INTRODUCTION TO CONTRACT AND

TORT LAW
LSC0144

WEEK 3:
FORMATION OF A VALID CONTRACT
ACCEPTANCE

Department of Legal Studies

Sem 2 (20/21)
 CONTENT:

1. What is an acceptance?
2. Method of acceptance
3. Statements/Conduct that are
not considered as acceptance
4. Communication of acceptance
5. Exception to the
communication rule
6. Revocation of an acceptance
1. What is an acceptance?
 What is an acceptance?

1. Unconditional agreement to all the terms of that

offer.
(Elliot and Quinn)

2. A final and unqualified assent to the terms of the

offer, made in the manner specified or indicated by the
offeror. It can occur orally, in writing or, occasionally, it
may be implied from the offeree’s conduct.
(Stephen Graw)

3. An agreeing either expressly or by conduct to the act

or offer of another so that a contract is concluded, and
the parties become legally bound.
(Merriam-Webster Dictionary)
 General Rule for Acceptance

Acceptance can be oral or in writing, but in some cases

by doing something.

Acceptance must be unconditional. The offeree must

accept the precise terms of an offer.

Acceptance must be communicated to the offeror.

Offers which are not accepted do not continue

indefinitely.
2. Method of acceptance
 Method of acceptance

offer acceptance contract

counter
offer acceptance contract
offer

Invitation
offer acceptance contract
to treat
▪ If the offeror stipulates a specific and the only means of acceptance,
the offeree is bound to make the acceptance in that way. If the
offeree fails to do so, the offeror is not obliged to perform the
promise.

▪ On the other hand, if the offeror indicates a means of acceptance

without stipulating that it is the only means of accepting the offer,
the offeree now has the flexibility to accept it by the means or any
other means.

▪ If the offeror does not indicate how the offeree should communicate
his acceptance, the general rule of thumb will be applicable in
which the acceptance should be communicated by the same means
that were used to send the offer. The offeree is required to act
reasonably and in accordance with what the offeror intended.
 Can silence amount to an acceptance?

An offer must be accepted according to the method /

mode prescribed. If no mode is prescribed, the
acceptance must be according to some usual or
reasonable mode.

Merely remaining silent cannot amount to an

acceptance, unless it is absolutely clear that
acceptance was intended.

Similarly, the offeror cannot impose silence as the

means of acceptance.

For example, the offeror cannot say to the offeree: “If

I do not hear from you to the contrary, I will take it
you have accepted.”
 Felthouse v Bindley [1863] 142 ER 1037, Exch Ch

The plaintiff made an offer to his nephew to buy his

horse for $30 15s, saying “If I hear no more about
him, I shall consider the horse mine”.
The nephew did not reply. But he asked the
defendant (auctioneer) to keep the horse out of the
sale of his farm stock.

The defendant mistakenly sold the horse and the

plaintiff sued him.

It was held that the plaintiff’s claim failed as there

was no contract between him and his nephew.
Silence cannot be prescribed as an acceptance.
Acceptance of an offer to enter a unilateral contract

Unilateral contracts are usually accepted by

conduct.

If Annie offers RM500 to anyone who finds her lost

cat, finding the cat will be an acceptance of the
offer, making her promise binding.

It is not necessary for anyone to contact her and say

that they intend to take up her offer and find her
cat.

There is no acceptance until the act has been

completely performed.
3. Statements/Conduct that are not
considered as acceptance
 Can there be a conditional acceptance?
▪ Acceptance must be unconditional, absolute and must exactly fit the offer.

▪ Acceptance is the mirror to the offer. Thus, it must correspond exactly with the
offer in order to form a valid and binding contract.

▪ As it is the final expression of assent to the terms of the offer, any attempt to
introduce or suggest a new term at the point of acceptance will not amount to
acceptance, instead it can be considered as a counter offer.

▪ A counter offer is a rejection of the original offer. It is a new offer by the

offeree.

▪ As soon as a new offer is made by the offeree, he cannot accept the original
offer as it is treated as revoked.

▪ This kind of conditional acceptance or “acceptance with strings attached” does

not constitute acceptance at all. Hence no binding contract is formed.

▪ Acceptance represents the meeting of the minds of the parties to the contract.
Thus, what is accepted must be in line with what is offered.
Jiji offered to sell his car to Dodo provided that Dodo fulfil three listed terms in
the proposal. If Dodo only wanted to fulfil 2 out of the 3 terms stipulated by Jiji
or add the fourth terms to the proposal, then the acceptance to Jiji’s offer is not
absolute.
 Hyde v Wrench [1844] 49 ER 132

The defendant offered to sell his farm to the

plaintiff for $1000, the plaintiff replied that he
would give $950 for the farm. The defendant
refused this and when the plaintiff then replied
that he would give the $1000, the defendant
refused to sell.

It was held that there was no contract between

the two because when the plaintiff had stated
that he would give $950 for the farm, this
amounted to a counter-offer and cancelled out
the original offer.
 Situation not a Counter Offer

1. A mere request for information 2. Negotiation and the ‘battle of forms’

This is not a counter offer. Where parties carry on a long process of

negotiation, it is difficult to pinpoint exactly
when an offer has been made and accepted.

It is not an acceptance, but neither is it a

rejection. In such cases, the courts will look at the whole
course of negotiations to decide whether the
parties have in fact reached the agreement at all
It has an entirely neutral effect on the offer, and and, if so, when.
when the offeror replies, the offeree still has the
option of accepting or rejecting.
4. Communication of acceptance
 If A shouts an offer to B across a river but,
just as B yells back an acceptance, a noisy
aircraft flies over, preventing A from
▪ An acceptance need to be communicated in hearing B’s reply, no contract has been
made. A must be able to hear B’s acceptance
order to be effective. before it can take effect.

Per Lord Denning in Entores Ltd v Miles Far

▪ Until the offeror becomes aware of the East Corporation (1955)
acceptance, no binding contract is formed.

▪ The communication of acceptance is very

important because if a person is bound by a
contract without knowing that his offer has
been accepted, it would certainly create
difficulties in all kinds of situations.
If the contract was made by telephone, and A failed to catch what
B said because of interference on the line; there is no contract until
A knows that B is accepting the offer.
Acceptance must only be made by the offeree or agent duly appointed for
the purpose.

Powell v Lee (1908)

The plaintiff had applied to the managers of a school to become the
principal. They considered his application and by a narrow vote they had
decided to appoint him as principal. After the vote an unauthorized
person had contacted the plaintiff by telegram to inform of the outcome
of the vote. But the managers had later came together and decided to
retract their former decision and appointed someone else.

The plaintiff was not successful in court because the form of

communication of the acceptance was not an effective form of
communication. Furthermore the acceptance was given to him by
someone who was not authorised and consequently there was no valid
acceptance or breach of contract.
4. Exception to the communication rule
 Waiver of communication of
acceptance/Terms of the offer

Exception to the
Conduct of the offeror
communication rule

Postal rule
 1. Waiver of communication of acceptance/Terms of the offer

Even though the offeror cannot impose on the offeree a condition that
silence will be deemed as a form of acceptance, he may waive his right to
have the acceptance communicated to him by the offeree.

Normally, acceptance is not required to be communicated to the offeror

in unilateral contract. The performance of the conditions in the offer
constitute as the acceptance regardless whether the offeror is aware of it
or not.

See Carlil v Carbolic Smoke Ball Co where the court rejected the defendant
argument that the plaintiff must notify them that she was accepting the offer.
The court further stated that performance of the term of the offer by the offeree
is enough to indicate acceptance. In this case, the defendant clearly indicated in
the advertisement that all that was required was to use the smoke ball when
someone got cold. The act of plaintiff where she bought and used the smoke ball
amounted to acceptance with does not required to be communicated to the
defendant.
 2. Conduct of the offeror

The offeror who fails to receive the acceptance

due to their own fault may still be bound by the
contract.

For instance, where an offer was accepted by

telephone and the offeror failed to ask for the
acceptance to be repeated when he did not catch
the words of acceptance made by the offeree.

In other situation, the acceptance was sent via

fax during business hour but no one in the office
noticed it, or someone had noticed it but failed to
read it.
 3. Postal rule

▪ The problem of acceptance arise when

the parties are communicating and
negotiating at a distance using various
medium such as post.

▪ The postal rule states that where the

parties contemplate acceptance by mail
or telegram, acceptance will be complete
as soon as the letter/telegram is properly
posted.
 Adams v Lindsell [1818] 106 ER 250

The defendant wrote to the plaintiff offering to sell them some

wool and asking for a reply ‘in the course of post’. The letter
was delayed in the post. On receiving the letter, the plaintiff
posted the letter of acceptance the same day.

However due to delay, the defendant had assumed the

plaintiff was not interested in the wool and sold it to a third
party. The plaintiff sued for breach of contract.

Held: There as a valid contract which came into existence the

moment the letter of acceptance was placed in the post box.
 Instance method of
acceptance

Exception to the postal Offer stipulating the

rule method of acceptance

Misdirected acceptance
 1. Instant method of acceptance

Does postal rule apply to an instant method of communication?

The Postal Rule does not apply when an acceptance is made by an instant mode of
communication. Example, telephone, fax, telex and the use of answering machines and electronic
mailboxes. (telegram, WhatsApp, )

Postal rule should only apply in a situation where the offeree is not able to know or contemplate
that their communication has been ineffective. When the acceptance is communicated through
faxes, emails or text messages, the offeree is in the position to know immediately whether his
message has been received or not. The offeree will usually know at once that they had not
managed to communicate with the offeror. He then can assume whether an effective
communication of acceptance has been formed or whether he needed to try to contact the offeror
again.

Take for an instance communication through WhatsApp, the offeree can assume that his
acceptance had been communicated to the offeror when he saw the message has been blue
ticked. However, the downside is if the offeror disable his privacy setting, no blue tick will appear
and the offeree cannot assume that his acceptance has been accepted until he received a reply
from the offeror. Even if the blue tick do appear, the offeror might argue that the message had
been read by someone else.
2. Offer stipulating the method of
acceptance

The offeror can negate the

operation of postal rule by simply
requiring an actual
communication.

For instance, the offeror indicated

clearly in the offer that he must
receive the acceptance for it to be
effective.
 3. Misdirected acceptance

The postal rule is inapplicable in a situation

where the posted letter of acceptance is lost
or delayed because the offeree has wrongly
or incompletely written the offeror’s
address.

As it is the fault of the offeree, it is

reasonable to impose the responsibility for
the carelessness on him.
4. Revocation of acceptance
▪ An acceptance is deemed to be communicated when it is
brought to the notice of the offeror.

▪ Thus, if the offeree wants to revoke his acceptance, he

must do so before the acceptance is communicated to the
offeror or before the offeror received the acceptance.

▪ An offer will terminate at the point when the offeror

received the revocation.

▪ Revocation acts as a rejection to the offer made by the

offeror. Thus, the offeree cannot accept what has been
rejected later on as there is no offer left to be accepted.
 Can a posted acceptance be revoked?
Acceptance may be revoked at any
time by the offeree before the
communication of the acceptance is
complete or at the moment when the
letter of acceptance reaches the offeror.
Hence, no revocation could be made
afterwards.
Alan offers by a letter sent by post
to sell his watch to Bell. The letter
was posted on 1st of the month. Bell
accepted the offer by a letter sent
by post on the 4th. The letter
reached Alan on 6th.
Alan may revoke his offer at any
time before Bell posts his letter of
acceptance – 4th but not
afterwards.
Bell may revoke his acceptance at
anytime before the letter of
acceptance reaches Alan – 6th but
not afterwards.