Paper 3; Contract Formation; Acceptance
Key Cases Once an offer has been made, it must be accepted for it to be an agreement. Acceptance is the
unconditional agreement to all terms of an offer, communicated effectively (by either words
Acceptance or conduct) from offeree to offeror.
Felthouse V Bindley (1861) – Silence Acceptance
cannot amount to acceptance
The general rule on acceptance is that it can be in any form, it does not have to be in the same
Entores V Miles Far East Corp (1955) – The format as the offer. In order to be valid, the acceptance must be effectively communicated,
general rule on acceptance is that it must silence cannot be counted as acceptance. Acceptance can also be shown through conduct. In
be clearly communicated. reward cases acceptance must be given in exchange for a reward, if the offeree doesn’t know
there is an offer (or has forgotten about one), they cannot be said to have accepted the offer.
Brogden V Metropolitan Rail Co (1877) –
Both parties conduct showed the contract The Postal Rule
had been accepted.
A key exception to the general rule is the postal rule, which states that acceptance by post is
R V Clarke (1972) – There cannot be effective as soon as it is posted. Lord Wilberforce said: “No universal rule can cover all such
acceptance without the knowledge of the cases; they must be resolved by reference to the intentions of the parties by sound business
offer. practice and in some cases by a judgement where the risks should lie.” If one party suggests
something (such as recorded posting) to assist the other, it is the others discretion to ignore
The Postal Rule the suggestion if they want to.
Adams V Lindsell (1818) – Where post is
Battle of Forms
the agreed form of communication
between the parties and acceptance is A battle of forms arises when two businesses are negotiating the terms of a contract and each
correctly stamped and addressed, it is party wants to use it own terms and conditions. The battle of the forms is won by the party
effective when posted. who fired the ‘last shot’, that is the party to put forward their terms and conditions that were
not explicitly rejected by the other party.
The London and Northern Bank (1900) –
The definition of posted did not apply to Modern Forms of Communication
the way the letter was sent
The law has struggled to deal with issues arising from modern methods of communication. The
Yates Building V Pulleyn (1975) – If a principle is that acceptance, apart from the postal rule, occurs when the offeror is aware of the
method of acceptance is stated by one acceptance. In forms of modern technology (like email) courts struggle to decide whether or
party to assist the other, this can be not the postal rule should apply. There is no clear-cut rule for modern forms of
ignored in their agreement communication and the outcome of each case is dependent on context.
Battle of Forms
Butler Machine Tool Co V Ex-Cell-O Corp
(1979) - The battle of forms is often won
by the party who fired the ‘last shot’, that
is the party to put forward their terms and
conditions that were not explicitly
rejected by the other party
Modern Forms of Communication
Thomas V BPE Solicitors (2010) – The
issue must be resolved by reference to (1)
the intention of the parties and (2) sound
business practice. In this case the postal
rule applied.
Notes
Key Terms and Definitions
Posted – A letter is posted when it is correctly addressed and stamped and posted or passed to a person authorised to receive mail.
Key Cases Once an offer has been made, it must be accepted for it to be an agreement. Acceptance is the
unconditional agreement to all terms of an offer, communicated effectively (by either words
Acceptance or conduct) from offeree to offeror.
Felthouse V Bindley (1861) – Silence Acceptance
cannot amount to acceptance
The general rule on acceptance is that it can be in any form, it does not have to be in the same
Entores V Miles Far East Corp (1955) – The format as the offer. In order to be valid, the acceptance must be effectively communicated,
general rule on acceptance is that it must silence cannot be counted as acceptance. Acceptance can also be shown through conduct. In
be clearly communicated. reward cases acceptance must be given in exchange for a reward, if the offeree doesn’t know
there is an offer (or has forgotten about one), they cannot be said to have accepted the offer.
Brogden V Metropolitan Rail Co (1877) –
Both parties conduct showed the contract The Postal Rule
had been accepted.
A key exception to the general rule is the postal rule, which states that acceptance by post is
R V Clarke (1972) – There cannot be effective as soon as it is posted. Lord Wilberforce said: “No universal rule can cover all such
acceptance without the knowledge of the cases; they must be resolved by reference to the intentions of the parties by sound business
offer. practice and in some cases by a judgement where the risks should lie.” If one party suggests
something (such as recorded posting) to assist the other, it is the others discretion to ignore
The Postal Rule the suggestion if they want to.
Adams V Lindsell (1818) – Where post is
Battle of Forms
the agreed form of communication
between the parties and acceptance is A battle of forms arises when two businesses are negotiating the terms of a contract and each
correctly stamped and addressed, it is party wants to use it own terms and conditions. The battle of the forms is won by the party
effective when posted. who fired the ‘last shot’, that is the party to put forward their terms and conditions that were
not explicitly rejected by the other party.
The London and Northern Bank (1900) –
The definition of posted did not apply to Modern Forms of Communication
the way the letter was sent
The law has struggled to deal with issues arising from modern methods of communication. The
Yates Building V Pulleyn (1975) – If a principle is that acceptance, apart from the postal rule, occurs when the offeror is aware of the
method of acceptance is stated by one acceptance. In forms of modern technology (like email) courts struggle to decide whether or
party to assist the other, this can be not the postal rule should apply. There is no clear-cut rule for modern forms of
ignored in their agreement communication and the outcome of each case is dependent on context.
Battle of Forms
Butler Machine Tool Co V Ex-Cell-O Corp
(1979) - The battle of forms is often won
by the party who fired the ‘last shot’, that
is the party to put forward their terms and
conditions that were not explicitly
rejected by the other party
Modern Forms of Communication
Thomas V BPE Solicitors (2010) – The
issue must be resolved by reference to (1)
the intention of the parties and (2) sound
business practice. In this case the postal
rule applied.
Notes
Key Terms and Definitions
Posted – A letter is posted when it is correctly addressed and stamped and posted or passed to a person authorised to receive mail.
