The fact of agreement – the acceptance

If an offer has been made and it has not been terminated, an agreement will come into being if the offer is accepted.

Acceptances are usually expressed in some way, but on occasion can be implied.

The acceptance brings about consensus ad idem or a meeting of the minds.

· Requirements that must be met include:

Acceptance must be unequivocal: meaning it must be clear and understood with nothing left to be negotiated - interpreting language used.

The requirement of knowledge of the offer: Offer must be communicate to the offeree à for the offer to be accepted the offeree must have accepted in reliance upon that offer

R v Clarke (1927) - Higgins: “There cannot be assent without knowledge of the offer; and ignorance of the offer is the same thing whether it is due to never hearing of it or to forgetting it after hearing…”

Acceptance must correspond with the offer: Any response to an offer that adds additional terms or alters existing terms set out in the offer is not an acceptance; it is a counter-offer which has the effect of rejecting, rather than accepting the offer.

However, it may not be a counter-offer, the response may be an acceptance with additional terms included, not by way of counter-offer but rather accepting the original offer and adding additional terms to be accepted by the offeror without effecting the original terms:

Dunlop v Higgins (1848)

- Where in relation to an offer to sell goods, accepted the offer and requested that it be delivered on a particular date.

- Was held to be a valid acceptance because it was clear that the acceptance was not conditional upon the offeror agreeing to deliver the goods on that date.

Acceptance can be express or implied: most are by means of some express statement - an offer cannot stipulate that no response can be treated as an acceptance. Felthouse v Bindley (1862)à cannot be an acceptance by silence.

However, in Empirnall Holdings v Machon Paul Partners (where a contract wasn’t signed but payments were made which the court held amounted to an acceptance) The case also held that Felthouse v Bindley was subject to 2 qualifications:

i. If an estoppel can be raised against the offeree;

ii. The conduct of the offeree amounts to an implication that he/she has accepted the offer - McHugh JA says the ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signaling to the offerer that his offer has been accepted.

Acceptance generally must be communicated: Acceptance is only effective once it has been communicated to the offeror - so the offeror has been notified that the offeree accepts the offer - Carlill v Carbolic Smoke Ball Co - The acceptance requires the performance of the conditions of the offer: an act actually had to be performed.

However, requirement of communication is not universal - it can be dispensed by the offeror & communication is not required where the postal acceptance rule applies.

Offeror Dispenses with the need for communication: Communication is for the benefit of the offeror, he/she can choose to permit acceptance to arise without communication having taken place à this can be express or implied: Carlill

Cases involving reward and leading to unilateral contracts upon acceptance are ones in which almost always the court will find the need to communicate has, by implication, been dispensed with by the offeror à acceptance is performance of the terms of the contract – there being no need to also communicate acceptance to create a contract.

The Postal Acceptance Rule

Henthorn v Fraser [1892] - “…Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.”

Acceptance takes place when the letter is posted and not at the later time when the letter is received - communication of acceptance is not required in cases where the rule applies.

The scope of the rule

Rule also applies to telegrams, on the basis that telegrams are analogous to letters in that the message to be sent by telegram is given to the post office à though it does not apply to telephone or telex communications: Entores v Miles Far East Corporation [1955];

nor does it apply to faxes: Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988);

E-mail: opinion is divided and relevant legislation regulating electronic transaction is unclear on the issue as well

It has also been suggested that DX and courier systems operate differently to post office and the rule does not apply.

A justification is that one of the parties must inevitably a accept the risk involvedà choice has been made that the offeror accept the risk.

· The rule only applies if it is reasonable, contemplated or authorized that acceptance be by post à the nature and circumstances in which negotiations take place could indicate that actual communication is required even though negotiations are conducted via the post, as seen in:

Tallerman v Nathan’s Merchandise (Vic) (1957).

· The letter or telegram must be properly addressed, have appropriate postage or other fees paid, and actually be deposited with the post office.

· It is irrelevant whether the letter ever reaches its destination. The acceptance occurs when the letter is sent, thereby its arrival at the address of the offeror is logically irrelevant: Household Fire & Accident Insurance Co v Grant (1879).

· An offeror can exclude the operation of the rule at the time the offer is made - the key is to establish that the offeror requires actual communication before acceptance takes place. Acceptance actually has to be received by the offeror, it not being a case where the acceptance is effective upon posting
the acceptance letter: Bressan v Squires

· This exclusion must be expressly stated in the contract and a particular process and steps that need to be taken for acceptance to occur should be outlined within the contract by the offeror: Manchester Diocesan Council for Education v Commercial & General Investments Ltd

[Important] Offeree accepts through mail then revokes before offeror receives acceptance mail:

· If the rule applies and the offeree sends a letter/telegram of acceptance but, before that letter/telegram is received by the offeror, the offeree changes his/her mind and by some speedier means of communication to the offeror advises the offeror that he/she (the offeree) does not want to accept the offer, the issue arises as to whether the first letter of acceptance is binding, with the result that a contract exists. Nunin Holdings v Tullamarine Estates - states that the question does not appear to have been directly answered in the cases.

· The postal acceptance rule is interplay with the rule as to revocation of offers in Stevenson Jacques v Co McLean (1880) - where if a person who makes an offer revokes it before it has been accepted, which he is at liberty to do, the negotiation is at an end. If the offer is not retracted it is in force as a continuing offer till the time for accepting or rejecting it has arrived; revocation does not take place until it is communicated.

Acceptance and the date and place of contract

Date is the date of acceptance à date of communication of the fact of acceptance takes place, with regards to postal acceptance rule, this is the date the letter is posted.

Place of the contract is the place of acceptance, the place where the offeror is when communication of acceptance takes place; with regards to postal acceptance, this is the place where the letter of acceptance is posted.

Brinkibon Ltd v Stahag Stahl GmbH

Facts: Battle of jurisdiction - Brinkibon in London sent a telex accepting a counter-offer from a Viennese company for the sale of steel bars. It later began litigation.
Held: The English courts did nit have jurisdiction as the contract had been made in Vienna. This followed the general rule in cases of instantaneous communication between principles: that at the contract was made when and where the contact was received.

· Alternatives to offer and acceptance:

Brambles Holdings v Bathurst City Council (2001) - It was found that Brambles letter was not a rejection of the offer, and its conduct in charging the higher fees was an unequivocal acceptance of the offer.

Goodman v Cospak [2004], Master Macready identified three approaches that have been used in the battle in the forms of the cases:

1. So-called ‘last shot’ doctrine: British Road Services v Arthur V Crutchley
2. The so-called ‘higher status’ doctrine: Transmotors v Robertson, Buckley [1970] - the status of forms and documents.
3. So called ‘global or synthesis’ approach: Toyota Motor Corporation v Ken Morgan Motors [1994] - existence is established entirely without any reference to offer and acceptance.

The requirement of certainty and completeness

· These concepts relate to the need for the agreement’s words being sufficiently precise and clear so that the scope of obligations can be ascertained (certainty) and that the key and important parts of the agreement have been set out (completeness): Thorby v Goldberg

· Court does not require absolute certainty and completeness; it requires sufficient certainty and completeness: Fletcher Challenge Energy v Electricity Corporation of NZ [2002].
Court tries to uphold an agreement, if it cannot the agreement is void and completely unenforceable. Parties need to come up with an agreement; the court will not do this for them.

Completeness: An agreement must contain all essential terms, whether a term is essential depends on the nature of the agreement.

It is not necessary to have the price stated – it will be enough if there is an agreed mechanism for determining the price: Hall v Busst

If an agreement has been executed, the courts are less likely to find it incomplete because to do so would have more serious consequences to the parties than if the agreement was not carried out at all.

In Foley v Classique Coaches [1934] it was found that the petrol sales agreement would have been failed on grounds that it was incomplete as to price.

Certainty: Once the essential terms have been established, it is then to be determined if they are uncertain à if they are uncertain then the agreement is void: Upper Hunter County District Council v Australian Chilling & Freezing (1968), where it was found that there was no uncertainty.

In Life Insurance of Australia v Phillips: When a contract contains a number of stipulations one of which is void for uncertainty, the question whether the whole contract is void depends on the intention of the parties to be gathered from the instrument as a whole. If the contract be divisible, the part which is void may be separated from the rest and does not affect its validity.

In G Scammell & Nephew v Ouston [1941] - where A agreed to purchase a vehicle from B with hire purchase terms, House of Lords held agreement to be void for uncertainty because there was no evidence of a trade custom, business procedure of previous dealings between the parties which could have been applied to construe the vague parts of the agreement.

However, in Allcars v Tweedle [1937] - A agreed to purchase a car

From B on terms of Bs ‘usual agreement’ - held sufficiently certain and enforceable.

- ‘an agreement to agree’ is void for uncertainty.

Agreements to negotiate in good faith

If the parties come to an agreement to negotiate in good according to the House of Lords in Walford v Miles [1992], it is seen as an agreement to agree and therefore void for uncertainty.

In Coal Cliff Collieries v Sijehama (1991) the majority countenanced the possibility that such agreements could in the appropriate circumstances be enforced, although majority recognized that in most cases damages recovered would be nominal.

Subject to Contract: In cases where parties have reached an informal agreement recording the essential terms of their bargain between, but also envisage formal contracts being prepared and executed at a later date à question arises as to whether the earlier informal agreement creates an enforceable contract or whether an enforceable contract only arises upon execution of the formal contract.

In Masters v Cameron (1954) - having regard particularly to the final sentence, the document did not constitute a binding contract, but was only a record of terms and conditions upon which the signatories were agreed as a basis for the negotiation of a contract