WHAT IS ACCEPTANCE?
To constitute a contract, the offer must have been accepted by the party to whom it is made. An acceptance has ben defined as the final and unqualified expression of assent to the terms of an offer.
Acceptance by conduct:
Brogden v. Metropolitan Railway Co. : Brogden had been supplying coal to the defendant company for a number of years without any formal written agreement. The parties decided to regularize their relations by entering into a written agreement. The defendant’s agent sent a draft form of the agreement to Brogden. Brogden included the name of an arbitrator in the contract and signed it and returned it to the company marked “approved”. The company’s agent put the draft agreement in his desk and nothing further was done to complete the execution of the contract. Both parties thereafter, proceeded to act in accordance with the terms of the draft agreement , supplying and paying for the coal in accordance with its terms. A dispute arose between the parties and Brogden denied that there was any binding contract between them.
The issue for the court was this: If it is assumed that the delivery of the draft document by Brogden to the company with the addition of the arbitrator’s name was a final and definite offer to supply coal on the terms contained in the document, was that offer ever accepted by the company, if so when and how?
The court, noting that keeping the draft agreement did not amount to acceptance since ti was not an overt act, held that even though there had been no further communication from the Railway Co. after it received the draft agreement (offer), the subsequent conduct of the parties could only be explained by assuming that they had both agreed to the terms. The court found that acceptance could be implied from the parties’ conduct of selling and buying coal on the specified terms included in the draft contract. Thus a contract came into effect either when the company ordered its first load of coal from Brogden upon those terms or at least when Brogden supplied it.
WHAT IS A COUNTER OFFER?
Acceptance and counter offers.
To conclude a contract, the offeree’s response must be an absolute and definite acceptance of the terms proposed in the offer and must leave no room for doubt. Accordingly, for the response to qualify as an effective acceptance, it must be an absolute and final assent to the terms and conditions stipulated in the offer.
Thus, a reply or response to an offer which varies the terms of the offer or introduces terms different from those indicated in the offer amounts in law to a counter-offer and not an acceptance. A counter-offer constitutes a rejection of the original offer and amounts to the making of a new offer by the offeree. Secondly, a counter-offer operates to destroy or nullify the original offer such that it cannot subsequently be accepted.
The case in point is Hyde v Wrench: In June , defendant wrote to plaintiff offering to sell his farm to him for 1,000 pounds. Plaintiff’s agent immediately called on the defendant and made an offer of 950 pounds. Defendant asked for time to consider it. On June 27th, defendant wrote to say he could not accept the plaintiff’s counter offer. On June 29th , the plaintiff wrote accepting the earlier offer of June 6. Defendant refused to sell the farm to plaintiff and plaintiff sued for specific performance. The court held that there was no valid binding contract between the parties. In making an offer to buy the property for 950 pounds, plaintiff had made a counter –offer which effectively rejected defendant’s original offer. After that , plaintiff could not revive the original offer by tendering an acceptance of it.
Deegbe v. Nsiah & Antonnelli : The plaintiff (D) , a legal practitioner was a tenant in the house of the defendant (N). In April 1977, N sold the house to the co-defendant (A). On May 31, 1977 , a firm of solicitors acting on behalf of A gave D notice to vacate the house on or before August, 31 1977. On August 10, 1977, D brought an action for specific performance of an alleged contract by N to sell the house to him for 65 000 cedis. In an accompanying statement of claim he deposed that N had before the sale to A made an offer to sell the house to him and that he subsequently accepted the offer by a letter he wrote to N, a copy of which was attached to his statement of claim. In a section of that letter, eh had implored N to “consider a serious reduction in the price quoted for het house”. N denied making any offer to D.
On the issue of whether there was a contract between N and D, the court held dismissing the appeal, that an acceptance must be an absolute and unqualified acceptance of all the terms of het offer. A qualified acceptance operates as a rejection of the offer. The plaintiff’s letter was an invitation to the defendant to make a fresh offer , which he never did . It was clear therefore that the parties were not ad idem and there was no contract between the plaintiff and the defendant. There could therefore be no specific performance because there was no concluded contract between the plaintiff and the defendant and the latter was free to sell his house to the co-defendant.
WHAT IS AN INQUIRY?
Counter-Offer and Inquiry : Generally, a mere inquiry or request for further information which does not introduce new terms is not a counter offer and , therefore does not destroy the original offer. A case which illustrates the distinction between a counter-offer and an inquiry is Stevenson , Jacques & Co. v. McLean : The defendant offered on Saturday to sell to the plaintiffs 3,800 tons of iron at “40s net cahs per ton” open till Monday. The plaintiffs in response sent a telegram to the defendant asking for particulars of delivery and method of payment. The telegram stated : “ Please let us know if you will accept 40 for delivery over months, and if not the longest limit you will give”. The defendant treated the telegram as a counter offer and sold the goods to a third party. Subsequently, the plaintiffs sent a telegram of acceptance. The defendant also wrote to the plaintiffs informing them that the offer had been revoked , but the revocation arrived after the plaintiffs had dispatched their acceptance.
The court held that the plaintiffs’ response was not a counter-offer but a mere inquiry or request for information which should have been answered not treated as a rejection of the offer.
Communication of Acceptance :
The general rue is that an acceptance has no effect unless and until it is communicated to the offeror or otherwise brought to his notice. This principle was vividly illustrated in the case of Entores Ltd v Miles Far East Corporation : The plaintiffs in London made an offer by telex to the defendants in Holland. The offer was accepted by a telex communication received on the plaintiff’s telex machine in London. Subsequent, there was a breach of contract and the question arose whether the contract was made within the jurisdiction i.e. in England. The defendants argued that the contract was made in Holland and not in England. The court held that where a contract is made by means of instantaneous forms of communication, the contract becomes complete only when the acceptance is actually communicated to or received by the offeror. Since communication by telex or telephone are virtually instantaneous the postal rule does not apply. The contract was made at the place where the acceptance was received and not where the acceptance was dispatched.
In Fofie v. Zanyo, the defendant and three others, as administrators to an estate , offered in a letter to sell a building out of the estate to the plaintiff. The plaintiff contended that he accepted the offer and made instalment payments of the purchase price. The defendant denied that the plaintiff accepted the offer and contended, inter alia , that the payments were in relation to an earlier ten – year tenancy that the administrators had granted the plaintiff. The Supreme Court held, inter alia that before it could be said that there had been an acceptance of an offer by an offeree, there had to be (a) positive evidence by words, in writing or conduct from which the court might infer acceptance; and (b) the acceptance had to have been communicated to the offeror. The court noted that even though no specific method of acceptance was prescribed by the] defendant, since the offer to sell the house to the plaintiff was made by a letter, one would have thought that the acceptance would be by letter. However, not only was there no such evidence, but also none was communicated to the defendant. The plaintiff’s acceptance of the defendant’s offer was, therefore, a mere mental acceptance. But that was not enough to constitute acceptance. Accordingly, the plaintiff failed to prove the existence of a sale contract between him and the defendant.
Another important principle relating to the communication of acceptance is that for the acceptance to be effective it must come from the offeree himself or his authorized agent.
In Powel v. Lee : The defendants were managers of a school who had decided to appoint a headmaster. The plaintiff made an offer by applying for the position and the plaintiff and two other candidates were short listed for consideration. The Managers of the school passed a resolution that the plaintiff should be appointed as Headmaster. No directions were given as to the communication of the resolution to the plaintiff. One of the managers, without being asked to do so, informed the plaintiff that he had been selected. The decision was later changed and the plaintiff sued for breach of contract. The court held that the purported acceptance was not effective because it had not been officially communicated by the Board of Managers. There was therefore no contract.
Exceptions to the General Rule on Communication of Acceptance
There are a number of exceptional situations where the law will recognize that an acceptance is effective even though it has not been brought to the actual notice of the offeror. These include the following:
Express or Implied Waiver of Requirement of Communication
Where the terms of the offer expressly or impliedly waive or dispense with the requirement of communication, the acceptance will be deemed to be effective even if it is not brought to the notice of the offeror. Generally, in general offers or offer for unilateral contracts, the law implies from the nature of the offer that the requirement of actual communication of acceptance is waived. In Carlil v. Carbolic Smokeball, the court could not uphold the defendant’s argument that the plaintiff’s acceptance of the defendant’s offer to pay 100 pounds to anyone who contracted influenza after using the carbolic smokeball for two weeks was not effective because it had not been communicated to the company. It was implied from the nature of the offer that the requirement of notification of acceptance of the offer was waived.
Acceptance by Post
According to the common law postal rule, where an acceptance is communicated by letter sent through the post, the acceptance is complete and takes effect at the time when the letter of acceptance, properly addressed, is posted. The authority of the postal rule is stated in the case of Adams v. Lindsell : On September 2, 1817, the defendants wrote to the plaintiffs offering to sell a quantity of wool on certain terms. The defendant required an answer “in course of post”. The defendants misdirected their letter so it did not reach the plaintiff’s until September 5. On the same day, that is, on the 5th , the plaintiffs posted a letter of acceptance. The letter of acceptance was received by the defendants on September 9. If the original offer had been properly addressed , a reply would have been received by the 7th. Meanwhile, on September 8, the defendants, not having heard from plaintiffs, sold the wool to third parties. It was held that the plaintiff’s acceptance became legally effective on September 5th the date on which the acceptance letter was posted. Thus a contract had been concluded on September 5 and the defendants, having sold the wool to third parties on the 8th was in breach of that contract.
A number of principles have been developed by the courts to govern the implementation of the postal rule.
(1) For the postal rule to apply, the letter of acceptance must have been posted and for this purpose a letter is deemed to have been posted when it is in the control of the Post Office.
(2) Generally, the postal rule only applies when it is reasonable to use post as a means of communicating acceptance.
In Henthorn v. Fraser, the court stated “The rule applicable where the circumstances are such that it must have been within the contemplation of the parties that according to the ordinary usage of mankind the post might be used as a means of communicating acceptance of an offer” .Generally an offer communicated by post may be accepted by post but depending on the circumstances it may be reasonable to accept an offer by post even if the offer was not communicate by post.
(3) The postal rule applies even if the letter of acceptance is delayed or wholly lost in the post and never reaches the offeror.
Household Fire and Carriage Accident Insurance Co. v. Grant : One Kendrick was the agent of the plaintiff company in Glamorgan. The defendant handed to Kendrick a written application for shares in the company. Kendrick forwarded the application to the plaintiff company in London and the Secretary of the company made out a letter of allotment in favour of the defendant. The letter was addressed to the defendant and posted. The letter never arrived but the defendant’s name was entered on the register of shareholders and dividends were credited to him. The company later went into liquidation and sued the defendant for the balance due upon the shares. The issue was whether there had been an effective acceptance which had concluded a contract between the parties.
The court held that the acceptance of the defendant’s offer became effective as soon as the letter of acceptance was posted and it was irrelevant that the letter never arrived.
(4) The postal rule can be excluded by the terms of the offer. Thus the rule does not apply where the terms of the offer explicitly or impliedly indicate that the acceptance will become effective only when it is actually received by the offeror.
Holwell Securities Ltd v. Hughes : By clause 1 of an agreement entered into between the defendant and the plaintiffs, the plaintiffs were granted an option to purchase certain freehold property from the defendant. Clause 2 of the agreement provided : “The said option shall be exercised by notice in writing to the defendant at any time within six months from the date hereof…” On 14th April, 197, the plaintiffs’ solicitor wrote a letter to the defendant giving notice of the exercise of the option. The letter was posted, properly addressed and prepaid, but it was never in fact delivered to the defendant or to his address. No other written communication of the exercise of the option was given or sent to the defendant before the expiry of the time limit on 19th April. In an action against the defendant seeking specific performance of the option agreement, the plaintiff’s contended that since a contractual offer could be accepted by posting a letter of acceptance, the time of acceptance being the moment of posting, the option had been validly exercised when their letter of 14th April was posted.
The court held that the option had not been validly exercised. The rule that an acceptance of an offer could be effected, so as to constituted a binding contract merely by posting a letter of a acceptance, did not apply when the express terms of the offer stipulated that the acceptance had to reach the offeror. The court stated that the clause in the agreement which stated that the option was to be exercised by notice in writing “ to the defendant meant that the written document had to be communicated or notified to the defendant and this was inconsistent with the application of the postal rule. The word “notice” implies bringing the information to the actual attention of the vendor.
(5) The postal rule applies exclusively to acceptances communicated by post or telegram. the rule does not apply to acceptances made by telephone , telex, facsimile machine or other forms of instantaneous or near instantaneous transmission. Acceptances communicated through such means become effective only when they are actually received by the offeror.
(6) The postal rule does not apply to letters containing rejections, counter offers or revocation of offers or revocation of acceptances. Such responses become legally effective only upon actual communication of the party to whom they are addressed.
Acceptance by telex
Telex is considered as a form of instantaneous communication and is, therefore treated in accordance with the general rule of acceptance that a contract is formed at the place where acceptance is communicated to the offeror. In Entores v Miles Far East Corporation, the court declined to extend the postal rule to telex communications on the ground that such communications are virtually instantaneous and the parties could be regarded as negotiating in each other’s presence.
Acceptance by electronic mail
In Ghana , the provisions in sections 18 and 19 of the Electronic Transactions Act, 2008 (Act 772) which make provision for the determination of the time of receipt of an electronic record could be relied on in determining when an offer or acceptance communicated by electronic mail takes effect.
According to the Electronic Transactions Act , an offer , acceptance or payment of consideration for the formation of a contract, which is expressed in an electronic record is generally deemed to have been sent or dispatched at the time that the record enters the information processing system outside the control of the originator. With regard to the receipt of such communications, the Act takes the position that where the addressee has designated an information system for the purpose of receiving electronic records, receipt is deemed to occur at the time when the electronic record enters the designated information system. However, if no information system has been designated to receive electronic records, receipt is deemed to occur when the electronic record enters an information system of the addressee through which the addressee retrieves the electronic record.
Acceptance by Facsimile Transmission
An acceptance by facsimile transmission being a form of instantaneous communication, is treated in accordance with the general rule that a contract is formed at the place where acceptance is communicated to or received by the offeror.
Prescribed Method of Acceptance
The generally rule is that where the mode of acceptance has been prescribed by the offeror, the offeree must comply with the prescribed method and acceptance in any other form or communicated in any other way would normally not be binding on the offeror.
Financing Ltd v Stimpson : The defendant on March 16 , at the premises of a dealer signed a hire purchase form , offering to take the plaintiff’s car on hire purchase terms. On march 18, he paid a deposit of 70 pounds and was allowed to take the car away from the dealer’s premises. The defendant was dissatisfied with the car and on march 20, he returned it to the dealer, offering to forfeit his deposit so as to cancel the contract. Four days later the car was stolen from the dealer’s premises and badly damaged. On March 25, the plaintiffs, (owners of the car(, not having been told that the defendant had returned the car, signed the hirer purchase forms. It was a term of the hirer purchase agreement that the Finance Company would not be bound until it singed the agreement. In other words acceptance of the offer to buy could only be made by the signing of the contract.
The court held that the defendant had revoked his offer by returning the car to the dealer. It was enough that he had made it clear that he did not want to go on with the transaction so the hirer was not liable. On the issue of whether the purported acceptance was effective, the court noted that the terms of the offer made it clear that acceptance should be made by the signing of the forms by the plaintiff(Finance Co.). Therefore giving the car to the hirer did not amount to acceptance.
Where the offeror has prescribed a particular method of acceptance, but not in terms insisting that only an acceptance communicated in that mode will be binding, an acceptance communicated by any other mode which is no less advantageous to the offeror will be effective to conclude the contract. In Tinn v. Hoffman, where acceptance was requested by “return of post”, it was held that that does not mean exclusively a reply by letter or return of post, but you may reply by telegram or by verbal message, or by any other means no later than a letter written by return of post. IF the offeror intends only to be bound by an acceptance in a particular manner, he must state so.
WHAT IS SILENCE AS A MODE OF ACCEPTANCE?
Prescription of Silence as Mode of Acceptance
As a general rule, an offeror is not allowed to arbitrarily impose contractual liability on an offeree by stipulating that his silence will be construed acceptance. In Felthouse v. Bindley , An uncle and a nephew entered into negotiations about the sale of a horse. there was a misunderstanding about the price to be paid for it. The uncle subsequently wrote to the nephew proposing that they split the difference and stating “If I do not hear from you I shall consider the horse sold at that price”. Later, the horse was mistakenly sold by the auctioneer to another party and the uncle sued. It was established from the evidence that the nephew had actually decided to accept the offer but did not communicate his acceptance to the uncle. He had rather directed the auctioneer not to sell that horse because it had already been sold. The court held that there was no contract because the nephew (offeree) had not communicated his acceptance to the offeror and the offeree was not bound by the offeror’s prescription of silence as a mode of acceptance.
However, where the offeror has expressly stated that silence would be considered as acceptance, (thereby waiving the requirement of communication of the acceptance), the offeree’s silence in response to the terms of the offer could be binding on the offeror. In this case, since the offeror prescribed silence as a mode of acceptance he cannot be heard to complain that the acceptance was not communicated to him. Thus it has been noted that in Felthouse v Bindley , if the nephew (offeree) had sought to enforce the contract against the uncle (the offeror) on the ground that his silence amounted to acceptance he probably would have succeeded. On this basis it has been noted that perhaps the rule principle in Felthouse v. Bindley is that the offeror cannot by ultimatum impose contractual liability on the offeree by imposing on him the obligation to state his non-acceptance but if the offeree unequivocally manifests his intention to accept, there would be a contract.
See also section 50(1) of Act 772 which speaks to unsolicited goods, services or communications.