LECTURE 3

Agreement: Part 2 – Acceptance

At the end of this lecture, students should understand:

1. Relationship between Offer and Acceptance;

2. Communication of Acceptance;
3. Agreement without Offer and Acceptance;
4. Postal Acceptance Rule
5. Electronic Communications
6. Correspondence between Offer and Acceptance

1. Relationship between Offer and Acceptance – Acceptance must rely on the Offer

The Crown –v- Clarke

Facts:
 The Commissioner of Police made a proclamation that the Government of WA would
offer £1,000 reward for information that would lead to the arrest and conviction of
the persons who committed the murders of an inspector of police and a sergeant of
police – AND importantly, that the Governor would pardon any accomplice not being
the person who actually committed the murders who provided the information.
 In June, Clarke and another person were arrested and charged with one of the
murders. Four days later Clarke, who had seen the proclamation, made a statement
which led to the arrest of one a man who was later convicted of the crime.
 Clarke gave evidence at trial that he had NO INTENTION of claiming the reward.
 Upon his release, he claimed the reward.
 The issue was whether his giving of the information was in reliance of the offer of
the £1,000 or to clear himself from a false charge of murder.

1
Held:
Isaacs ACJ:
 The information was not given in exchange for the offer.
 It is true that without his information no conviction was probable – therefore - he has
performed the condition required by the offer.
 However, his performance of the condition was exclusively to clear himself of the
charge, NOT for the reward:
“Clarke never accepted or intended to accept the offer in the proclamation,
and, unless the mere giving of the information without such intention
amounted in law to an acceptance of the offer or to performance of the
condition, there was neither “acceptance” nor “performance”, and therefore
there was no contract.”

Higgins J:
 Clarke did not act on the faith of, in reliance upon, the proclamation.
 The performance required of the conditions stated in the proclamation raises a
presumption that Clarke was acting on the faith of, in reliance upon, the proclamation.
BUT, that presumption is rebutted by his own express admission.

Starke J:
 The person performing the conditions of the offer must be acting upon its faith or in
reliance upon it. If not, he does not accept the offer and the offeror is not bound to
him.
 How do we know whether he has acted in reliance of the offer?
o There is a presumption that anyone performing the offer’s conditions accepts
that offer. From such facts an acceptance is probable but it is not an absolute
proposition of law - it is an inference of fact and may be excluded by
evidence.
o What evidence? Ordinarily, whilst it is true that the law judges intention
objectively, where previous communications have been dispensed with, and
where performance of the conditions of the offer is not conclusive due to the

2
 fact that perhaps the offeree never heard of the offer or never intended to
accept it - the statements or conduct of the party himself which were not
communicated to the other party are admissible to show why the acts referred
to in the offer were performed.

2. Communication of Acceptance

a) Silence as acceptance

Felthouse –v- Bindley

Facts:
 A man wrote to his nephew offering to buy a horse and said: “If I hear no more about
him, I consider the horse mine at £30 15s.”
 The nephew intended to accept the uncle's offer and instructed his auctioneer that
the horse was already sold and should not be auctioned with his other stock. The
auctioneer sold the horse at auction by mistake and the uncle sued the auctioneer.

Held:
 The action was unsuccessful as it was found that no contract between uncle and
nephew had been formed because the nephew had not communicated his
acceptance.
 The uncle was therefore held to have had no property in the horse at the time of the
auction and no cause of action against the auctioneer.

3
 b) Acceptance inferred from Conduct

Empirnall Holdings –v- Malcom Paull Partners

Facts:
 Empirnall, a property developer, verbally engaged architects Machon Paull to act as
project managers for a particular development.
 After some work was done, the architects requested a progress payment and the
execution of a contract.
 They were told to submit the progress payment, but were told the director and the
major shareholder of Empirnall, “does not sign contracts”.
 Despite this, the architects sent two copies of a contract to Empirnall and asked that
one copy be signed and returned.
 Two weeks later the architects wrote another letter stating that they were proceeding
on the understanding that the conditions of the contract were accepted and the works
would be continued in accordance with those terms and conditions.
 The architects continued to work and receive progress payments, but the contract was
never signed. When Empirnall became insolvent, it became necessary to determine
the effectiveness of a clause of the unsigned contract such that the architects’ fees
could be paid.

Held:
 Although an offeror cannot set up a contract by stipulating silence as the mode of
acceptance, silence may indicate acceptance in some circumstances.
 In this case Empirnall did more than remain silent. It took the benefit of the services
provided by the architects, knowing they were to be paid in accordance with the offer
and having had a reasonable opportunity to reject the offer.
 In those circumstances an objective bystander would conclude that Empirnall had
accepted the offer on the terms proposed.
 McHugh JA:

4
 “Where an offeree with a reasonable opportunity to reject the offer of goods
or services takes the benefit of them under circumstances which indicate that
they were to be paid for in accordance with the offer, it is open to the tribunal
of fact to hold that the offer was accepted according to its terms.”

3. Agreement without Offer and Acceptance

Brambles Holdings –v- Bathurst City Council

Facts:
 Brambles managed a solid waste disposal depot for the Council. There was a
contractual agreement for this.
 That 1st Contract expired on November 1989.
 20 February 1990 – Council wrote to Brambles stating it was ‘appropriate’ for
Brambles to increase liquid waste fees.
 2nd Contract was entered into on 12 July 1990 – Clause 21 and 22 specified the
increased fee and required a portion of that fee to be given back to Council.
 By letter - 19 September 1991 – Council wrote to Brambles stating that it had resolved
to increase liquid waste fees and the additional income was to be put in a Liquid Waste
Treatment Plan to ameliorate significant difficulties that were being faced at the
depot.
 By letter – 3 October 1991 – Brambles responded by stating that the present rates did
not make it viable to continue providing a liquid waste disposal service.
 Despite this, Brambles continued to charge liquid waste fees as set out in mid-
September 1991 letter, but retained the money.
 The Council sued Brambles in relation to the retained liquid waste fees.
 Brambles argued:
o That no offer had been made by the Counsel by its mid-September letter;
o That if there was an offer, his 3 October letter amounted to a rejection of that
offer and therefore extinguished it.

5
Held:
 Heydon JA accepted that there was a possibility that the mid-September letter was
not an offer given it used the language of command, rather than that of a proposal
which could be accepted or rejected. In any event, this argument was not available to
Brambles due to the fact that it had not been pleaded or argued at first instance.
 Ipp JA held that Brambles' letter did not amount to a rejection but was merely part of
the commonplace negotiations that often occur between companies when
attempting to come to some sort of agreement.
 Heydon JA said that the notion that rejection always renders an offer incapable of
acceptance is based on the erroneous assumption that the classic offer and
acceptance analysis must be applied across the board when reaching decisions
about the formation of contracts. Although the offer and acceptance formulation is
“a useful tool in most circumstances” and is the “conventional” approach, it is
“neither sufficient to explain all cases nor necessary to explain all cases.”
 Where no offer and acceptance can be identified, it is relevant to ask whether an
agreement can be inferred, whether mutual assent has been manifested – that is –
a meeting of the minds, and whether a reasonable person in the position of each of
the parties would think there was a concluded bargain.
 Here – it was held that a reasonable person in the Council's shoes would, in the light
of Brambles’ decision to charge the higher fees, have been reasonably entitled to
believe that the he was agreeing to the terms in the 19 September letter despite his
initial rejection. The fact that he did not communicate his move to the new fee levels
directly to the Council does not matter.
 Had Brambles wished to reserve the right to retain the higher fees despite the position
which Council had communicated in the September letter, it was his responsibility to
inform it as such. He did not communicate this view in his October letter or any other
time for that matter. His failure to do so meant that the Council was reasonably
entitled to believe that he was acting in conformity with the September letter and
entering a contract on its terms.

6
4. Postal Acceptance Rule

 Acceptance is deemed to have occurred when the offeree posts notification of their
acceptance to the offeror. Note that the offeror does not actually have to have
received the mail - the contract has already been formed by the offeree posting the
acceptance.
 If the mail is lost in the post, the rule still applies.
 Does not apply to facsimiles - they are likened to other forms of instantaneous
communication and therefore the offer is accepted when the fax is received and is
taken to occur where they are received:
o Brinkibon v Stahag Stahl:
 Concerned negotiations over a purchase of steel. The communications
were by telex. Acceptance was taken to have occurred when the return
telex was received.
 The notification of acceptance occurs when it arrives at the offeror’s
telex machine (even if not read) – so communications such a telex and
telephone are to be treated as being accepted when received – so if
telephone, the moment it is heard.
 Exceptions - A different principle may apply where the message:
 is sent or received through a third party;
 is sent out of office hours; or
 is not intended to be read immediately.
 Lord Wilberforce did not indicate what rule might apply in these
situations. It could be that the postal rule should apply where an
acceptance is sent or received through a third party. When a message
is sent out of office hours or is not intended to be read immediately, it
may be that it becomes effective some time after it is received by the
offeror's machine – eg – next business day.
 All such cases are likely to be resolved by reference to the presumed
intention of the offeror.

7
5. Electronic Communications

 Under the common law, the general rule is applied to electronic communication.
Therefore, acceptances sent electronically will be effective only when received by the
offeror.
 Irrespective of CL, time of receipt of an electronic communication is now governed by
the Electronic Transactions Acts (ETAs).
 The ETAs are based on the UNCITRAL Model Law on Electronic Commerce 1996, which
has since been supplemented by the United Nations Convention on the Use of
Electronic Communications in International Contracts 2005.
 Where an electronic communication is sent to an address designated by the
addressee, the time of receipt is the time that it becomes capable of being retrieved
by the addressee at that designated address.
 Where an electronic communication is sent to an address which has not been
designated by the addressee, the communication is only effective once both:
o the communication has become capable of being retrieved by the addressee;
and
o the addressee has become aware that the electronic communication has been
sent to that address.
 Electronic messages sent over the internet to a designated address will be effective
once it is received by the server operated by the recipient or a commercial server used
by the recipient.
 Electronic communications cover facsimiles.
 An email at the top of the letter head is not a “designated address”.

6. Correspondence between Offer and Acceptance

 What is a ‘battle of forms?’ It is a battle of ‘terms and conditions.’

 It is when two parties are attempting to come to an agreement, but each have their
own terms and conditions on which they rely.

8
  But what happens if those two sets of terms and conditions are in conflict such that
they cannot be reconciled?
 Who wins?

Butler Machine Tool Co v Ex-Cell-O Corp

Facts:
 Butler Machine Tool Co. made and sold machine tools. They sent a letter to Ex-Cell-O
on May 23, 1969 offering Ex-Cell-O some new machinery for £75,535. With it, was
Butler's standard contract terms which included a price variation clause, so if their
manufacturing costs went up, that price rise would be passed on to Ex-Cell-O.
 Ex-Cell-O replied on May 27 and said they would order the machinery, but on Ex-Cell-
O's own standard terms. Ex-Cell-O's standard terms did not have a price variation
clause.
 On the foot of the Ex-Cell-O’s order there was a tear-off slip headed:
“Acknowledgment: Please sign and return to Ex-Cell-O. We accept your order on the
terms and conditions stated thereon – and undertake to deliver by – Date – signed.” In
that slip the delivery date and signature were left blank ready to be filled in by the
Butler.
 Butler replied on June 5 on the tear-off slip from Ex-Cell-O's terms. At the bottom of
this slip it read, "we accept your order on the terms and conditions stated therein"
however Butler added a letter reasserting that the deal was being made under
Butler's own terms, from the May 23 letter. A while later, nothing further had been
said, and Butler delivered the machinery. They asked for £75,535, plus £2,892
according to their price variation clause.
 Ex-Cell-O refused to pay the extra. Butler sued Ex-Cell-O.
 The lower court held that the seller's price variation clause continued through the
whole dealing as it was to “prevail over any terms and conditions in [Ex-Cell-O’s]
order.” So Butler was entitled to rely upon it.
 Ex-Cell-O appealed.

9
Held:
Lord Denning MR:
 Laid out the traditional test for the contract: the quotation of the price was an offer
subject to terms and conditions and the order by Ex-Cell-O constituted a counter-offer
which Butler accepted.
 The offer to sell the machine on terms provided by Butler was destroyed by the
counter offer. Therefore, prima facie, the price variation clause was not part of the
contract.
 However, given that Butler was relying on their letter attached to the
acknowledgement reasserting their own terms and conditions, the Court needed to
examine the documentation by applying an objective test of the conduct and language
of the parties.
 Here considering the documents as a whole, the last document was decisive. It was
clear that the sale was concluded on the buyers and not the sellers’ terms, and this
did not provide for a price variation clause. This was because the reference to the
quotation in Butler’s subsequent letter only referred to the price and the identity of
the machine, NOT the original terms and conditions on the back of the quotation.
 So a win for Ex-Cell-O.

Lawton LJ:
 Came to the same conclusion as Denning but for different reasons. He disagreed with
Denning’s “global approach”, and thought that the battle of the forms should be
conducted according to the “set rules” that have been known for over 130 years.
 When those rules are applied to this case – the counter offer killed the quotation, and
although the letter which accompanied the tear-off slip referred to the quotation, it
did so only for the purposes of identifying the machine and its price - it did not revive
the terms and conditions in the quotation.

10
QUESTIONS THAT YOU SHOULD BE ABLE TO ANSWER AFTER TODAY’S LECTURE:

1. Does acceptance always need to be communicated? What are the ways in which
acceptance can be communicated? Can silence amount to acceptance?

GENERALLY, silence cannot amount to an acceptance, for example, an offeror cannot

stipulate that no response to the offer will be treated as an acceptance – eg – “if I don’t hear
from you by COB tomorrow, I will take that as acceptance of the terms” – Felthouse v Brindley.
This was confirmed in Empirnall Holdings –v- Malcom Paull Partners by the CoA.

Empirnall Holdings - held that although an offeror cannot set up a contract by stipulating
silence as the mode of acceptance, silence may indicate acceptance in some circumstances.
For example, where the offeror has accepted works done by an offeree, or goods provided by
an offeree, and has had a reasonable time to reject those works or goods but has remained
silent, it is open for the court to find that the offer has been accepted.

Unilateral contracts -communication of acceptance is through the performance of the

conditions in the offer. Eg – Carlil v Carbolc and Crown v Clarke.

Also, an offeror may expressly or impliedly dispense with the need for communication.

2. Where an offer has been rejected, is it still available for acceptance?

Heydon JA said in Brambles that the notion that rejection always renders an offer incapable
of acceptance is based on the erroneous assumption that the classic offer and acceptance
analysis must be applied across the board when reaching decisions about the formation of
contracts. Although the offer and acceptance formulation is “a useful tool in most
circumstances” and is the “conventional” approach, it is “neither sufficient to explain all cases
nor necessary to explain all cases.”

11
He goes on to say that:
“If offer and acceptance analysis is not always necessary or sufficient,
principles such as the general principle that a rejection of an offer brings it to
an end cannot be universal. A rejected offer could remain operative if it were
repeated, or otherwise revived, or if in the circumstances it should for some
other reason be treated, despite its rejection, as remaining on foot, available
for acceptance, or for adoption as the basis of mutual assent manifested by
conduct.”

3. With respect to offer and acceptance, do we look to the objective or subjective

intention of the parties?

Usually objective such as in in Empirnall Holdings, but as in Crown v Clarke, where there is a
lack of communication documented or the performance of the conditions are not conclusive
of whether an offer was accepted, a party’s conduct and words can be used to show that the
acts were performed in reliance of the offer.

4. What is the legal effect of a counter-offer?

Where an offer is made by one party, then another party accepts but varies the attached
terms and conditions, this is considered a counter offer.

Megaw J said in Trollope & Colls Ltd v Atomic Power Constructions Ltd [1963] 1 WLR 333 at
337: “the counter-offer kills the original offer.”

5. How does acceptance occur for a unilateral contract? Must there be an intention to
accept?

YES – Carlil v Carbolic – by the performance of the condition in the offer. Cf Crown v Clarke –
the performance of the acts have to be in reliance of the offer and not for some other reason.

12
 6. Can post-formation conduct be relevant to the question of whether a contract was
formed?

Yes – in order to determine the intentions of the parties where no offer or acceptance can be
found and where there is no way to discern intention otherwise that by surrounding facts and
circumstances such as post formation conduct. Eg – Brambles.

7. Does agreement always require offer and acceptance? If not, what is the test?

Brambles Holdings –v- Bathurst City Council refers to Meates v Attorney General which stated
that the test is the “acid test”. The test in a case like Brambles is whether, viewed as a whole
and objectively from the point of view of reasonable persons on both sides, the dealings
show a concluded bargain.

8. What is the postal acceptance rule and when does it apply?

 Acceptance is deemed to have occurred when the offeree posts notification of their
acceptance to offeror. Note that the offeror does not actually have to have received
the mail - the contract has already been formed by the offeree posting the acceptance.
 If the mail is lost in the post, the rule still applies.
 Does not apply to facsimiles and telexes? No – it does not. Telex is likened to other
forms of instantaneous communication and therefore the offer is accepted when the
telex is received and is taken to occur where the telex is received:
o Brinkibon v Stahag Stahl:
 Concerned negotiations over a purchase of steel. The communications
were by telex. Acceptance was taken to have occurred when the return
telex was received;
 The notification of acceptance occurs when it arrives at the offeror’s
telex machine (even if not read) – so communications such a telex and
telephone are to be treated as being accepted when received – so if
telephone, the moment it is heard.
 Exceptions - A different principle may apply where the message:

13
  is sent or received through a third party;
 is sent out of office hours; or
 is not intended to be read immediately.
 Lord Wilberforce did not indicate what rule might apply in these
situations. It could be that the postal rule should apply where an
acceptance is sent or received through a third party. When a message
is sent out of office hours or is not intended to be read immediately, it
may be that it becomes effective some time after it is received by the
offeror's machine – eg – next business day.
 All such cases are likely to be resolved by reference to the presumed
intention of the offeror.

9. How do the rules apply to electronic communications?

 Under the common law, the general rule is applied to electronic communication.
Therefore, acceptances sent electronically will be effective only when received by the
offeror.
 Under the ETAs where an electronic communication is sent to an address designated
by the addressee, the time of receipt is the time that it becomes capable of being
retrieved by the addressee at that designated address.
 Where an electronic communication is sent to an address which has not been
designated by the addressee, the communication is only effective once both:
o the communication has become capable of being retrieved by the addressee;
and
o the addressee has become aware that the electronic communication has been
sent to that address.
 Electronic message sent over the internet to a designated address will be effective
once it is received by the server operated by the recipient or a commercial server used
by the recipient.
 Electronic communications cover facsimiles.
 An email at the top of the letter head is not a “designated address”.

14
10. Who wins in a ‘battle of forms’? Are there different views?

 It is when two parties are attempting to come to an agreement, but each have their
own terms and conditions on which they rely.
 But what happens if those two sets of terms and conditions are in conflict such that
they cannot be reconciled?
 Who wins?
 Yes – there are different views:
 Lord Denning takes a “Global Approach”:
o One view is that the battle is won by the party who fires the last shot. That is
– the party who puts forward the latest terms and conditions. If they are not
objected to by the other party, then they may be taken to have agreed to them.
This is how Ex-Cell-O won over Butler.
o Another view is that the battle is won by the party who gets the blow in first. If
they offer to sell at a named price on the terms and conditions stated on the
back of their quote, even if the buyer orders the goods purporting to accept
the offer on an order form with his own different terms and conditions, if they
are so different that it would affect the price, the buyer ought not to be
allowed to take advantage of the difference unless they draw it specifically to
the attention of the seller.
o Then there is another view pertaining to the situation shots can be seen to be
fired on both sides. Where there is a concluded contract but the terms and
conditions of each party caries. Here, the terms and conditions of both parties
are to be construed together. If they can be reconciled so as to give a
harmonious result, all well and good. If differences are irreconcilable – so that
they are mutually contradictory – then the conflicting terms may have to be
scrapped and replaced by a reasonable implication.

 Lord Lawton:

15
o Prefers the “set rules” - the counter offer kills the quotation. So the party who
fires the last shot wins.

16