you, as the acceptor, did everything reasonable to communicate your acceptance. The proposer’s negligence makes them bound. 2. If neither party is at fault (e.g., the phone line cuts off without anyone realizing): No contract is formed because the proposer didn’t hear the acceptance, and the acceptor reasonably believed it was communicated. Summary of the Rule for Instantaneous Communication A contract is formed when the proposer hears the acceptance. If the proposer didn’t hear because of their own fault, the contract is valid. If nobody is at fault, no contract is formed. Key case: Entores Ltd v Miles Far East Corporation: Acceptance is effective when received by the proposer. 3. Acceptance by performing conditions stipulated in offer : Carlill v Carbolic Smoke Ball Co: Performing the required conditions amounts to acceptance. 4. Acceptance by conduct : Principle ;When parties conduct themselves in a manner which indicates that they consider themselves bound by an agreement between them, a contract will be held to have come into existence. 5. Acceptance by Silence: Felthouse v Bindley: Silence does not constitute acceptance. Exceptional case: Re Selectmove Ltd: Silence may amount to acceptance in exceptional circumstances where the offeree agrees to such terms. Revocation of Acceptance Acceptance: A Comprehensive Note 5  1. Section 5(2) Contracts Act 1950 (CA 1950): An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterward. In simpler words, acceptance may be revoked before the letter is read/received/acknowledge by the offeror. 2. Section 4(2)(b) CA 1950: Communication of acceptance is complete against the acceptor only when the acceptance comes to the knowledge of the proposer. Key Rule for Revocation of Acceptance An acceptor can revoke their acceptance anytime before the proposer becomes aware of it. If the proposer has not yet received or known about the acceptance, the revocation is valid. When is Revocation Complete? Section 4(3) CA 1950 provides clarity: 1. For the proposer who revokes (Section 4(3)(a)): The revocation is complete as soon as the proposer sends out the notice of revocation. 2. For the person to whom the revocation is made (Section 4(3)(b)): The revocation is complete only when the other party receives the notice of revocation. Practical Example 1. A proposes to sell a car to B. 2. B posts a letter of acceptance on Monday. 3. B decides to revoke their acceptance and sends a revocation letter on Tuesday. 4. A receives B’s revocation letter on Wednesday before reading the acceptance letter. Acceptance: A Comprehensive Note 6  Result: Since the proposer (A) hasn’t become aware of the acceptance yet, the revocation by B is valid. No contract is formed. Acceptance: A Comprehensive Note 7