Acceptance and communication

What counts as acceptance, when it takes effect, and when silence or the post can change the answer.

What acceptance is

Acceptance is a final and unqualified agreement to the terms of the offer. It must be made by the offeree, while the offer is still open, and in response to the offer.

The traditional rule is the mirror image rule. An acceptance that adds or changes terms is not an acceptance. It is a counter-offer (Hyde v Wrench, 1840). Courts do not treat a simple request for information, or a statement that only expresses hope, as a counter-offer.

Battle of the forms

Businesses often exchange standard terms that conflict. The traditional approach looks at who fired the last shot. In Butler Machine Tool v Ex-Cell-O (1979), the buyer's order form was a counter-offer on its own terms. The seller then signed and returned the tear-off acknowledgement, which accepted that counter-offer. The buyer's terms won.

Remember that this is the starting rule, not a guarantee. Courts look at the whole exchange to work out who the parties were actually agreeing with.

Does acceptance have to be communicated

Generally yes. Silence cannot be acceptance, because an offeror cannot force a contract on someone by saying that silence will count (Felthouse v Bindley, 1862).

There are two main exceptions.

• The offeror waives communication. In a unilateral offer, the offeror usually asks for performance, not a reply, so performing the act is the acceptance (Carlill v Carbolic Smoke Ball Co, 1893).
• The postal rule applies, which is covered below.

Acceptance by conduct is also possible where the conduct clearly shows agreement. The offeree must know of the offer and act in response to it.

When does acceptance take effect

The answer depends on how the acceptance was sent.

• Instantaneous methods (face to face, phone, and generally email). Acceptance takes effect when it is received (Entores v Miles Far East, 1955).
• Communications sent out of normal hours or through an intermediary. There is no fixed rule. Courts ask what the parties intended, what makes business sense and where the risk should sit (Brinkibon v Stahag Stahl, 1983).
• The post. Under the postal rule, acceptance takes effect when the letter is posted, even if it is delayed or never arrives (Adams v Lindsell, 1818; Household Fire Insurance v Grant, 1879).

The postal rule only applies if using the post is a reasonable way to reply. It is excluded if the offeror says that acceptance must actually be received, or if the offer's terms point away from it. In Holwell Securities v Hughes (1974), an option that required 'notice in writing' was held to need actual notice, so posting was not enough.

The postal rule helps the acceptor, but it does not apply to revocation or rejection. Revocation takes effect only when received.

Prescribed methods

If the offeror asks for a particular method, the safe course is to use it. If the method is not stated to be mandatory, an alternative that is no less advantageous to the offeror will usually still work. If it is stated to be exclusive, only that method will do.

Two further points to watch for

• Cross-offers. Two identical offers that cross in the post do not form a contract, because neither is made in response to the other (Tinn v Hoffman, 1873).
• 'Subject to contract'. Words like these usually show that the parties do not intend to be bound until a formal contract is signed, so there is no acceptance yet.

Using this in an SQE question

• Check whether the reply matched the offer exactly. If not, it is a counter-offer.
• Identify the method used, then pick the right moment of acceptance for that method.
• If silence is relied on, the answer is almost always that no contract has formed.

Key cases

• Felthouse v Bindley (1862)Silence is not acceptance.
• Entores v Miles Far East (1955)Instant communications take effect on receipt.
• Adams v Lindsell (1818)Postal rule: acceptance takes effect on posting.
• Butler Machine Tool v Ex-Cell-O (1979)Battle of the forms: last shot can win.

Check yourself

Answer out loud before you open each one.

An original summary written for Head Start from the SRA specification and the law. Check the detail against your course materials. This is not legal advice.