Acceptance and termination

General principle
1) The mirror image rule
a) Acceptance must be a final and unqualified expression of agreement to the terms of
an offer
b) Acceptance, generally must correspond exactly and in every detail with the offer
*Simple and straightforward

2) Objective test of agreement applies to an acceptance no less than to an offer

3) Acceptance must be properly communicated. if no, there is no binding contract
4) Acceptance must take place before the offer is terminated

Absolute and unqualified

1) An acceptance may fail to create a binding contract if it attempts to vary the terms of
the offer
2) Such variation may amount to an outright rejection of the offer or a rejection by way of
a counteroffer
3) Precise correspondence between offer and acceptance is not always necessary

Tinn V Hoffman and CO (1873) *no acceptance in the case of cross offers
Facts:
i. P wrote a letter to D offering to buy 800 tons of iron from D at a certain price.
ii. By coincidence, on the same day D wrote a letter to P offering to sell 800 tons of iron
to P at the same price.
iii. The letters crossed each other in the post.
iv. Neither party replied to the other’s letter.
v. P contended that D’s letter amounted to an acceptance of his (P’s) offer to buy.

Issue: Was there a contract between the parties?

Held:
Such cross offers would not make a binding contract because the offer in one of such letters
could not amount to an acceptance of the offer contained in the other

Hyde V Wrench (1840) * counteroffers operate as non-acceptance or rejection

Facts:
D offered to sell property at £1,000. P counter-offered to buy it for £950, which D refused.
Later P purported to accept D’s offer to sell at £1,000.

Held:
P had rejected D’s offer with his counter-offer; P therefore could not revive the original offer
made by D; no binding contract.
Jones V Daniel [1894] * including ancillary terms of importance in an acceptance amounts
to a counter offer
Facts:
i. D offered to buy a certain piece of land from P at a particular price.
ii. In response, P wrote an ‘acceptance’ letter to D agreeing to purchase at that price
but together with that letter sent a ‘document of sale’ for D’s signature which
contained some additional terms relating to payment of a deposit and time for
completion.
iii. D returned the document unsigned.
Held:
a) The ancillary terms included in the ‘document of sale’ were of importance and were
not binding until such time as D had accepted them.
b) They were actually counter-offers even though they concerned ancillary matters.

Brodgen V Metropolitan Railway Co (1877)

* A technical counter-offer on a matter of no importance to the parties does not amount to
a rejection of the offer.
*A counter-offer operates as a new offer which may be accepted.
*There can be acceptance by conduct.

Facts:
i. B had a long-standing informal arrangement to supply coal to MRC.
ii. They decided to formalise their arrangement; accordingly, MRC sent a draft contract
to B, which contained a blank space for B to insert the name of an arbitrator.
iii. B inserted name of arbitrator in the blank space that MRC had provided, signed and
returned the document to MRC, who never got around to signing the document.
iv. B continued to supply coal according to the terms of the unsigned contract, which
MRC continued to pay for coal supplied, until a dispute arose, whereupon B stopped
supply.
v. MRC sued B for breach of contract.
vi. B argued that there was no contract between the parties because by inserting the
name of the arbitrator he had in fact rejected MRC’s offer by way of a counter-offer
which was never accepted by MRC.
Held:
a) Technically, insertion of arbitrator’s name amounted to a counter-offer by B.
b) However, this did not have any immediate effect on the parties since B had
continued supplying coal, and MRC had continued using it and paying for it, even
though MRC had not signed the contract. (CONDUCT)
c) Further, MRC’s conduct clearly showed that they had, in any event, accepted the
counter-offer so that there was a binding contract between the parties.
“BATTLE OF THE FORMS”

British road services Ltd V Arthur V Crutchley Ltd [1968]

Facts:
• BRS delivered goods for storage to AVC. BRS’ driver handed over a delivery note to
AVC stating the goods were to be stored based on BRS’ terms of carriage.
• AVC stamped the delivery note stating the goods would be stored on their terms.
• BRS’ terms of storage and AVC’s terms of storage were different.
Issue: on whose terms were the goods stored?
Held:
AVC had made a counter-offer which BRS accepted by handing over the goods to them for
storage i.e. the contract was concluded on AVC’s terms.

[This decision supports the view that in the ‘battle of the forms cases’, the contract is based
on the terms of the party ‘firing the last shot’.]
Butler Machine Tool Co v Ex-cell-o Corp [1979]
1. Sellers (S) offered machinery to buyers (B) subject to S’ terms which included a price
variation clause, delivery to be made in 10 months.
2. B accepted the offer but issued its own ‘Order form’ which included a tear-off reply
slip incorporating B’s terms which included a fixed price clause.
3. Upon receiving the ‘Order form’ S signed and returned B’s tear-off slip together with
a letter stating that they (S) were selling “in accordance with” their own offer.
4. The machinery was delivered to B.
5. Subsequently, S sued B for an increased sale price based on the price variation clause
in their offer.

Issue: on whose terms was the contract made?

Held:
i. All 3 Judges of the CA held that the contract was concluded on B’s standard
terms i.e. the fixed price clause applied. The CA did not adopt the ‘last shot fired’
approach of British Road Services Ltd v Arthur V Crutchley Ltd.
ii. Instead, all 3 Judges chose to look at all the communications that the parties had
exchanged.
iii. However, two different approaches were used in reaching the decision that the
contract had been concluded on B’s standard terms.
iv. Two Lord Justices adopted the traditional offer, counter-offer and acceptance
model, applying the “mirror-image” rule, whilst the Lord Denning, MR adopted a
different approach.
Majority:
• Applying the rules of offer and acceptance, B’s order form was a counter-offer which
destroyed the offer made in S’ quotation.
• S, by completing and returning the acknowledgment of B’s order, which was stated
to be on B’s terms and conditions, had accepted the counter-offer on B’s terms.
• S could not therefore claim to increase the price under the price variation clause
contained in their own offer.
• S' letter, returning B’s tear-off slip, which they had signed, with its reference to their
original quotation did not operate to incorporate S' terms back into the contract
Lord Denning ( minority) :
• If the conflicting terms of both parties were irreconcilable, then the documents
comprised in a ‘battle of forms’ case were to be considered as a whole to discover
the terms of agreement reached by reasonable implication.
• There are 2 stages to this process.
• Stage 1 – is there a concluded contract? To decide that “look at all the documents
passing between the parties and glean from them, or from the conduct of the parties
whether they have reached agreement on all material terms even though there may
be differences between the forms and conditions printed on the back of them”
• Stage 2 – what are the terms of the concluded contract? If the terms used by the
parties by were mutually contradictory, the court may “scrap” those terms and
replace them by a “reasonable implication”.
• Note: Lord Denning MR had advocated a similar departure from the traditional offer
and acceptance model in Gibson v Manchester City Council but when Gibson went
up to House of Lords, this approach was rejected.
Acceptance must be communicated
1) The acceptance must come to the offeror’s attention
2) Maybe express or implied
3) Postal rule of acceptance of offer
4) Performance of terms of offer

Prescribed mode of acceptance

1) The offeror may prescribe the mode of acceptance
2) Whether the prescribed mode is mandatory or permissive
3) Courts will interpret the prescribed mode of acceptance strictly to deice whether it
was mandatory or permissive

Compagnie De Commerce V Parkinson Stove Co [1953]

Facts
• PS’ offer to CC stipulated that acceptance must be made in the Form supplied with
the offer and made it clear that they would NOT regard any other method of
acceptance as valid.
• CC accepted the offer in writing but did not use the prescribed Form.
Held
a) Although CC’s acceptance was unqualified and absolute, it was not valid because the
offer had stipulated a particular mode of acceptance as the only way the offer could
be accepted.
b) CC’s claim failed as it had not followed the mandatory prescribed mode of
acceptance.

Manchester Diocesan Council For education V Commercial and general investment Ltd.
[1970]
Facts:
1. Clause 4 of tender stated that mode of acceptance of any tender for sale of land by
MDC was to be by letter to the address given in the tender by the tenderer.
2. But the tender did not stipulate this as the only mode of acceptance.
3. MDC’s letter of acceptance of CGI’s offer was in fact sent to CGI's surveyor at an
address different from that stated in Clause 4.
Issue : Was there a binding contract between MDC and CGI?
Held:
a) If an offeror intends that he shall be bound only if his offer is accepted in some
particular manner, he must make this clear.
b) If he does not do so, acceptance may be communicated by any other mode which
was no less disadvantageous to the offeror.
c) Here, MDC’s failure to accept in accordance with the prescribed mode did not
vitiate the acceptance since
i) clause 4 did not prescribe those terms as the only mode of acceptance i.e. the
prescribed mode of acceptance was not mandatory; and
ii) MDC’s method of acceptance was no less disadvantageous to CGI than the
prescribed mode.
IS acceptance by silence possible ?
Acceptance requires some positive conduct indicating assent . Silence is equivocal .

Exceptions : if the offeree makes it clear to offeror that if the offeror does not hear from him
he offeror can take it that the offer has been accepted

Felthouse V Bindley (1862)

Facts:
1. N delivered his horse to D, an auctioneer, for sale at an auction.
2. Meanwhile, P made a written offer to buy N’s horse stating, “If I hear no more about
him, I consider the horse mine”.
3. N did not reply to P but thought that he had thereby sold the horse to P.
4. Consequently, N instructed D to withdraw the horse from the auction, but D,
mistakenly, sold the horse at the auction to someone else.
5. P contended that N’s silence amounted to acceptance of his offer, and therefore, D
had wrongly the horse which belonged to him (i.e. P’s), and sued D for damages for
committing the tort of conversion.

Issue:
Was there a binding contract between P and N that passed ownership of the horse from N
to P before it was sold at auction? If yes, D would be liable for conversion.

Held:
a) There was no binding contract between P and N.
b) N’s silence did not amount to an acceptance of P’s offer.
c) Although N in his own mind intended to sell the horse to P at the price offered, he
had not communicated this intention to P.
d) Nothing, therefore, had been done to vest the ownership of the horse in P before it
was sold by D.
e) Therefore, the horse still belonged to N, and D had not converted the horse to his
own use.

Roberts v Hayward (1828)

*silence of offeree may amount to acceptance by conduct
Fact:
A tenant’s period of tenancy was expiring.
The landlord offered the tenant a new period of tenancy at a higher rent.
The tenant did not make any reply to the landlord, but simply stayed on at the premises
after his old tenancy had expired.
Held:
A valid new tenancy had been created and the tenant was liable to pay the increased rent.
The tenant’s “silence on the subject is tantamount to his saying, I will continue in on the
terms of your proposal.”
Non-instantaneous mode of communicating acceptance

Adams v Lindsell (1818)

Facts:
1. Tuesday – D posted offer letter to P stipulating that acceptance was to be by post.
2. Friday – P received the offer letter and posted acceptance letter on Friday itself.
3. Next Monday – D sold off the goods to 3rd party since he had not yet received any
reply from P.
4. Tuesday – D received acceptance letter.
Issue:
when was the contract concluded? When P posted the acceptance letter or when D received
the acceptance letter?
Held:
a) Contract was concluded on Friday as soon as P posted the letter of acceptance.
b) If D were not bound by until he received P’s letter of acceptance, then P ought not to
be bound until after receiving D’s the notification that D had received P’s acceptance
and assented to it. And so, it might go on ad infinitum.

Household Fire and Carriage Insurance Co Ltd v Grant (1879)

*Postal rule applies even if the letter of acceptance is never received
Fact:
 On 30 Sept G applied by letter to subscribe for 100 shares in P.
 On 20 October P posted a letter confirming that G had been allotted 100 shares
 P’s letter was correctly addressed but it never reached G due to fault of postal
authorities.
 sued G for the price of the shares allotted to him.
Held:
G’s offer to subscribe for the share had been accepted when P posted the letter. G therefore
had to pay for the shares

Korbetis v Transgrain Shipping BV [2005]

*If the letter of acceptance was wrongly addressed by the offeree different considerations
applied – the postal rule will not apply.
• In such event, it was unfair to the intended recipient [the offeror] that he should be
bound by something which he was unlikely to receive because of the fault of the
sender [the offeree].
• In such circumstances, the postal rule had the potential of giving a careless would-be
acceptor an unfair advantage.
• The postal rule should not apply to misdirected letters of acceptance.
• A misdirected acceptance should take effect, if at all, at the time which was least
favorable to the party responsible for the misdirection
Holwell Securities Ltd v Hughes [1974]
• P was granted an option to purchase D’s land. The option was “exercisable by notice
in writing to [D] at any time within six months…”.
• P’s posted a letter (correctly addressed) to D giving notice of the exercise of the
option within the 6 months’ period, but it was never in fact delivered to D or to his
address.
Held:
a) Postal rule did not apply when the offer stipulates that acceptance must reach the
offeror.
b) Here option was to be exercised by 'notice in writing to’ D i.e. the written document
had to be communicated or notified to D
c) This was inconsistent with the rule that the mere posting of the document was
sufficient.

Therefore, the option had not been validly exercised

Instantaneous mode of communicating – The receipt rule

1.acceptance must come to the attention of the offeror
2.instantenous communication the contract is concluded where and when acceptance of
the offer was received by the offeror
3.the postal rule of acceptance does not apply to such modes of communication

Entores Ltd v Miles Far East Corporation [1955]

Per Denning LJ (obiter)
• “…consider a case where two people make a contract by word of mouth in the
presence of one another. Suppose, for instance, that I shout an offer to a man across
a river or a courtyard, but I do not hear his reply because it is drowned by an aircraft
flying overhead. There is no contract at that moment. If he wishes to make a
contract, he must wait till the aircraft is gone and then shout back his acceptance so
that I can hear what he says.”

Entores Ltd v Miles Far East Corporation [1955]

Facts:
1. An English company in London received an offer of sale of certain goods by Telex
from a Dutch company in Amsterdam.
2. The English company counter-offered by Telex .
3. The Dutch company accepted the counteroffer by Telex.
Issue: had the contract been concluded in London or in Amsterdam?
Held:
a) A contract made by instantaneous communication is complete only when the
acceptance is received by offeror.
b) Since communications by Telex were virtually instantaneous the contract was made
in London, where the telex accepting the counter-offer was received.