COMPARATIVE CONTRACT LAW
PART II: THE LAW OF CONTRACT
(CONTINUED)
COMPARATIVE LAW
LLM
KILAW
SPRING 2013
1
DR MYRA WILLIAMSON
WHAT HAPPENS AFTER THE
OFFER HAS BEEN MADE?
Until an offer is accepted, it creates no legal rights and it may be
terminated
Termination of an offer may happen in a number of ways:
A) The death of the offeror or the offeree before acceptance has
occurred
B) By non-acceptance with the time specified, or within a
reasonable time
C) When it is revoked before acceptance
D) When its rejected by the offeree
•
“Offeror” means the party that makes the offer
•
“Offeree” means the party that receives the offer
2
NOTE: A) and B) are also called “lapse”
A) LAPSE OF THE OFFER BY
DEATH
General rules:
If the offeree dies, it is clear: the offer can no longer be accepted
(and the estate of the offeree cannot accept it on his behalf)
If the offeror dies, it is a bit unclear:
3
• An offeree can’t accept after being informed of the death of the
offeror
• If the offeree doesn’t know…there are cases going both ways*
B) LAPSE OF THE OFFER BY
NON-ACCEPTANCE
The Rule: An offer may lapse if it is not accepted within the time
stipulated OR within a “reasonable” time.
Courts will decide what is a “reasonable” time
The time may depend on the type of contract
When an offer is made by one particular means, the means of
acceptance should, prima facie, be by the same means
Authority: Ramsgate Victoria Hotel v Montefiore (1866)
Facts:
4
• M offered, by letter on 8 June, to purchase shares in a company
• No answer was received until 23 November
• M then refused the shares
Held: M’s offer to buy the shares lapsed through unreasonable delay by
Ramsgate in accepting
C) REVOCATION OF AN OFFER
The offeror may decide to revoke the offer
The revocation is of no effect until it is brought to the notice of
the offeree
Authority: Byrne v Van Tienhoven (1880)
The facts:
1 October - V offered goods for sale to B: offer made by letter
11 October – B received the letter and accepted by telegraph
immediately
8 October – V wrote to B revoking the offer
5
20 October – B received the letter of revocation
BYRNE V VAN
TIENHOVEN (1880)
Held:
B had accepted the offer on 11 October
Revocation must be communicated to the offeror before he
has accepted in order to be effective
The fact that the letter of 8 October had been posted and
was on its way to B was immaterial (i.e. it didn’t matter).
6
This case is authority for the proposition that in order for a
revocation of an offer to be effective, it must be
communicated to the offeree before the offeree has accepted
C) REVOCATION CONTINUED…
•Notice of revocation could
come from a reliable source
instead of directly from the
offeror (this is sometimes
called indirect revocation)
7
•Authority:
Dickinson v Dodds (1876)
D) REJECTION OF AN OFFER
Rejection of an offer can take two
forms:
i. Where
the offeree communicates his
rejection to the offeror; and
8
ii. Where the offeree makes a counter
offer
REJECTION
CONTINUED…
Hyde v Wrench (1840)
The facts:
W offered to sell a farm to H for £1,000
H replied that he would pay £950.
W refused to accept the lower amount.
H then said he would pay the original amount of £1,000.
Then W changed his mind – refused to sell the farm to H
9
H went to court to force W to sell him the farm (he sought an
order for specific performance which means he wanted an a
court order to force W to sell the farm to him)
REJECTION CONT’D…
Held:
• There was no contract between Hyde and
Wrench
• Why not? Because when H offered the sum of
950, that was a counter-offer
• The counter-offer was a rejection of the original
offer
10
• This case is authority for the proposition
that a counter-offer rejects the original offer
SUMMARY
Now we have completed summarising the law around the
first element of a contract: the offer
We have looked at what an offer is, what it is not and how it
can be terminated (4 ways).
Now we will look at the second important element to prove
that a contract exists: acceptance
If either element (offer or acceptance) are missing, then there
is no contract
ACCEPTANCE:
GENERAL RULES
What is “acceptance”?
Definition: “Acceptance” is the expression, orally, in writing
or by conduct, of assent to the terms of the offer in the
manner prescribed by the offeror
The offer and the acceptance must correspond: there must
be no room for doubt as to the fact of acceptance
The “mirror image” rule: the acceptance must be absolute
and must correspond exactly with the terms of the offer
12
The acceptance must be without qualification
COMMUNICATING ACCEPTANCE
13
1. Mental acceptance
2. Particular method of acceptance
• “Mental acceptance” means accepting an
offer in one’s mind but not communicating
it to the offeror
Generally, this is not sufficient
Authority: Felthouse v Bindley (1862)
• “Particular method of acceptance” means
that if a particular method is required, then
acceptance must be by that method
FELTHOUSE V BINDLEY (1862)
The facts:
Felthouse (the offeror) made an offer to his
nephew: Felthouse offered by letter to buy his
nephew’s horse
F wrote: “If I hear no more about him, I shall
consider the horse mine at £30. 15s.”
The nephew did not reply
14
But the nephew asked Bindley (the auctioneer)
to keep the horse out of the sale of his farm
stock
FELTHOUSE V BINDLEY (1862)…
The facts continued…
Bindley accidentally sold the horse
Felthouse sued Bindley for conversion of his property
F believed that a contract had been made between him and his nephew for the
horse because he had heard nothing after making the offer
Held: there was no contract because the nephew had merely mentally accepted
the offer
The nephew should have communicated his acceptance to the offeror
(Felthouse)
Since the acceptance had not been communicated, there was no contract (F lost
the case)
This case is authority for the proposition that if an offer is made directly to a
person, that person cannot simply mentally accept the offer and assume there is
a contract
The “mental acceptance” must be communicated to the offeror to count
15
Mental acceptance by itself is insufficient
2. PARTICULAR METHODS OF
ACCEPTANCE
General Rule: if the offeror prescribes a particular method of
acceptance, then the method of acceptance should normally
be followed
• e.g.. If the offeror requests acceptance by telegram, then
acceptance by letter would be insufficient
But where acceptance consists of performance of an act, this
will be sufficient in itself (since the offeror does not
contemplate acceptance orally or by letter)
16
• Authority: Carlill v Carbolic Smoke Ball Co
OTHER RULES OF ACCEPTANCE
Acceptance must be unqualified: acceptance must be
absolute and conform exactly with the terms of the offer
Authority: Neale v Merret (1930):
• M offered to sell land to N for £280.
• N replied: enclosed £80, promised to pay the balance by
monthly installments of £50 each
• Held: N could not enforce acceptance; there was no contract
because the acceptance was qualified (by the payment terms)
17
Remember the rule: acceptance must mirror the offer
(“mirror image” rule)
RULES REGARDING MODES OF
ACCEPTANCE
A distinction is drawn between
instantaneous and non-instantaneous
methods of communication
Instantaneous: telephone, email, fax,
Non-instantaneous: telegram, post
18
Terminology: what does instantaneous
mean? It means ‘happening immediately’ or
‘on the spot’
RULES REGARDING
ACCEPTANCE
A different rule applies to each:
A. For non-instantaneous methods: the
rule is that it takes effect as soon as
the letter is posted
19
B. For instantaneous methods: the rule
is that an offer has no effect until it
reaches the offeror
A. NON-INSTANTANEOUS
METHODS (E.G.. BY POST)
Acceptance by post, telegram
The postal acceptance rule: was laid down by the court in the
case of Adams v Lindsell (1818)
The postal acceptance rule is one of the most famous principles
of contract law in the common law
The facts:
On 2 September, L wrote to A offering to sell A wool at a certain
price & requesting an answer by post
The letter to A went astray and didn’t reach A until 5 September
On the same day, A accepted and posted the letter
Letter of acceptance didn’t reach L until 9th Sept
20
On the 8th Sept, L sold the wool to someone else
ADAMS V LINDSELL (1818) CONT’D…
A sued L for breach of contract
L argued in court that there was no contract until the
acceptance had reached him
Held: the offer was accepted on the day it was posted
The offeror was bound from the time the letter was posted
This decision has been criticized – it’s a famous decision and
much discussed over the years
21
The rule was probably made for commercial convenience but
it has been subject to criticism
B. INSTANTANEOUS METHODS
(E.G.. BY TELEPHONE)
The case law shows that the acceptance rule is different
when the method of communicating the acceptance is via an
‘instantaneous’ communication (i.e. telephone)
The “postal rule” does NOT apply to instantaneous methods
of communication
Here, the contract is complete only when the acceptance is
received by the offeror at his/her end of the line
For example, if the line goes dead during the communication,
there is no contract
ENTORES LTD V MILES FAR EAST
CORPORATION (1955)
Landmark English case about the moment of acceptance via telex
The Facts:
Entores was a London-based trading company
It sent an offer by telex for the purchase of copper cathodes
Offer was made to a company based in Amsterdam called “Miles Far
East Corp”
The Dutch company sent an acceptance by telex.
Later, defendants breached the contract
Entores wanted to sue the Dutch company for damages
Entores (plaintiff) wanted to show that the contract was made in London
where the acceptance took place
23
Why? So legal action could take place in an English court
Definition: a character
printer connected to a
telegraph that operates
like a typewriter
24
PAUSE…WHAT IS A
TELEX?
ENTORES LTD V MILES FAR
EAST CORPORATION (1955)
Held:
Denning LJ held that the contract had been made in London since the
acceptance was not complete until actually received by the offeror
(plaintiff)
This decision was upheld by the House of Lords in Brinkbon Ltd v
Stahag v Stahl (1982)
Entores was an important judgment
Denning LJ held that the postal rule cannot apply to instantaneous
communications
25
Extract: When a contract is made by post it is clear law throughout the
common law countries that the acceptance is complete as soon as the
letter is put into the post box, and that is the place where the contract is
made. But there is no clear rule about contracts made by telephone or
by Telex. Communications by these means are virtually instantaneous
and stand on a different footing
SUMMARY OF
ACCEPTANCE RULES
1.
Mental acceptance, by itself is not enough
2.
Particular method of acceptance – if specified it must be
followed
3.
Acceptance must be unqualified
4.
Acceptance by post:
• The postal rule: Acceptance has effect from the moment it is
posted (even if it never reaches its destination)
5. Acceptance by instant means:
• Postal rules doesn’t apply: Acceptance has effect from
when it is received by the offeree
QUESTION: WHAT ABOUT
EMAILS?
What rule should apply to emails?
Are they more like telephone calls (instantaneous) or normal
post (non-instantaneous)?
See article “The Postal Rule in a Digital Age”
This article will be the reading for this week. Once you have
read the article, please read my post and comment on the
article. Please consider whether there is a rule in Kuwait
covering acceptance - does it matter how acceptance
occurs?