Acceptance of an Offer for Contract Formation
Published on 29th June, 2018 by Benjamin Li Yong Le
Acceptance by an offeree of the terms of the offer is a requirement for contract formation
What is acceptance?
An acceptance of an offer is a final and unqualified expression of assent to the terms of an offer - Treitel, Gay Choon Ing v Loh Sze Ti Terence Peter.
The acceptance must be of the same terms offered by the offeror, therefore there cannot be addition of new terms –
There should not be any variations, conditions or qualifications to the purported acceptance because a counteroffer destroys the original offer.
Case to illuatrate this point - Hyde v Wrench
Wrench offered to sell a farm to Hyde for £1000.
Hyde responded that he would pay £950 for the farm which Wrench rejected.
Hyde later accepted Wrench’s original offer of £1000 which Wrench rejected again.
The Court held that there was no agreement between the parties as Hyde had rejected the original offer by submitting the counteroffer of £950 which destroyed the original offer.
How is acceptance communicated?
Acceptance should be communicated either written or verbal means to the offeror.
If the offeror did not hear or is not aware of the acceptance, then there is no acceptance. It is pertinent to note that silence by the offeree cannot be considered as acceptance of the offer.
An exception is the postal acceptance rule which is outdate.
How is acceptance judged by the Courts
Whether an acceptance has in fact occurred is ascertained objectively from the behaviour of the parties, including any correspondence that has passed between them – Inland Revenue Commissioners v Fry.
IRC sued Mrs Fry £113,082 income tax. There were negotiations between Mrs Fry and IRS to reduce tax bill.
Mr Fry sent a cheque £10,000 to IRS with a cover letter stating that the payment was offered in full and final settlement of the debt due from Mrs Fry, which offer could be accepted by presentation of the cheque for payment.
IRC cashed cheque.
The Court applied the objective reasonable observer test – since IRC receive thousands of cheques a day and its standard operating procedures is to bank it. Therefore, merely presenting it to the bank cannot be taken as acceptance