Acceptance

Introduction
 What is an acceptance?
◦ S.2(b) Contracts Act 1950

 How do you make an acceptance

◦ S.3 Contracts Act 1950

 Conditions of an acceptance
◦ S.7 Contracts Act 1950

 When is acceptance complete

◦ S.4(2) Contracts Act 1950

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 [1] What is an Acceptance?
S.2(b) Contracts Act

When the person to whom the proposal

is made signifies his assent thereto, the
proposal is said to be accepted: a
proposal, when accepted, becomes a
promise”

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 [2] How?
s.3 Contracts Act 1950:

“The communication of … the

acceptance … are deemed to be made by
any act or omission of the party …
accepting … by which he intends to
communicate the … acceptance … or
which has the effect of communicating it”

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i. An ‘act’

 Expressly stated: s.9

◦ Words
◦ Spoken i.e. phone or face-to-face, through
letters
◦ Corresponding Issue: when is communication of
acceptance complete? Entores Ltd v Miles Far
East Corp : when the acceptance reaches the
offeror

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 Via conduct: s.8
◦ S.7(b) i.e. in the manner prescribed by the
proposer
 Holwell Securities Ltd v Hughes
 “it shall be exercisable by notice in writing to the
[defendant]…”

◦ Fulfilling conditions in the offer

 Carlill v Carbolic Smoke Ball

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ii. An ‘omission’
 Not an ‘act’
 However, does not mean ‘silence’
◦ Felthouse v Bindley
 But
◦ It can be interpreted as such in exceptional
circumstances

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Re Selectmove Ltd [1995] Court of Appeal

“Where the offeree himself indicates that

an offer is to be taken as accepted if he
does not indicate to the contrary by an
ascertainable time, he is undertaking to
speak if he does not want an agreement
to be concluded. I see no reason in
principle why that should not be an
exceptional circumstance such as that the
offer can be accepted by silence”
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 [3] Conditions of Acceptance
S.7 Contracts Act

“In order to convert a proposal into a

promise the acceptance must –
a. be absolute and unqualified
b. be expressed in some usual and reasonable
manner …”

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 s.7(a)
“be absolute and unqualified”

Situations when it is not an absolute and

unqualified acceptance:

i. Counter-offer
ii. Terms of the offer amended
iii. ‘Subject to contract’ or condition
precedent

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(i) Counter-offer
 Hyde v Wrench
 Defendant offered to plaintiff to sell his farm for 1,000
pounds. The plaintiff offered to purchase at 950 pounds.
Defendant was not agreeable. Plaintiff then purported
to accept original offer. Was there a contract?
 Not an acceptance AND a new offer is
made
 Original offer is destroyed

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Malayan Flour Mills Bhd v Saw Eng Chee
 X, who is now deceased, held several pieces of land. Prior to
his death, X sent a telex to the appellant proposing to sell
the land at a certain price and under specific conditions. The
parties re-negotiated and the solicitor prepared a formal
offer letter with the new negotiated terms. X then changed
his mind and instructed the solicitors not to sign the offer
letter. The appellant then purported to accept the original
offer in the telex.
 Court (CA): The re-negotiation was not a counter-offer. It
did not affect the original offer by telex because the parties
did not agree that the renegotiation should supersede the
original offer by telex. The offer in the telex was open to
acceptance but, in this case, the appellant had failed to fulfil
the conditions of the offer stated in the telex.

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 Counter offer is NOT ‘request for more
information’
 Counter offer: a material variation of the
terms of the offer
 Request for more information: a mere
enquiry
 Stevenson v McLean
◦ D fixed 40s per ton for iron, nett cash
◦ P telegraphed to D “Please wire whether you
would accept forty for delivery over two months,
or if not, longest limit you could give”. D did not
reply and instead sold the iron to someone else.
P’s telegram was not an offer but a request for
more information.
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(ii) Terms of offer amended
Brogden v Metropolitan Railway Co

Terms of agreement drawn up by P’s

agents and sent to D. He then filled in the
blank parts, inserted name of the
proposed arbitrator, wrote “approved” at
the end of the page and signed it.
Returned to P’s agent who put it in his
desk. No acceptance

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 “Offer”
The arrangement we came
to was that … you have the
right to buy the land for
$300,000 payable in
$30,000 instalments over
10 years, starting February
1, 1978
Diamond Peak Sdn Bhd v Tweedie
--binding agreement
“Acceptance”
We agreed to the terms and
conditions of your offer and
the manner of payment that is
◦ The price of $300,000 for all the
abovementioned lots ..
◦ Payment will be made in ten
(10) instalments. Each instalment
of $30,000 will be spread over a
period of ten years
◦ Transfer of the property to be
made on payment of first
instalment …
◦ Vacant possession to be given
on first payment of the
property.
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(iii) “subject to contract”

 Common to have acceptance stating,

“subject to contract”, “without prejudice”,
“formal agreement would be prepared
and executed”
 Two meanings:
◦ There is no contract until the formal
document is signed, or
◦ A binding contract is already entered into and
the execution of the document is a formality.

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 Daiman Development Sdn Bhd v Mathew
Lui Chin Tech & Anor Appeal
The purpose of the construction is to
determine (i)whether the parties intend to
be bound to each other or (ii) whether, no
matter how complete their arrangement
might appear to be, they do not so intend
until the occurrence of some further event
…
◦ The questions is one as to the expressed
intention and is not answered by … any particular
form of words

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 Kam Mah Theatre Sdn Bhd v Tan Lay Soon
◦ “subject to contract” gives rise to a strong
presumption of the necessity of a further formal
contract and it requires cogent evidence to
displace this strong presumption

 Lim Chia Min v Cheah Sang Ngeow & Anor

◦ “proposed that a formal agreement would be
prepared and executed” means exactly that

 Charles Grenier Sdn Bhd v Lau Wing Hong

◦ “subject to the sale and purchase agreement” did
NOT mean no contract until then
◦ The parties, property & essential terms were
identified with sufficient clarity
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Lee Chin Kok v Jasmin Arunthuthu Allegakoen &
Ors [2000] 4 MLJ 481 (SC, KL)
Respondents (vendors) had properties which were
being sold for them by estate agents. The letter to
appellant (buyer) was marked ‘without prejudice and
subject to contract’ confirming the appellant’s
interest in buying the property at RM215,000.
Certain terms and conditions were laid out.: non-
refundable RM3,000 payment and if plans approved
by local authority, 10% of sales price (minus deposit)
to be paid, and balance within 3 months.
However, after the said letter was sent, vendor
informed the agent of certain changes to the
conditions of the letter. Properties were later sold
off to 3P. Appellant sued for BOC
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SC: Found in favour of vendors
Referred to Charles Grenier’s case:
The phrase ‘subject to the sales and purchase
agreement’ did not point to an intention that no
contract was to come into existence until a formal
sales and purchase agreement had been prepared
and executed.
Rather, when read in the context of the
correspondence and the objective aim of the
transaction : was it indication of an intention to
merely formalize the agreement already concluded
between the parties?
(next slide)

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Here:
 Respondents never signed the building approval
plans
 No sales and purchase agreement entered into
 The RM3,000 deposit had been refunded
 All the correspondences had ‘Without prejudice
and subject to contract’
 Other than the payment of $3,000, nothing else
was paid.
 Therefore, no concluded contract

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[4] When is an Acceptance Complete?
 It is not enough that you make an
acceptance, but it has to be communicated
before it is complete
 Two different rules apply, depending on
mode of acceptance:
1. Postal rule
2. Instantaneous communication

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1. Postal Rule
 Acceptance made through post / telegram
 Contracts Act 1950 applies
S.4(2)
The communication of an acceptance is
complete –
(a) as against the proposer, when it is put in a
course of transmission to him, so as to be
out of the power of the acceptor; and
(b) as against the acceptor, when it comes to
the knowledge of the proposer

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2. Instantaneous communication
 Face-to-face, phone, telex
 Case law applies
 Bhagwandas Goverdhanda Kedia v Girdharlal
Parshottamadas and Co
◦ Entores Ltd v Miles Far East Corporation [1955]
2 QB 327, CA

“ contract only complete when the acceptance

is received by the offeror…”

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 Entores Ltd [1955] 2 QB 327

Lord Denning:
It is not until the message is received that
the contract is complete. In all the
instances I have taken so far, the man who
sends the message of acceptance knows
that it has not been received or he has
reason to know it. So he must repeat it.
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But, suppose that he [acceptor] does not
know that his message did not get home.
He thinks it has.

The offerror in such circumstances is

clearly bound, because he will be estopped
from saying that he did not receive it.

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But if the offeror without any fault on his
part does not receive the message yet
the sender of it reasonably believes it has
got home

– then I think there is no contract.

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 Miscellaneous Issues
1. Knowledge of offer
2. Motive of acceptor
3. Can acceptance be retrospective?
4. Is a cross offer an acceptance?

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1. Knowledge of the Offer
 Must a person know about the offer
before an acceptance can be made?
 Two opposing views:
◦ Gibbons v Proctor (1891)
 knowledge not needed
◦ Fitch & Anor v Snedaker (1868)
 Knowledge needed
 Malaysia?
◦ Vague

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Arguable, based on:

 S.2(b): When the person to whom the

proposal is made signifies his assent thereto,
the proposal is said to be accepted: …

 S.4(1): Communication of proposal is

complete when it comes to the knowledge
of the person to whom it is made

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2. Motive of the Acceptor
 Williams v Cawardine
◦ Reward for information leading to the discovery of
the murderer
◦ Plaintiff knew of offer but gave information to “ease
her own conscience and in hopes of forgiveness” =
contract, motive irrelevant

 R v Clarke
◦ Reward for information which lead to arrest and
conviction for the murders
◦ Clarke knew of offer but gave information to clear
himself from the false charge of murder
◦ No contract because Clarke was not acting on the
offer
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3. Restrospective acceptance?
 Trollope & Colls Ltd v Atomic Power Constructions Ltd
◦ When the formal contract came into existence, there had
been an intention to make a contract, there was
agreement on all essential terms and a sufficiently clear
acceptance of the offer, and that, therefore, a term should
be implied to give business efficacy to the agreement to
the effect that the terms applied retrospectively.

 Megaw J had stated that "so far as he was aware, there

was no principle of English law which provided that a
contract cannot in any circumstances have retrospective
effect… often the contract expressly so provides. I can see
no reason why, if the parties so intend and agreed, such a
stipulation should be denied legal effect.”

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4. Cross-offer
 No valid acceptance
 Tinn v Hoffman
◦ Two offers, identical in terms, crossed in the
post

“The promise or offer being made upon each

side in ignorance of the promise of offer made
on the other side neither of them can be
construed as an acceptance of the other”

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End