Chapter 3 Outline answers to end-of-chapter questions

Agreement Part II: Acceptance

1. On Monday, Gamer Phones (Retail) Ltd received a brochure from Smart-Tech Manufacturing Ltd. It offered a 30% discount on all smart phones for all orders placed by 5pm Friday using the pre-paid envelope. Pawel, the manager of Gamer Phones, completed the order form and posted it on the Wednesday. Due to a disruption to the post, the order was received on the Saturday. Is Pawel entitled to the discount?

For the introduction, identify the issues raised and the approach to be adopted. Observe that Pawel will be entitled to the discount if he has a contract for it. The question states than an offer was received. This is an offer for a unilateral contract which will result in a contract following performance of the required conditions of acceptance. This means the focus is on acceptance, specifically acceptance by post, and whether it was effective by the deadline.

Define acceptance and mentioned the objective assessment of contract formation. Also address the general rule from any of the cases e.g. Entores v Miles [1955]

Now turn to explain the post rule exception with reference to Adams v Lindsell (1818) and the rule and reasoning from Household Fire Insurance v Grant (1879) which Pawel would rely on.

In order for the exception to apply, it must be reasonable to post and for this, explain the reasoning of Henthorn v Fraser [1892].

You can now apply the rules and reasoning to Pawel’s acceptance. Post was a permitted method and reasonable because of the pre-paid envelope provided. Pawel will then argue that acceptance took place on Wednesday when the form was posted.

Recognise that the post rule can be displaced by contrary intention and explain the points made in the reasoning of Holwell Securities v Hughes [1974].

Apply this to the facts. It would be argued by Gamer Phones that the instruction displaced the post rule and required notice of the acceptance in order for it to be effective. This could be based on the wording of the offer which stated that the order had to be ‘placed’ by 5pm Friday. Raise the question - does ‘placed’ suggest notice is required? It is not clear.

Conclude on the likely outcome. You could observe that it appears more likely that a contract was formed when the letter was posted. The fact that it arrived is likely to be enough proof of posting within the deadline. While the reference to ‘orders placed’ might suggest the need for notice, it is not clear. In such a case, given the reasoning of Thesiger LJ in Household Fire Insurance v Grant (1879), it could be argued that Gamer Phones had the opportunity to protect itself with the use of clearer wording. In the absence of that, they should bear the risks. If a contract was formed within the deadline, Pawel would be contractually entitled to the discount.

2. Daisy is a seller of high-performance cars. She received a written offer from a buyer for the purchase of her Audi RS7 for £50,000. The offer stated that if Daisy did not reply within two weeks, it would be presumed that Daisy has accepted the offer. She did not reply within that period. Is Daisy under an obligation to sell the car for £50,000?

Your introduction should acknowledge that since the question refers to an offer being made, the question is concerned with a narrow issue of acceptance by silence (inaction). The question is whether or not a contract exists for the sale of the car, and contract formation is based on an objective assessment of the parties’ intentions.

The starting point of the main body is the general rule on the communication of acceptance (e.g. Entores v Miles [1955]). Also, it can be observed that in the case of offers for a unilateral contract, the need for acceptance to be communicated can be waived by the offeror, but there is still an act of acceptance.

The leading case on acceptance by inactivity or silence is Felthouse v Bindley (1862). Explain it along with the reasoning. There have been some hints towards allowing for an exception for the rule (Goff LJ in The Leonidas D [1985] and Peter-Gibson LJ in Re Selectmove [1995]) but nothing conclusive.

Next apply rule and reasoning from Felthouse v Bindley to Daisy’s situation. Such inactivity is not enough for acceptance. In Felthouse, the nephew who received the offer had assumed he had a contract for the sale of the horse, and that was still insufficient.

Conclude on the point. In the absence of a very clear apparent intention to accept by inactivity, perhaps from previous dealings, then there is no real chance of Daisy having a contractual obligation to sell.

3. ‘The rule of receipt (the general rule) should apply to emailed acceptance’. Critically discuss.

In your introduction, explain that the default rule on acceptance to be applied to email has not been determined by the courts. Either it is the general rule requiring the message to be received, or it is the post rule under which the acceptance is effective when sent. Then state your approach – the reasoning of these approaches will be evaluated to conclude on the accuracy of the statement.

Start with the general rule on instantaneous communication by explaining the reasoning from Denning LJ in Entores v Miles [1955] and the guidance from Lords Fraser and Wilberforce in the Brinkibon v Stahag Stahl [1983]. Explain that such reasoning could apply to email communication. Academic opinion favours the application of the general rule to email (Donal Nolan, ‘Offer and Acceptance in the Electronic Age’ OUP, 2010) and there has been a little judicial support for this (Blair J in Thomas v BPE Solicitors [2010]).

As part of your critical discussion, explain the problems arising from the application of the general rule to email. This is about the uncertainties as to when such a message can be deemed to be communicated.

Then turn to the alternative of the post rule. Explain the reasoning behind the rule from Thesiger LJ in Household Fire insurance v Grant (1879). Now link this reasoning to the operation of email communication.

As part of your critical discussion, explain the problems associated with extending the post rule to email communication.

The final part of the main body could explain the opinion of Rajah JC in Chwee Kin Keong v [2004]. While it is from another jurisdiction, it remains the most detailed judicial discussion of the issue. Explain how and why the opinion leans towards favouring the general rule. This is about having an approach that is consistent with other jurisdictions.

Finally provide a conclusion on the point. In this you can recognise that your critical discussion has shown that there are disadvantages to both approaches. Recognise that in reality, the risks of email are so obvious that it is common for the terms of the offer to specify when acceptance takes place. Perhaps the answer lies in the point made by Lord Wilberforce in Brinkibon which recognised the need for flexibility based on the facts. 

4. Critically evaluate the way the courts have responded to the ‘battle of forms’.

Your introduction should explain what the ‘battle of the forms’ situation is, and why it presents a problem for the courts. Also address your approach by stating that it is necessary to evaluate the approaches represented in the main cases.

The first part of the main body should be an account of Butler Machine Tool v Ex-cell-o [1979]. Explain the approach of the majority which represented the last shot theory.

At this stage you can commence your critical evaluation. Refer to the merits of this traditional approach i.e. the appearance of certainty. Now refer to the criticism of the last shot theory, i.e. the scope for uncertainty resulting from arbitrary decisions on what is the last shot.

For the next step, explain the ‘compromise contracts’ approach preferred by Lord Denning MR and continue your evaluation by addressing the advantage and disadvantage of it. For completeness in terms of judicial suggestions, it is useful to recognise the first shot theory that Lord Denning also acknowledged.

Now turn to the more recent case of Tekdata v Amphenol Ltd [2009]. Explain the points made by Longmore LJ and Dyson LJ supporting the last shot theory but also how Longmore LJ felt the need to acknowledge Denning’s compromise contracts approach. 

Conclude with a wider reflection of the way the courts have responded to the battle of the forms. The courts have attempted to recognise a contractual relationship and maintain certainty with the last shot approach. They appear to have left open the possibility of some flexibility in case it is needed. Arguably this is the best position since no single rule can achieve absolute certainty, and at the same time, accurately reflect the parties’ intentions.

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