Acceptance

Assent
1) must be final, i.e. not tentative
2) must be unqualified, i.e. no conditions or variations
3) must be objectively manifested—subjective assent is neither necessary nor
sufficient
4) may be expressed through conduct

Subject to Contract
An acceptance that is made “subject to contract” is not unqualified (and hence not binding).
 Reliance is at the parties’ own risk.
 A.G. of Hong Kong v Humphrey’s Estate (Queen’s Gardens) Ltd. [1987] 1 AC
114
- no contract despite government’s reliance in demolishing existing staff
quarters and refitting developer’s flats
 But “subject to contract” may be waived if subsequent conduct demonstrates that the
parties intended to be bound.
 RTS Flexible Systems Limited v Molkerei Alois Muller Gmbh [2010] UKSC 14
- while manufacturer initially proceeded based on a letter of intent, the parties
eventually reached consensus on essential terms, performed and even varied
the terms of their agreement

1. Communication
 As general rule, acceptances must be communicated to the offeror.
 “Suppose…that I shout an offer to a man across a river…but I do not hear his reply
because it is drowned by an aircraft flying overhead. There is no contract at that
moment…”
 “Suppose…I make an offer to a man by telephone and, in the middle of his reply, the
line goes ‘dead’ so that I do not hear his words of acceptance. There is no contract at
that moment”
 “In all the instances…so far, the man who sends the message of acceptance known
that it has not been received or he has reason to know. So he must repeat it. But
suppose that he does not know…”.
 Entores v Miles Far East Corporation [1955] 2 QB 327 (Denning L.J.)

Exceptions to the rule of communication

Some exceptions to the general rule:
 Waiver
 Note that waiver is more likely to be implied into a unilateral rather than bilateral
contract. See Carlill v. Carbolic Smoke Ball Company.
 The Postal Rule
 An acceptance is effective when it is posted, not when it is received—if ever!
Household Fire Insurance v Grant [1879] 4 Ex D 216.
  Note however that the revocation of an offer is effective only when it is
received.
 Hence, a contract is validly entered into if an offeree’s acceptance is posted before
the offeror’s revocation is received. Byrne & Co v Leon Van Tien Hoven & Co [1880]
5 CPD 344

1.1 The Postal Rule

(1) Nature:
 only applies when the parties agreed on communicating by post
 default rule vs. mandatory rule
 default rule : applies unless the party say sth otherwise change the default
position: saying by notice in writing
 mandatory rule: applies even though the party say sth otherwise

(2) Holwell Securities Ltd v. Hughes [1974] 1 WLR 155, Court of Appeal

Facts
■ Plaintiffs were granted an option to purchase land. The agreement with the defendant
provided: “THE said option shall be exercisable by notice in writing to the [defendant]
at any time within six months from the date hereof . . . ”.
■ By letter dated April 14, 1972, plaintiffs sought to exercise this option. Despite being
posted in the ordinary way, the letter never reached the defendant.
■ Plaintiffs argue that the option was properly exercised and a contract for sale and
purchase constituted at the time the letter was posted

Held
■ The parties did contemplate the exercise of the option by mail, a prerequisite to invoking
the postal rule.
■ But the language of the contract nevertheless precludes application of the postal rule.
As the option was to be exercised “by notice in writing to the [defendant],” the mere
act of posting the letter did not suffice

Takeaways
 Prerequisite of the postal rule: The parties did contemplate the exercise of the option
by mail,
 A default rule that can be changed by contract

(3) Justification for the Postal Rule

➢ Post office as agent of the offeror
Bryne & Co. v. Van Tiehnhoven & Co. (Lindley J): “When . . . these authorities are looked at, it
will be seen that they are based upon the principle that the writer of the offer has expressly
or impliedly assented to treat an answer to him by a letter duly posted as a sufficient
acceptance and notification to himself, or in other words, he has made the post office his
agent to receive the acceptance and notification of it”.
➢ Prevents an infinite loop. See Adams v. Lindsell (1818) 1 B& Ald 681
➢ Favors offeree who may rely on the contract once acceptance has been posted
- The offeree can prepare once he has posted the offer - which is also good for the
offer
➢ Assumption of risk by the offeror who could have specified alternative modes of
communication

1.2 Instantaneous Communications

General Rule
The general rule, i.e. an acceptance concludes a contract when it is communicated to the
offeror, applies to instantaneous communications.
- Entores v Miles Far East Corp [1955] 2 QB 327 (contract formed in London
where acceptance by telex was received and not in Amsterdam where telex was
sent). See also Brinkibon Ltd v Stahag Stahl [1983] 2 AC 34; Susanto Wing Sun Co
Ltd v. Yung Chi Hardware Machinery Co Ltd [1989] 2 HKC 504.
- Reasoning: The postal rule is an exception made to faciltiate commercial
transactions where there is a substantial interval of time between when an
acceptance is sent and when it is received

Debates on Email
 观点 1: David Baxter Edward Thomas and Peter Sandford Gander v BPE Solicitors
(a firm) [2010] EWHC 306 (Ch):
- “The ‘postal rule’ is an anomalous exception to the general rule, which is limited to
its particular circumstances. It does not apply to acceptances made by some
“instantaneous” mode of communication…in my view the same principle applies to
communication by email, at least where the parties are conducting the matter by
email, as the solicitors were in this case”.
 观点 2：Chwee Kin Keong v. Digilandmall.Com Pte Ltd (Rajah JC):
- “… unlike a fax or a telephone call, [email] is not instantaneous”.
 Further consideration:
 Assuming the postal rule does not apply, there is still the question of whether the
contract is concluded when the acceptance is received or when it is read

Note: What constitutes receipt of an email?

 In Hong Kong, the Electronic Transactions Ordinance, s.19(2) provides:
“Unless otherwise agreed between the originator and the addressee of an electronic record, the
time of receipt of an electronic record is determined as follows –
(a) if the addressee has designated an information system for the purpose of receiving
electronic records, receipt occurs
(i) at the time when the electronic record is accepted by the designated information
system; or
(ii) if the electronic record is sent to an information system of the addressee that is
 not the designated information system, at the time when the electronic record comes
to the knowledge of the addressee;
(b) if the addressee has not designated an information system, receipt occurs when the
electronic record comes to the knowledge of the addressee

1.3 Prescribed Method of Acceptance

The offeror may prescribe a method of acceptance. An offer may, however, be accepted
by other methods if
 the alternative method is “no less advantageous” to the offeror
 – here, it is necessary to discern the offeror’s purpose in prescribing the method of
acceptance
 and the offeror has not made the form of acceptance mandatory, i.e.exclusive of all
other methods
See Manchester Diocesan Council of Education v Commercial and General Investments Ltd
[1970] 1 WLR 241

1.4 Silence as Acceptance

Can silence be construed as acceptance?
(1) Generally speaking, no.
The offeror may not impose a duty to speak on the offeree.
(2) Not even if silence is the prescribed methods of acceptance and the offeree
subjectively intends to accept the offer.
Felthouse v Bindley [1862] EWHC CP J35.
- Facts：
 Paul Felthouse offered to buy a horse from his nephew, writing an offer which stated
“if I hear no more about him, I consider this horse mine for £30 15s”
 The nephew (also called Felthouse) never responded to his offer but did actualy
intend to sell the horse to his uncle. So the nephew told the auctioneer, Bindley, not
to sell the horse.
 Bindley forgot about this conversation and sold the horse at auction for £33 to
another person.
 Paul Felthouse (the uncle) sued Bindley for conversion, stating it was his horse.
- Held：
 Willes J held that although the nephew, in his own mind, had intended to accept the
offer, he had not actually done so and therefore the horse did not belong to the
uncle.
 The uncle had no right to impose a condition that the offer was accepted unless
communicated otherwise.
 Therefore, in the absence of any positive action, there was no sale and the charge of
conversion could not succeed.
- Takeaways
 Objectively, silence is consistent with both acceptance and rejection.
 Silence can not constitute an acceptance, not can be prescribed as an method of
 acceptance

(3) But there are circumstances where silence might be taken as acceptance if subsequent
course of dealing establishes there was a consensus.
i.e. silence+ subsequent course of dealing = acceptance
– Brogden v. Metropolitan Railway Company (1877) 2 App. Cas. 666 (while defendants
never communicated acceptance of contract for the purchase of coal, they behaved as
though a contract had been concluded, ordering the maximum quantity under it and
complaining about inexactness in the supply)
– Rust v. Abbey Life Assurance Co. Ltd [1979] 2 Lloyd’s Rep. 334 (plaintiff who
received a property bond policy on terms different from those she proposed had
previously handed over a cheque in defendant’s favor and neither did nor said anything
for seven months)

1.5 Acceptance in Ignorance of an Offer

Can an offer be accepted by someone ignorant of its existence ?
– Generally speaking, no. See Williams v. Carwardine (1833) 5 C&P 566
– McKendrick argues that an exception should be made in the case of unilateral contracts,
where the performance being asked for has been tendered.
 Reasoning: The rationale is that there is no detriment to the offeror or to the
offeree.
 But if the person accepting the offer must also be motivated by it, then
ignorance necessarily precludes acceptance. See R v. Clarke (1927) 40 CLR 227’
(person on trial for murder gave information about the true perpetrator
‘exclusively in order to clear himself)

2. Termination of an Offer
(1) Rejection
– An offer that has been rejected is terminated and cannot be later revived by the offeree’s
purported acceptance
(2) Lapse of time
– An offer that specifies a time limit for acceptance cannot be accepted after the deadline
has passed
– An offer that does not specify a time limit for acceptance expires after a reasonable time
(3) Revocation
– An offer may be withdrawn any time prior to acceptance , provided such withdrawal
is communicated to the offeree.
– Exception: Except that an offer of a unilateral contract may not be withdrawn once the
offeree has commenced performance.
 Errington v. Errington & Woods [1893] 1 QB 256 (father’s estate may not revoke
offer once son and daughter-in-law had started making mortgage payments
understanding the property would be transferred to them once the loan balance
was paid off)
 The withdrawal of the offer does not have to be communicated by the offeror. An
 offeree may not form a contract by accepting an offer that he or she knows through
a third party is no longer open. Dickinson v. Dodds (1876) 2 Ch D 463
(4) Death or Supervening Incapacity
(5) Counter-offer
 A counter-offer by an offeree is tantamount to a rejection of the original offer. Hyde v.
Wrench (1840) 3 Beav 334
 It is important, however, to distinguish between an inquiry and a counter-offer.
 Offer: “Mr. Fossick’s clerk shewed me a telegram from him yesterday mentioning
39s. for No. 3 as present price, 40s. for forward delivery. I instructed the clerk to
wire you that I would now sell for 40s., nett cash, open till Monday”.
 Counter-Offer: “I offer forty for delivery over two months”.
 Inquiry: “Please wire whether would accept forty for delivery over two months, or
if not, longest limit you would give”. Stevenson, Jacques & Co v. Mclean (1880) 5
QBD 346

SUFFICIENTLY CERTAIN AND CAPABLE OF BEING ENFORCED

1. What is uncertainty of a contract

Vague, Incomplete or Uncertain Terms

Where parties have omitted or glossed over key terms of their agreement, courts may find
there to be no contract. Agreements that are vague, incomplete, or uncertain but have
induced performance are especially difficult:
on the one hand, courts are not keen to make a contract for the parties and impose
obligations the parties did not contemplate;
on the other hand, courts are also reluctant to deny the legal effect of agreements the parties
thought were binding. The resolution of such cases is fact-specific

1.1 uncertainty as to the price

May and Butcher Ltd v. The King [1934] 2KB 17, House of Lords
Facts
 Suppliants alleged a contract with Controller of the Disposal Boards for the purchase of
used tentage.
 In a letter dated 29 June 1921, the Controller wrote, stating that in consideration of a
deposit of “£1,000 as security for the carrying out of this extended contract,” the
Commission confirmed the sale “of the whole of the old tentage which may become
available…up to and including December 31, 1921”.
 Among the terms:
 “The price or prices to be paid, and the date or dates on which payment is to be
made by the purchasers to the Commission for such old tentage shall be agreed
upon from time to time between the Commission and the purchasers as the
quantities of the said old tentage become available for disposal, and are offered to
the purchasers by the Commission”
 “It is understood that all disputes . . . will be submitted to arbitration in accordance
 with the provisions of the Arbitration Act, 1889”
 In a second letter dated 7 January 1922, the Disposals Controller confirmed the sale of
tentage that might become available up to 31 March 1923: “the prices to be agreed upon
between the Commission and the purchasers in accordance with the terms of clause 3 of
the said earlier contract shall include delivery free on rail . . . nearest to the depots at
which the said tentage may be lying . . .”
 In August 1922, after suppliants’ proposals were rejected by the Controller, the
Disposals Board wrote stating that they considered themselves free of the agreement.
 Suppliants filed a petition of right claiming an injunction against the sale of the
remaining tentage and compensation for the damage done to them
Held
- No contract existed because price was an essential term left uncertain.
- If there were no price term, the Sales of Goods Act, 1893, would impute a
reasonable price. But here, there was a provision that the parties were to agree.
- The parties could have provided for an arbitrator to fix the price, but they did not.
The general arbitration clause applied to disputes arising from the agreement. But
here, there was a failure to agree.
Ratio
- If there is no terms regarding the price, the statute may step in/the court may fix a
price for the parties
- If there is an “agreement to agree”, then the court can do nothing or it is essentially
make contract for the parties
1.2 Uncertainty as to a unique term
Scammell and Nephew Ltd v. Ouston[1941] AC 251, House of Lords
- Facts
 At an interview, defendants agreed to sell plaintiffs a Commer van for £268 and to
take plaintiffs’ Bedford van at a trade-in value(以旧换新) of £100.
 The next day, at defendants’ request, plaintiffs formalized this agreement in a letter
which stated that “this order is given on the understanding that the balance of the
purchase price can be had on hire-purchase terms(分期付款，租购合同) over a
period of 2 years”.
 The parties later had a disagreement over the condition of the Bedford van which
defendants refused to take in part-exchange.
 Plaintiffs claimed damages for breach of contract.
- Held
 No contract existed because of the vagueness of the hire-purchase term.
 A hire-purchase contract is a contract of hire that gives the hirer an option to
purchase if specified conditions are met. It is not a contract of sale.
 In addition, there are many varieties of hire purchase contracts, differing as to
termination, warranty of fitness, duties of repair, interest, etc, and there was no
evidence to suggest that there were “well-known ‘usual terms’ in such a contract”.
- Ratio
 A hire-purchase contract is not a contract of sale
 If there is a type of transactions with many variations on a contract, then is should
 be considered that no contract was concluded here
1.3 Open contract vs. Uncertainty as to the date of completion
Open contract
- As explained by Bokhary PJ, an open contract is “one by which the vendor and
purchaser simply agree upon the sale of an identified property at a stated price .
The general law of property, so the expression goes, would then have to step in to supply
all the other terms: including even the date for completion”.
- A contract with only the subject matter and the price can be considered as a concluded
contract, which the general law of property step in to supply the other terms

However, the concept of open contract doesn’t apply to Hong Kong Land

Kwan Siu Man v. Yaacov Ozer [1999] 1 HKC 150

- Facts
 The parties were tenant and landlord engaged in a dispute over possession. In 15
or 16 November 1991, they met by chance in the lift lobby of KY Mansion.
 Plaintiff agreed to purchase defendant’s flat for HK$ 4.25 million. No other terms
relating to the sale of the property were discussed.
 They were “very clear as to the belief that it was for the lawyers to deal with all
other formalities and…expected them to do so”.
 After some correspondence about, among other things, the completion date of the
sale, defendant called off negotiations in mid-February 1992. Plaintiff sought to
enforce the oral agreement of 15 or 16 November
- Held
 No “open contract” arose from the oral agreement between the parties in the
lift lobby.
 “[A]s is common knowledge in Hong Kong, the property market is highly volatile.
Whatever might have been the position in England in the last century—when the
concept of an “open contract” was first developed in a climate of a stable pound
sterling and no inflation—in the Hong Kong of today, the date of completion is an
essential term of any contract for the sale and purchase of land…
- Ratio
 the date of completion is an essential term of any contract for the sale and purchase
of land…

1.4 uncertainty vs. implication

Hillas & Co Ltd v. Arcos Ltd (1932) 147 LT 503, House of Lords
- Facts
 n an agreement dated 21 May 1930, appellants agreed to buy from respondents
“22,000 standards of softwood goods of fair specification over the season 1930”.
 One of the conditions, clause 9, provided that “Buyers shall also have the option of
entering into a contract with sellers for the purchase of 100,000 standards for
delivery during 1931. Such contract to stipulate that, whatever the conditions are,
buyers shall obtain the goods on conditions and at prices which show to them a
 reduction of 5% on the f.o.b. value of the official price list at any time ruling during
1931. Such option to be declared before the 1st Jan. 1931”.
 Appellants purported to exercise the option on 22 December 1930 but respondents
had already agreed to sell their entire output for the 1931 season to a third party.
 Appellants claimed breach of contract and damages.
- Held
 There is a valid and binding contract.
 “[T]he parties were both intimately acquainted with the course of business in the
Russian softwood timber trade” and had successfully executed the sale of “22,000
standards of softwood goods of fair specification over the season 1930”.
 As to the goods to be sold under the option
 – Clause 9 does not describe them but the words “softwood goods of fair
specification” are necessarily implied.
 – The phrase “of fair specification” is not uncertain “[r]eading the document of
21st May as a whole” and given evidence about the course of trade
 Is clause 9 a mere agreement to agree?
 The phrases “option of entering into a contract” and “such contract to
stipulate” are inartful ways of saying there is no contract until the option is
exercised.
 The word “conditions” in the phrase “to stipulate that, whatever the conditions
are, buyers shall obtain the goods on conditions and at prices which show to
them a reduction of 5%” does not refer to yet-to-be-determined contractual
conditions but to prevailing market conditions
2. Resolving Uncertainty
2.1 Making Use of the Criteria or Machinery Agreed by the Parties
- Resolution by One or Other of the Parties. – Paragon Finance plc v. Nash
[2001] EWCA Civ 1466, [2002] 1 WLR 685 (contract gave lenders the power
to set interest rates
- Resolution by a Third Party
 Foley v. Classique Coaches [1934] 2 KB 1
 Facts:
 agreement for coach company to purchase all fuel from filling
station carried out for three years and arbitration clause covered
price of petrol
 Held: the arbitration clause provides the mechanism for the
ascetaintion of the price
 Takeaway
 Does the arbitration clause apply to the price term of the
contract?
 Is there a arbitration clause before a concluded contract
 F&G Sykes (Wessex) Ltd v. Fine Fare Ltd [1967] 1 Lloyd’s Rep 53
 agreement acted on and arbitration clause covered number of chicks
to be provided to nominated growers after the first year
If the Agreed Machinery Breaks Down

- The traditional rule was that the court would not compel the parties to
operate the machinery. Neither would it substitute the parties’ machinery
with its own. The contract would become unenforceable.
 Justification
 Or the court may make contract for the party – the freedom of
contract
 How do you compel the parties to operate the mechanism
 What if one party doesn’t agree
 Use contempt power?
Contempt power means the power of public institutions such as Congress or a court
to punish persons who show contempt for the process, orders, or proceedings of
that institution.
 Drawbacks
 The contract fails and the bargaining fails
- The modern rule looks at whether the machinery agreed by the parties
is
Essential
 What is essential machinery to a contract
 If the machinery is to fix the price, it is essential
 If the machinery is one of several ways to achieve what the part
wants(the fair and reasonable price), an alternative method can be
used
Cases under modern rule
 Sudbrook Trading Estate Ltd v. Eggleton [1983] 1 AC 444, House of
Lords
- Facts:
 appointment of parties’ valuers not essential because agreement was for
sale of the freehold reversions at fair value
- Held
 What the party truly intend is a fair price
 Fair value = market value
 The court can help the party to find a fair price
- Ratio
 appointment of parties’ valuers not essential
 In such circumstances, the court may fix a fire price for the party
according to the market price
 Gillatt v. Sky Television Ltd [2000] 1 All ER (Comm) 461
- Facts: independent chartered accountant to fix the price of the shares
- Held
 appointment of independent chartered accountant is essential
 not listed company – there are many ways to value a unlisted
company – in such circumstances, the method itself can affect the price
 materially
 because there were several approaches to ascertaining the “open market
value” of shares in a private company and the parties intended for the
valuation to be determined by the independent chartered accountant,
not the court
- key takeaways
 appointment of independent chartered accountant is essential
 when the contract fails, the court usually retreat to the intention of the
party and help to achieve their original intention
 learn the rule – learn how to move

2.2 Intervention of Statute

In Hong Kong Section 10 of the Sale of Goods Ordinance provides:
1) The price in a contract of sale may be fixed by the contract, or may be left to
be fixed in manner thereby agreed, or may be determined by the course of
dealing between the parties.
2) Where the price is not determined in accordance with the foregoing
provisions, the buyer must pay a reasonable price. What is a reasonable price is
a question of fact dependent on the circumstances of each particular case

Again, the legal principles set out in the May and Butcher Ltd case is also relevant to
the intervention of the statute
 if the party is totally silent about the price, the statute intervenes
 if the party say sth about the price , and they say the price is

2.3 Severance
The court may sever a vague or uncertain term from an agreement to render it
enforceable, especially where the term is unimportant.
- Nicolene Ltd v. Simmonds [1953] 1 QB 543 (clause that “the usual
conditions of acceptance apply” despite lack of such conditions between the
parties was meaningless and could be ignored)

2.3 Implication of Terms

The court may also imply reasonable terms into an otherwise incomplete
agreement especially where the parties have acted on the agreement, evincing
consensus on all essential terms.
- Wells v. Devani [2019] UKSC 4, [2019] 2 WLR 617
 Facts:
 Devani: developer, sth flats unsold
 Wells: help Devani to sell the fats
 When the commission will be due is not stipulated in the contract
 Held
 The the commission will be due when the contract completes
  term that commission(佣金，手续费) was payable on sale implied
into oral agreement between estate agent and developer

2.4 Another solution: Mears v. Nationwide Mutual Insurance Company91

F.3d 1118 (8th Cir. 1996)
- Facts
 Plaintiff won a contest in which the stated prize was two Mercedes-Benz
automobiles.
 Defendant argued, inter alia, that the contract was too indefinite to
enforce because the models and conditions of the automobiles were not
specified.
- Held
 “[W]hen a minor ambiguity exists in a contract, Arkansas law allows
the complaining party to insist on the reasonable interpretation that
is least favorable to him”.
 Reasoning:
 if the ambiguity is minor, what if the other party intend to do-
give them the least the term implies
 The defendant can not complain: it is also the commitment
you at least have meant
 Plaintiff was owed two new Mercedes-Benz automobiles, of the least
expensive make
- Ratio
 (The least interpretation approach?)
 “[W]hen a minor ambiguity exists in a contract, Arkansas law
allows the complaining party to insist on the reasonable
interpretation that is least favorable to him”.
 Note: the prerequisite is the ambiguity is a minor one