Acceptance in Contract Law

Note on Acceptance in Contract Law by Legum


Acceptance is defined as the final or unqualified or unconditional approval or consent of the terms contained in the offer. The concept of acceptance is usually understood in terms of a mirror image principle, which says that what is being accepted must be the same as what is being offered.

Acceptance can be in the form of words, conduct, or writing.

Acceptance by Conduct:

Means that an offeree can be said to have accepted the offer made by offeror based on the conduct of the offeree. In the case of Brogden versus Metropolitan Railway, it was held that the conduct of Metropolitan Railway represented acceptance by conduct.

Acceptance and Counter-Offers:

If an offeree introduces a new term in the offer made, it is a counter offer. A counter offer is a new offer from the offeree to the offeror and consequently terminates the original offer. To conclude a contract, the offeree’s communicated acceptance must reflect exactly the terms contained in the offer. According to Dowuna Hammond, for communication of acceptance to “qualify as an effective acceptance, it must be an absolute and final assent to the terms and conditions stipulated in the offer.”

In the case of Hyde v Wrench, the plaintiff’s response to the defendant asking for a reduction in the price of the item being sold was deemed to constitute a counter offer, automatically terminating the original offer.

The case of Deegbe v. Nsiah similarly had the application of the principle that differences in the terms of the offer and the terms of the acceptance constituted a counter offer.

Counter Offer versus Request for Information or an Inquiry:

Sometimes, a party to whom an offer is made may need certain essential details to, for example, decide to accept the offer or information on how to fulfil some contractual obligation. These requests for information do not constitute counter offers. Sometimes, an offeree can ask if the offeror would want to modify the terms of his offer. This situation is merely requesting for information on what the offeror would do or can do, and is different from a statement from the offeree to the offeror changing the terms of the offer and hoping that the offeror accepts.

In the case of Stevenson, Jacques & Co. V. McLean, the plaintiff’s enquiry for whether the defendant “would accept forty for delivery over two months, or if not, longest limit you could give” was taken by the defendant to be a counter offer, but the court ruled otherwise.

Conditional Acceptance:

A conditional acceptance is also called a qualified acceptance and occurs when the offeree indicates that he is willing to accept the offer on certain conditions. Thus, he is willing to accept the offer if the offeror agrees to alter certain terms of his offer. The rule is that conditional acceptance does not constitute acceptance.

In the case of Winn v Bull, 1877, the inclusion of the words “subject to the preparation and approval of a formal contract” led the court to hold that there was no contract between Winn and Bull due to the conditionality introduced by that phrase.

Communication of an Acceptance:

Since an acceptance of an offer would usually require that the offeror takes certain steps, including informing other offerees that the offer is off the table, put some structures in place amongst others, it is required that there is a communication of acceptance by the offeree. The general rule is that acceptance has no effect unless communicated to the offeror or brought to his notice. However, in cases such as Carlill versus Carbolic, it was held that the offeree did not have to communicate their acceptance back to the offeror for such acceptance to be effective.

In the case of Entores v Miles Far East Corporation, a London-based company Entores sent an offer via Telex to purchase some goods from the defendant, a company in Amsterdam, Miles Far East Corporation. The Dutch Company sent their acceptance via Telex to the complainant. When the contract was not fulfilled, the plaintiffs sued for damages. The court had to decide the jurisdiction in which the contract was formed to know which law to apply in resolving their dispute. It was held that the contract was formed in London after the complainants got the acceptance message.

Who does the communication of Acceptance?

The principle is that for an acceptance to be effective, its communication must come from the offeree himself or his authorized agent.

In the case of Powell v. Lee, Powell applied for the job of headmaster, and the school managers accepted his application and decided to appoint him. One of the managers, without authority, informed Powell that he had been selected. The school managers later changed their minds and hired someone else. Powell claimed there was a breach of contract. The court held that since the communication had not come from the official agent of management, there was no communication of acceptance.

Exceptions to the rule that acceptance must be communicated back to the offeree to be effective:

The following are some situations where acceptance is effective even though the offeror has not received the knowledge of such acceptance.

1. When the offeror expressly or implicitly waives the requirement of communication:

The rule that acceptance must be communicated back to the offeror was meant to ensure that the offeror knows that his offer had been accepted and thus act accordingly. If an offeror decides to waive this right, then acceptance is still valid even in the absence of communication. It is generally held that unilateral offers implicitly waive the requirement for communication of acceptance.

2. Postal rule:

This is another exception to the rule that acceptance must reach the offeror before it is effective. The common law rule is that acceptance by post is deemed to have been communicated once the letter of acceptance has been posted to the offeror and properly addressed. In addition, acceptance by telegram is effective once the telegram is handed for transmission to the offeror.

This principle was established in the case of Adams versus Lindsell: in this case, an offer for the sale of wool from the defendant to the plaintiff required a response via post. The plaintiff got the offer on the 5th and communicated acceptance via post on the same day. When the plaintiff got the offer, he posted the letter of acceptance on the 5th. The defendant sold the wool to a third party on the 8th and received the plaintiff’s acceptance letter on the 9th. The court held that the plaintiff’s acceptance became legally effective on the date the letter was posted. For this rule to apply, the letter of acceptance must be posted and be in the control of the post office.

Exceptions to the postal rule:

1. The postal rule applies when it is reasonable to use post to communicate acceptance: In the case of Henthorn v. Fraser, the court held that it was reasonable to communicate acceptance of an offer via post, and that acceptance was effective.

2. The second exception is that when the terms of the contract explicitly state that acceptance is only effective upon reception of the posted letter, then the postal rule does not apply. See the case of Holwell Securities v Hughes

General notes on when the postal rule applies and when it does not:

1. The rule does not apply to counter offers, rejections, or revocations. A letter on these is only effective upon receipt of communicated acceptance.

2. The rule does not apply to acceptance communicated by instantaneous near-instantaneous transmissions such as telephone.

3. When an offer states that acceptance is only valid upon receipt of the acceptance letter by the offeror, then the postal rule does not apply.

Mode of Acceptance Indicated by the Offeror:

As captured earlier, the posted rule does not apply when the offeror states that acceptance ought to be received by the offeror to form a valid contract. This rule applies in other instances of offer and acceptance. Thus, if the offeror states how acceptance ought to be done, any other way of accepting may not be binding on the offeror. See the case of Financings Ltd versus Stimpson where the court held that the plaintiff’s acceptance of the offer made by Stimpson did not constitute acceptance because the acceptance was done in a way not prescribed by the offer.

Notice, however, that it was established in the case of Tinn v Hoffman that once acceptance is communicated in a way that is objectively better or equal to the prescribed mode of acceptance, the acceptance may still be valid.

What happens if the offeror prescribes silence as the mode of acceptance?

In instances the offeror states that they would take the silence of the offeree as indicative of the latter’s acceptance of an offer, it is generally held that the offeror cannot arbitrarily and unilaterally impose a contractual liability on the offeree by prescribing that the silence of offeree equals acceptance of the offer. See the case of Felthouse v Bindley where the court held that the offeree was not bound by the offeror’s prescription of silence as a mode of acceptance in a case involving the sale of a horse.

The objection to the idea that silence can be prescribed as a means of acceptance comes from the ambiguity that characterises silence. Silence could be a consequence of a non-receipt of an offer, or contemplation of the offer amongst others.