Lecture 2: Acceptance

1. Definition of Acceptance
2. Rejected Offer, Counter Offer & Conditional Acceptance
3. Clarification and understanding
4. Standard Forms
5. Communication of Acceptance
A. General Rule
B. Electronic communication
C. Postal acceptance rule and exceptions
D. Waiver of communication
E. Prescribed means of acceptance
6. Acceptance by conduct
7. Acceptance in ignorance of offer
Lecture 2: Acceptance

I. Definition of Acceptance
 An indication, either express or implied, by the offeree made whilst the offer remains open
and in the manner requested in that offer of the offeree’s willingness to be bound
unconditionally to a contract with the offeror on terms stated in offer.

Tinn v Hoffman & Co [1873]

Held: There can be no agreement and therefore no contract, unless an offer has been
accepted.
Judges Blackburn J: “promise being made on one side in ignorance of promise on the
other side neither can be construed as an acceptance of the offer”

II. Rejected Offer, Counter Offer & Conditional Acceptance

A. Rejected offer cannot later be accepted
 The rejection of an offer will cause offer to terminate so that no longer be accepted

Lee Siu Fong Mary v Ngai Yee Chai [2006]

Held: If the offer was rejected by P, she could not unilaterally revive it by saying she
had later accepted it. No further offer from D to P to accept later.
Similar case: Yick Fung Garment Factory Ltd [1987]
Offer of employment could not later be accepted absent particular circumstance

B. Counter-offer
 Counter-offer occurs where offeree responds to an offer with an offer of his own in
non-identical terms to the original offer
 It operates to reject and terminate entirely the original offer so that it is no longer
available to be accepted. The party (original offeror) is free to accept counter-offer

 Price Variation
Hyde v Wrench [1840]
Facts: D wrote to P offering to sell his farm for $1000. P replied offering $950 which D need
time to consider. P then wrote to D purporting to accept D’s original offer.
Held: P in making his counter offer of $950, had rejected D’s original offer, causing it to
terminate (no longer be accepted).
 Shun Ho Energy Development Co Ltd v Secretary for Justice [2015]
Facts: A landlord’s offer to renew commercial tenancies for monthly rentals of $33000 and
$39000 was met with a request by tenant to pay instead $30000 and $35000. After the
landlord rejected his offer, the tenant purported to accept landlord’s original offer.
Held: There was no contract because the tenant’s request was a counter offer which
amounts to the rejection of an original offer (cannot be later accepted)

C. Conditional acceptance (I agree but…)

 Since an acceptance must be unconditional, if one purports to accept an offer, but
simultaneously attempts to introduce a new term or alter the offered term, it will
amount to an counter offer (i.e. terminate the original offer) (e.g. paid in
instalment)

 A procedure after the contract has made & unnecessary to follow in practice
Combi (Singapore) Pte Ltd v Winston Camera & Radio Co Ltd [1988]
Facts: D sent a telex message to the plaintiff offering to sell a quantity of $2.695 per unit. P
replied by fax purporting to accept the D’s offer but impliedly adding that D must
open a letter of credit.1
Held: HKCA held that because the fax contained a new requirement, it constituted a
counter offer causing the original offer in D’s telex to lapse.

Capacious Investment Ltd v Secretary for Justice [2001]

Facts: P owned various lands in N.T. which were resumed by the govt. Prior to resumption,
the govt. offered compensation of more than $21mn “in full & final settlement of all
claims”. P replied to accept but adding they reserve the right to claim interest
Held: Acceptance of govt. offer had been transformed into a counter offer by the
inclusion of a new term concerning interest while the govt. never accepted P’s
counter offer.

Cathay Pacific Airways Ltd v Hong Kong Air Cargo Terminals Ltd [2002]
Facts: D proposed a draft which contained an arbitration clause while in reply P also
proposed their own draft which contained their own arbitration clause. No formal
agreement was reached but D provided cargo services to P.
Held: D’s offer including obligation to arbitrate was entirely terminated by P’s counter

1
a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time
 offer which D had never accepted.

III. Requested clarification and statement of understanding

 A request for clarification or further particulars will not constitute counter offer

 Not every addition to expression of an offer will render acceptance ineffective. If

the addition is objectively interpreted as a statement of the offeree’s
understanding of the offer, the acceptance will remain effective.
 If an acceptance merely sets out steps or procedure necessary to be followed in
order to give effect to the agreement, it will not function counter-offer.

 Information on Delivery whether offeror would consider changing the offer

Stevenson, Jacques & Co. v McLean [1879-80] (objective interpreted: RM)

Facts: D sent a telegram on Saturday to P offering to sell a quantity of iron at 40s per ton,
and stating that he would keep offer open until Monday. P replied “Please wire
whether you would accept forty for delivery over 2 months , or if not longest limit
you would give.”
Held: The words are nothing specific by way of offer or rejection, but a mere inquiry.

 An expectation on the matter without clear & executable detail (e.g. date)
Global Tanker Inc v Amercoat Europa NV [1975]
Facts: D wrote to P in the term: “this is to confirm our offer of $12800 in full and complete
settlement of the claim outstanding for this vessel.” P replied “we accept your offer on
the understanding that payment to us will be promptly effected.”
Held: It was held for P on the basis that his reply was merely setting out P’s
understanding of D’s offer and did not introduce new term.

 Procedures/Practices necessary for the creation of binding contract

Yau Fook Hong Co Ltd v Attorney General [1988]
Facts: A developer offered to surrender interests it had in lands in settlement of debts owed
by other members to HKG. Register General accepted the offer, but stipulated that the
developed must “forward all relevant title deeds … for the purpose of title
checking…Upon receipt of confirmation as to your title from District Lands Officer. I
will arrange for execution of memo of release by you.”
Held: The request for title deed are consistent with acceptance by govt. of the offer made
 by developer. In conforming with terms of application form and time-honored
conveyancing practice, preparation of a memo of release follow upon the creation
of a binding agreement and checking of title followed.

IV. Precondition
 An acceptance may be subject to precondition that does not alter the offered terms.
Acceptance will be effective when precondition is satisfied & offer has not been
withdrawn.

Scenario: The training contract is offered by ONC to Chan on condition that he has
passed PCLL. Chan has received the training contract but is still waiting for the
release of PCLL results. Acceptance made by Chan will be subject to whether he has
satisfied the precondition. ONC can withdraw the contract at any time before
acceptance.

V. Standard Forms & Last Shot Approach

 Problems may arise in determining whether offers have been replaced by counter-offer

Butler Machine Tool Ltd v Ex-Cell-O Corp (England) Ltd [1975]

Facts: 1. Butler sent out a quotation of £75,535 along with a copy of their standard terms
of sale. The terms included a price variation clause and a term that the seller's
terms would prevail over any terms submitted by a purchaser.
2. Ex-Cell-O put in an order for the machine at the stated price and sent a set of
their terms which did not include the price variation clause. The order contained
an acknowledgement slip which required a signature by Butler to be returned.
This slip stated that the contract would be accepted on terms stated by Ex-Cell-
O.
3. Butler duly signed the slip and returned it with a new cover letter stating that Ex-
Cell-O has agreed in accordance with the terms set out by Butler.
Held: E’s order sought to change the term of B’s quotation, it was in reality counter-offer
which destroyed B’s offer, including price variation. Butler’s cover letter, construed
by reasonable man in the position of seller, was acceptance of E’s counter offer.
Principle Last shot approach: terms of contract are established by reference to counter-offer
made latest in time before the contract’s conclusion
 Last shot approach has been embraced in Hong Kong. (both implied by conduct!!)

HK Manohar Chugh (t/a Electric & Electronic Industries)v OKA Electronic Ltd [1991]
Facts: Whether the purchaser have actually communicated rejection of seller’s counter offer.
Held: (1) rejection  counter offer terminated  last shot applied (in terms of
purchaser’s original offer implied accepted by plaintiff in delivery of goods
(2) rejection   counter offer prevailed  implied accepted terms of counter
offer by accepting the good

VI. Communication of acceptance

 General Rule: Acceptance is not effective until it is communicated to the offeror.
Acceptance is effective at the time and in the place received by the offeror

Entores Ltd v Miles Far East Corp [1955]

Facts: Entores was a London-based trading company that sent an offer by telex for the
purchase of copper cathodes from a company based in Amsterdam. The Dutch
company sent an acceptance by telex. The contract was not fulfilled.
Held: The contract is complete when the acceptance is received by the offeror and the
contract is made at the place where acceptance is received. (postal rule not apply in
instantaneous means, i.e. acceptance is not effectively communicated when posted)
Similar case: Brinkibon Ltd v Staghag-Stahl [1983]: reaffirmed Entores, an acceptance sent
from London to Vienna was held to be effective in Vienna
[subject to word or circumstance indicated objectively parties’ intention in each
case]

 General rule also applied when acceptance is transmitted to the offeror’s agent
Suanto-Wing Sun Co Ltd v Yung Chi Hardware Machinery Co Ltd [1989]

 An offeror will be estopped from denying timely receipt if he caused the delay

The Brimnes [1975]

Facts: The complainant sent a message by Telex, which gave notice of withdrawal of the
ship from service. This Telex message was sent during normal office hours. However,
the defendant did not read it until the next day and had already made payment.
Held: An offeror cannot prevent a contract simply by refusing to open or read, in a
reasonably business-like way, a communication containing an acceptance.
(effective when it could be read rather than it is in fact read )

A. Electronic Communication of acceptance (When & Where)

  General Rule: acceptance made by electronic communication is effective at the
time and in the place the message is received by the offeror.
 When & Where it is received is subject to legislative provision.
 An acceptance will be made at the offeror’s place of business or place of residence
(when no place of business) regardless of where the offeror actually read the
email.2

Electronic Transaction Ordinance (Cap. 553) sec. 19(2)

Unless something indicate that offeror had contrary intention,
(a) if the offeror has designated information system for receiving emails, expressly or impliedly
designating by including an email address at which offeror may be contacted (in a
letterhead)3
Result: an email (contains acceptance) is received when it is accepted by the designated server
(b) (i) if an email (contains acceptance) is sent to an information system of the offeror that
offeror has not designated; or (ii) the offeror has not designated info. system for receiving
emails,
Result: the acceptance is received when it comes to the knowledge of the offeror (e.g. when he
reads it or would have read it in business-like way)

B. Postal Acceptance Rule (not included delivery service like Fedax)

 General Rule: The acceptance is complete when the letter is put into the mail box. 4
Contract is then formed. (rather actual receipt & no fault of misdirecting on a offer in
Adams v Lindsell [1818] / delay in acceptance is by accident Dunlop v Higgins [1848]

Household Fire and Carriage Accident Insurance Co Ltd v Grant [1879]

Held: Acceptance of offer to purchase allotment of share was effective by post because
the post was reasonable all circumstance, even offeror used post to communicate.
Similar case: Henthorn v Fraser [1892]: Postal acceptance rule was effective when it is not
dispatched by post (hand to offeror personally) and offeror does not request by post

 Exception: Offeror may exclude rule & requires actual communication. Court will
infer intention by offeror to exclude by words or circumstance or nature of contract

2
For example, if Chan works in HK but has travelled to North Pole when he received and read the email at a place
outside HK, the acceptance is still actually made in Hong Kong.
3
For example, if you sent an offer via Gmail without designating to send other email server, then it is very likely
that acceptance should be sent to the same place Gmail as well. (Professor’s assertion!!)
4
“Where reasonable persons in the position of the parties would have anticipated that the postal service
would or might be used to communicate acceptance, communication of acceptance is deemed to be effective at
the time and in the place the message of acceptance is placed into the care of the postal service in customary way”
 indicated.

 Postal Acceptance rule is considered less actual notification

Howell Securities Ltd v Hughes [1974]
Facts: Dr Hughes granted Holwell an option to purchase his house for £45,000. The option
was to be exercisable 'by notice in writing' within 6 months. Holwell posted a letter
exercising the option but never received by Hughes. Holwell sought to enforce
relying on the postal rule stating the acceptance took place before the expiry of the
option.
Held: By requiring 'notice in writing', Dr Hughes had specified that he had to actually
receive the communication and had therefore excluded the postal rule.
Scenario: If it is said that “The offer constituted by this option may be accepted in writing
within 6 month”, it appears to be sufficient that the language would be
understood by a reasonable people in the position of offeree as being intended to
oust the rule.

 Exception: Postal Acceptance Rule will only apply when the posting has observed all
other customary practice (such as pay the correct postage, place a stamp on the
envelop correctly or in HK employ Chinese or English).

C. Communication of acceptance: waiver by offeror in unilateral

 Acceptance must be communicated exists for the benefit of the offeror. However, the
offeror may waive his right to receive notification of acceptance.

Carlill v Carbonic Smoke Ball Co [1893]

Held: Where the unilateral offer is made to the public in return for performance of act,
waiver of the offeror’s right to receive notification of acceptance will be inferred.
(performance itself is sufficient !!)
Judge Say: Lindley LJ: “does not require notice of acceptance apart from notice of
performance”
Bowen LJ: “if the person implied or expressly intimates in his offer that it will be
sufficient to act on the proposal without communicating acceptance of it,
performance of condition is sufficient acceptance without notification”

D. Prescribed means of acceptance

  Offeror may prescribe a particular method of communicating acceptance, and failure
to accept in a prescribed way will generally render the purported acceptance
inefficient.
 For example, offer requires acceptance in writing ( oral acceptance is ineffective)
 Unless stated no other method is acceptable, acceptance communicated by other
means that are no less advantageous to the offeror will still suffice.

Manchester Diocesan Council for Education v Commercial & General Investment

Ltd [1969]
Held: Although D indicated that acceptance of its tender should be communicated to
its address, it did not state that an alternative mode of acceptance was not
effective. Because P used an alternative no less advantageous to D
(communicated to D’s surveyors), acceptance was effective.

E. Silence
 The offeror may not impose an agreement on the offeree by prescribing that
silence will be construed as acceptance.

Felthouse v Bindley [1862]

Fact: A nephew discussed buying a horse from his uncle. He offered to purchase the horse
and said if I don't hear from you by the weekend I will consider him mine. The horse
was then sold by mistake at auction. The auctioneer had been asked not to sell the
horse but had forgotten. The uncle commenced proceedings against the auctioneer for
conversion. The action depended upon whether a valid contract existed.
Held: Offeror cannot impose silence as means of acceptance.

 VERY Exceptional case based on special fact of the case in insurance policy document
Rust v Abbey Life Insurance Co Ltd [1979]
Held: P could not take advantage of benefits while reserving right to reject it or recover
price.

VII. Acceptance by Conduct (unequivocally referable to contract be inferred)

 It is possible for an offeree to impliedly accept an offer by conduct provided that the
conduct comes to the attention of the offeror.
  Condition 1: Acceptance will not lightly inferred (except unilateral), the conduct must be
unequivocally referable to punitive contract.

Brogden v Metropolitan Railway Co [1877]

Fact: D had been supplying coal to P (a railway company) for almost 2 years when he
suggested a price increase and a new contract. In response P drafted an agreement
with a few blank spaces for D to fill in. D filled in the blanks and returned it to the P,
who without signing it, placed it on the drawer. Thereafter, P traded with each other
for some 10 months. But P argued that he had never accepted D’s counter offer.
Held: Acceptance took place when the company commenced a course of dealing
referable only to the contract without any objection as to the terms.
Similar case: Pickfords Ltd v Celestica Ltd [2003]: a removal company accepted an offered
contract to provide relocation service by performing work after having received
offer.

 Condition 2: If it may be reasonably explained by alternative reasons other than

acceptance of an offer, it will not operate to bind the offer. An objective test is
employed to ascertain whether conduct amounts to acceptance/offer. Subjective
intention is generally irrelevant.

A contract will be implied from conduct where a reasonable person, having regard to all facts
and circumstances, will regard parties’ conduct as amounting to communicated offered
followed by communicated acceptance

Aramis [1989]
Judge Says: It must be necessary to identify conduct referable to/consistent with the contract
contended for or at the very least, conduct inconsistent with there being no
contract made between the parties to the effect contended for.
Applied in Whether the conduct of offeror in XXX would be understood (by a reasonable
HK cases person in the offeree’s position) as an offer by offeror to enter into contract?

 Exception: If the offeror knew that the offeree did not actually intend by his conduct to
 accept the offer, objective test does not apply in favor of a party who knows the truth.

Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd
[2004]
Held: Casil’s conduct did not constitute acceptance of an offer by Tongji because
(1) Casil’s conduct in negotiating letter of credit is objectively ambiguous (she is
merely acting as a financial intermediary to which it was not a party)
(2) Casil has never intended by conduct to be bound to any sale contract with
Tongji and Casil’s state of mind was known to Tongji
Comment: The court is unnecessary to use “subjective qualification” and it would be much
more consistent with the standard test of objectivity.
A reasonable party5 in Tongji position (in position knowing Casil not intended to
contract with Tongji) wouldn’t reasonably interpret Casil’s conduct as
acceptance.

VIII. Acceptance in ignorance of offer

 An acceptance in ignorance of an offer cannot create a contract since parties must
reach agreement (Koo Ming Kown v Next Media Ltd [2009])

Taylor v Allon [1966]

Facts: D appealed against conviction on a charge of driving an uninsured motor vehicle. His
defense was that he was insured by cover note from his previous insurer extending
insurance coverage until a new policy was agreed and issued.
Held: Cover note constituted an offer of a contract of insurance, but the offer could not
have been accepted because D was ignorant of its existence at the relevant time

 For an unilateral offer, if a person performs requested act without knowing of the
offer, no contract exists between him & offeror because there was no consensus ad
idem

 No matter what other motivation he has as long as he is aware

William v Carwardine [1835]
Held: If offeree was aware of the offer at the time of performing the requested act, it is
irrelevant offeree’s performance was motivated by consideration other than

5
Unlike reasonable bystander in tort, the reasonable man in contract is usually conceived as the actual
contracting party endowed with his own actual knowledge or experience but subject to reasonableness
 offer

 Not only must the claimant have the knowledge of the offer, he must also be aware of
the offer at the time he performs the requested act.

R v Clarke [1927]
Held: In performing an act requested by unilateral offer it is necessary that offer is
present in the offeree’s mind at the time the act is performed.
Comment: “Facts are unusual because it will be difficult for an offeror to establish that a
claimant aware of an offer before performing has ceased to be aware at the time of
performance.”