Acceptance. Methods of acceptance

· Acceptance by conduct

· Acceptance by silence

· Acceptance in bilateral contracts

· Inertia selling

· Acceptance by post

· Acceptance in Internet transactions

· Acceptance in unilateral contracts. Unilateral contracts and ‘agreement’

· Position in ‘reward’ contracts

· Acceptance in ignorance of an offer

The formal test of agreement is achieved by the concept of the ‘deed’. This is a formal written document, signed and, traditionally, sealed. The existence of a deed will be regarded as indicating that there is an agreement. There are certain contracts where a deed is required, but the device can be used for any type of contract if the parties so wish. This type of formality should be distinguished from the situations where some special procedure is required in addition to the finding of an agreement. In this situation there may be an agreement, but the courts will not enforce it unless certain formalities have been complied with.

Three examples will be mentioned here. First, all contracts involving the sale, or other disposal, of an interest in land must be in writing and signed by the parties. The justification for this rule is that contracts involving land are likely to be both complicated and valuable. Many commercial contracts, however, are also complex and valuable, yet there is no requirement of a written agreement (though in practice there is likely to be one).

Second types of contract are contracts of hire purchase, and other credit transactions, should be in writing and signed. This is a protective provision, designed to make sure that the individual consumer has written evidence of the agreement, and has the opportunity to see all its terms. A similar protective procedure operates in relation to contracts of employment, though here the requirement is simply that the employee should receive a written statement of terms and conditions within a certain period of starting the job, rather than that the agreement itself should be in writing.

A third situation where formality is required is when an agreement to guarantee the debt of a third party must, in order to be enforceable, be in writing and signed by the guarantor.

In most cases, however, English law imposes no formal requirements and looks simply for an agreement between two parties. In other words, the contract does not have to be put into writing, or signed, nor does any particular form of words have to be used. A purely verbal exchange can result in a binding contract. All that is needed is an agreement.

This simple assertion, however, masks a considerable problem in identifying precisely what is meant by an agreement. This may seem easy enough: it is simply a question of identifying a “meeting of the minds” between the parties at a particular point in time. But by the time two parties to a contract have arrived in court, they are clearly no longer of one mind. They may dispute whether there was ever an agreement between them at all or, while accepting that there was an agreement, they may disagree as to its terms.

Clearly, the courts cannot discover as a matter of fact what was actually going on in the minds of the parties at the time of the alleged agreement. Nor are they prepared to rely solely on what the parties now say was in their minds at that time (which would be a “subjective” approach), even if they are very convincing. Instead, the courts adopt what is primarily an “objective” approach to deciding whether there was an agreement and, if so, what its terms were. This means that they look at what was said and done between the parties from the point of view of the “reasonable person” and try to decide what such a person would have thought was going on. This approach means that the courts are not actually looking for agreements between the parties but: whether or not the negotiations and conduct have reached such a point that both parties can reasonably suppose that the other is committed to the contract so that it can be relied upon.

In other words it is behaviour justifying “reasonable reliance” on the other party’s commitment that is what the courts are in fact looking for, rather than “agreement”, whether looked at subjectively or objectively.

There are different types of objectivity. There is “promisor objectivity”, where the court tries to decide what the reasonable promisor would have intended, “promisee objectivity”, where the focus is on what the reasonable person being made a promise would have thought was intended, and ‘detached objectivity’, which views what has happened through the eyes of an independent third party.

The objective approach must, however, take account of all the evidence. Even if A has acted in a way which would reasonably cause B to assume a particular state of mind as regards an agreement, if B’s behaviour, objectively viewed, indicates that such an assumption has not been made by B, the courts will take account of this.

As we have seen, the process by which the courts try to decide whether the parties have made an agreement does not necessarily involve looking for actual agreement, but rather for the external signs of agreement. The classical theory of contract relied on a number of specific elements, which were regarded as both necessary and sufficient to identify an agreement which is intended to be legally binding. These were:

- offer;

- acceptance; and

- consideration.

These three factors, together with an overarching requirement that the court is satisfied that there was an intention to create legal relations, formed the classical basis for the identification of contracts in English law.

An offer may be defined as an indication by one person that he or she is prepared to contract with one or more others, on certain terms, which are fixed, or capable of being fixed, at the time the offer is made.

The offer may be made by words, conduct or a mixture of the two. The concept applies most easily to a situation such as that given in the above example where there are two parties communicating with each other about a commercial transaction. It fits less easily in many other everyday transactions, such as supermarket sales, or those involving the advertisement of goods in a newspaper or magazine. What the courts will look for, however, is some behaviour which indicates willingness to contract on particular terms. Once there is such an indication, all that is then required from the other person is a simple assent to the terms suggested, and a contract will be formed. The “indication of willingness” referred to above may take a number of forms - for example, the spoken word, a letter, a fax message, an email or an advertisement on a website. As long as it communicates to the potential acceptor or acceptors the basis on which the offeror is prepared to contract, then that is enough. It is not necessary for the offer itself to set out all the terms of the contract. The parties may have been negotiating over a period of time, and the offer may simply refer to terms appearing in earlier communications. That is quite acceptable, provided that it is clear what the terms are.

It is important, therefore, that behaviour which may have some of the characteristics of an offer should not be treated as such if, viewed objectively, that was not what was intended. Once a statement or action is categorised as an offer, then the person from whom it emanated has put themselves in the position where they can become legally bound simply by the other party accepting. It must be clear, therefore, that the statement or action indicates an intention to be bound, without more. The courts have traditionally approached this issue by drawing a distinction between an offer and an“invitation to treat”.

Sometimes a person will simply to open negotiations, rather than to make an offer which will lead immediately to a contract on acceptance.

The courts refer to such a preliminary communication as an “invitation to treat” or, even more archaically, as an “invitation to chaffer”. The distinction between an offer and an invitation to treat is an important one, but is not always easy to draw. Even where the parties appear to have reached agreement on the terms on which they are prepared to contract, the courts may decide that the language they have used is more appropriate to an invitation to treat than an offer.

Another area of difficulty arises in relation to the display of goods in a shop window, or on the shelves of a supermarket, or other shop where customers serve themselves. We commonly talk of such a situation as one in which the shop has the goods “on offer”. This is especially true of attractive bargains which may be labeled “special offer”. Are these “offers” for the purpose of the law of contract? The issue has been addressed in a number of criminal cases where the offence in question was based on there being a “sale” or an “offer for sale”. It has, however, generally been accepted subsequently that the display of goods within a shop is an invitation to treat and not an offer.

The slightly different issue of the shop window display. Аccording to the ordinary law of contract the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract.

Where goods or services are advertised, does this constitute an offer or an invitation to treat? The answer to the question “is this advertisement an offer?” will generally be determined by the context in which the advertisement appears, and the practical consequences of treating it as either an offer or an invitation to treat.

Generally speaking, an advertisement on a hoarding, a newspaper “display’’ or a television commercial will not be regarded as an offer. In other words, the practical consequences of treating the advertisement as an offer would be such that it is highly unlikely that this is what the person placing the advert can have intended. The advertisement is nothing more than an invitation to treat.

It follows from this that these types of advertisement should be regarded simply as attempts to make the public aware of what is available. Such advertisements will often in any case not be specific enough to amount to an offer. Even where goods are clearly identified and a price specified, however, there may still not be an offer.

This does not mean, however, that all newspaper advertisements will be treated as invitations to treat. If the guiding principle is promisor objectivity, rather than party freedom, then provided that the wording is clear, and that there are no problems of limited supply, there seems no reason why such an advertisement should not be an offer.

The second stage of discovering whether an agreement has been reached under classical contract theory is to look for an acceptance which matches the offer which has been made. No particular formula is required for a valid acceptance. As has been explained above, an offer must be in a form whereby a simple assent to it is sufficient to lead to a contract being formed. It is in many cases, therefore, enough for an acceptance to take the form of the person to whom the offer has been made simply saying ‘yes, I agree’. In some situations, however, particularly where there is a course of negotiations between the parties, it may become more difficult to determine precisely the point when the parties have exchanged a matching offer and acceptance. Unless they do match exactly, so the classical theory requires, there can be no contract. An ‘offer’ and an ‘acceptance’ must fit together like two pieces of a jigsaw puzzle. If they are not the same, they will not slot together, and the picture will be incomplete. At times, as we shall see, the English courts have adopted a somewhat flexible approach to the need for a precise equivalence. Nevertheless, once it is decided that there is a match, it is as if the two pieces of the jigsaw had been previously treated with ‘superglue’, for once in position it will be very hard, if not impossible, to pull them apart.

In unilateral contracts, the acceptance will always be by conduct though there are some problems as to just what conduct amounts to acceptance. Bilateral contract may be accepted by conduct, and there is no need for a verbal or written indication of acceptance.

In unilateral contracts the offeror may waive the need for communication of acceptance. The court thought that it clearly could not have been intended that everyone who bought something in reliance on the company’s advertisement should be expected to tell the company of this. It would be perfectly possible, of course, for an offeror to require such notice, but where an offer is made to the world or where a reward is offered for the return of property or the provision of information, the intention to waive such a requirement will easily be found.

In relation to bilateral contracts, the position is different. Silence cannot amount to acceptance, at least in bilateral contracts. It is by no means clear that the court intended to go this far. Acceptance of an offer cannot be inferred from silence, save in the most exceptional circumstances.

A requirement of communication will not, however, answer all problems. In the modern world communication can take many forms: face to face conversations, telephone, letters, faxes, or email. In some of these, there will be a delay between the sending of an acceptance and its coming to the attention of the offeror. The law of contract has to have rules, therefore, to make clear what is meant by ‘communication’. The simplest rule would be to say that no communication is effective until it is received and understood by the person to whom it is addressed.

Where communication of the offer is required, which is the case in virtually all situations, it is safe to say that communication means that the person to whom the offer is addressed is aware of it. Why should the position be any different as regards acceptances?

The problem first arose in relation to the post, where the delay is likely to be longest. Generally speaking, there will be a delay of at least 12 to 18 hours between the sending of an acceptance by post, and its receipt by the addressee. Does the sender of the acceptance have to wait until it is certain that the letter has arrived before being sure that a contract has been made? The issue was considered in Adams v Lindsell.

The defendants sent a letter to the plaintiffs offering wool for sale, and asking for a reply ‘in course of post’. The letter was misdirected by the defendants, and arrived later than would normally have been the case. The plaintiffs replied at once accepting, but the defendants, having decided that because of the delay the plaintiffs were not going to accept, had already sold the wool elsewhere. The plaintiffs sued for breach of contract. The court decided that to require a posted acceptance to arrive at its destination before it could be effective would be impractical and inefficient. The acceptor would not be able to take any action on the contract until it had been confirmed that the acceptance had arrived. The court felt that this might result in each side waiting for confirmation of receipt of the last communication ad infinitum. This would not promote business efficacy. It would be much better if, as soon as the letter was posted, the acceptor could proceed on the basis that a contract had been made, and take action accordingly. The court, in coming to this conclusion, was thus giving the practicalities of doing business priority over the question of whether at the time the contract was formed, the parties were in agreement. It was quite possible that by the time the letter of acceptance was posted, the offeror had had a change of mind and sent a withdrawal of the offer, or made a contract with someone else (as happened in Adams v Lindsell itself). Nevertheless, because in the court’s view the conduct of business would in general be better served by giving the offeree certainty in this situation, the postal rule was established.

It is likely that in the future an increasing amount of business will be conducted over the internet, either by means of email or, particularly in the case of consumer transactions, via a website. In the latter case, the consumer may be actually receiving a product over the web (for example, downloading a piece of software or a video or music file) or placing an order for goods to be delivered by the post or courier service. How do the principles outlined above apply in these situations?

In relation to email, as has been assumed in the previous discussion, there seems little reason to distinguish between this form of communication and other types of ‘instantaneous’ communication such as telex or fax. The contract will be formed at the earliest when the acceptance is received by the offeror’s email system, and is available to be read. At the latest, it should be regarded as complete once the time has passed at which it would be reasonable to expect the acceptance to have been read. Since most email systems will return an error message to the sender if delivery has not been possible, then there is no real need here for any other procedure for acknowledgment of receipt.

As regards contracting via a website, some of the potential problems were indicated by events in September 1999, when a retailer was found to be indicating on its website that televisions were available for the price of £3. This was a mistake: the price should have been £300. However, before it could be rectified, a large number of people had attempted to buy a television at the lower price. The crucial question was whether by responding to the information contained on the website, these people were accepting the retailer’s offer, or were themselves making an offer to buy at that price. Given that the purchasers would have had to submit credit card details in order to pay for the goods, and the retailer would presumably have reserved the right not to accept these as satisfactory, the better view would seem to be that the purchasers were making the offer to buy. The advertisement of the televisions would thus be simply an invitation to treat. The seller would be free to accept or reject the offers from the potential purchasers. The contract would be made where the seller had acknowledged to the purchaser that his or her offer was accepted, either by means of a direct response on the website or by a subsequent email.

This area has also been the subject of proposals from the European Commission, which has issued a directive dealing with a range of issues on electronic commerce, including the issue of ‘time of acceptance’. The final version of the Directive on Electronic Commerce was adopted in June 2000 (Directive 2000/31/EC). Article 11 provides that:

Member States shall ensure, except when otherwise agreed by parties who are not consumers, that in cases where the recipient of the service places his order through technological means, the following principles apply:

- the service provider has to acknowledge receipt of the recipient’s order without undue delay and by electronic means;

- the order and the acknowledgment of receipt are deemed to be received when the parties to whom they are addressed are able to access them.

English law in any case requires the offer to be accepted before it is effective, and this will satisfy the need for an acknowledgment of the order. If the offer is made by the website owner, however, and accepted by the customer, the Directive will place an additional requirement on the website owner to acknowledge the acceptance. In all cases, however, the Directive makes the test of when a communication takes place, the point at which it can be accessed by the recipient.

The Directive has been implemented in English law by the Electronic Commerce (EC Directive) Regulations 2002, the relevant sections of which came into force on 31 August 2002.

Regulation 11, entitled ‘placing of the order’, which deals with the matters covered by Art 11 of the Directive, states as follows:

1) Unless parries who are not consumers have agreed otherwise, where the recipient of the service places his order through technological means, a service provider shall -

(a) acknowledge receipt of the order to the recipient of the service without undue delay and by electronic means; and

(b) make available to the recipient of the service appropriate, effective and accessible technical means allowing him to identify and correct input errors prior to the placing of the order.

2) For the purposes of paragraph l) (a) above -

a) the order and the acknowledgment of receipt will be deemed to be received when the parties to whom they are addressed are able to access them; and

b) the acknowledgment of receipt may take the form of the provision of the service paid for where that service is an information society service.

3) The requirements of paragraph 1) above shall not apply to contracts concluded
exclusively by exchange of electronic mail or by equivalent individual
communications.

The word ‘order’ in reg 11 1) (b) (though not necessarily in reg 11 1) (a)) means the contractual offer (reg 12).

The sanctions for non-compliance are that non-compliance with reg 11 1) (a) gives a right to the customer to sue the service provider for damages for breach of statutory duty (reg 13). Non-compliance with reg 11 1) (b) gives the customer the right to rescind the contract (reg 15).

The wording of the Regulations seems to confirm the suggestion made above that it will generally be the customer who makes the offer. As noted above, reg 11 1) (b) requires the service provider to make available to customer ‘appropriate, effective and accessible technical means allowing him to identify and correct input errors prior to the placing of an order’. Regulation 12 then provides that ‘order’ in reg 11 1) (b) means ‘the contractual offer’. The service provider will thus be able to argue that any screen which they display in response to a costumer’s initial ‘order’ is simply fulfilling the requirements of reg 11 1) (b) and that reg 12 means that this must be taken as preceding ‘the contractual offer’. The ‘contractual offer’ then becomes customer’s clicking of a button confirming that he or she is happy with the terms set out on the page; so, although the Regulations do not on their face purport to affect the rules of offer and acceptance, it is clearly arguable that they do lead to particular conclusions about the stage at which an offer is made.

Date: 2015-12-18; view: 1221