LAWS2111 L3, 2011

Acceptance ctd & Termination of offer

Instantaneous methods

  • Brinkibon v Stahag Stahl
    • General rule: Acceptance is communicated when and where it is received.

Entores v Miles Far East

  • Lord Denning’s examples:
    • Shouting across a road.
    • Telephone line goes dead.
    • Telex machine – similar to fax?
  • Correct distinction for e-messages?
    • Instantaneous or non-instantaneous?
    • Face to face dealing, or dealings at a distance?

Brinkibon v Stahag Stahl

  • Communication problems:
    • Message sent out of office hours;
    • Faults in receiving machine;
    • Use of third person (eg. Telstra, service provider);
    • Sender or receiver may be agents with limited authority;
    • Agents may not pass message to principals immediately.
  • Relevance of fault?
  • Lord Wilberforce considers:
    • intent of parties;
    • ‘sound business practice’ (that you sent it to the address you were given and during business hours); and
    • judgment of where the risk ought to lie.

The postal rule.

Adams v Lindsell

  • D offers:
    • ‘I’ll receive your answer in the course of the post’.
    • D sent to P. But it was addressed incorrectly, so there was a delay.
    • P immediately posted a reply of acceptance, but D had already sold the goods.
  • Held: Acceptance was made when it was posted.

Tallerman v Nathan’s Merchandise

  • Dixon CJ follows rule, but basis:
    • If contemplated use of post
    • Inference that letter reply would amount to acceptance.
  • Highly contentious correspondence between solicitors.
  • Normal assumption would be that there was no contract until communication of acceptance has been received. Counsel had assumed the postal rule applied, so he could not discuss the more relevant question.

Consequences of postal rule

  • If you’ve posted your acceptance, then a contract is made even if that letter is lost in the post.
  • When is a contract conluded?
    • Household Fire v Grant: Letter was lost. A Contract was already made.
  • Any presumption may be rebutted.
    • Holwell Securities v Hughes: Would accept by ‘notice in writing’. This meant that communication had to be received before the contract was made.
    • Nunin Holdings Pty Ltd v Tullamarine:
      • Land sale contract.
      • On 5 September, buyer’s solicitor sent the buyer’s signed contract: ‘The contract is forward on the basis that it will be held by you on our behalf pending receipt by us of an identical contract signed by the vendor company’.
    • Held: The postal rule was not intended as the letter clearly required receipt.
  • Vienna Convention on International Sales.

New forms of communication


  • Fax
    • Reese v Hamon-Sobelco: Instantaneous (acceptance upon receipt).
    • Would be the same if a memory facility is used?
  • Courier services, document exchanges.
  • Tele conferences: General principle (acceptance is made when and where it is received).
  • Email and web purchases:
    • Instantaneous (face to face); or
    • Is the service provider like a post service?
    • May not be a single rule, no authoritative case law.
    • Subject to Brinkibon principles.
    • Analyse the speed of transmission, liability, judgment of where risk should lie. There may be no simple answer as to whether acceptance occurs upon receipt or despatch.
    • Email sent > Service providers > Address box > Email read.
    • For web purchases, the customer makes the offer and the seller provides acceptance via sending a confirmation email or an equivalent.

So basically, the postal rule is an exception to the general rule.

Commerce legislation

  • Legislation based on UNCITRAL Model law on Electronic Commerce (1996)
  • Electronic Transactions Act 2001 (Qld)
    • s 14 Allows electronic signatures
    • s 23 Time of despatch
      • Unless otherwise agreed between the originator and the addressee of the communication, the despatch of the communication occurs when it enters the information system.
    • s 24 Time of receipt
      • (1) If the addressee of an electronic communication has designated an information system to receive electronic communications, then, unless otherwise agreed between the originator of the communication and the addressee, the time of receipt of the communication is the time when it enters the information system.
      • (2) If the addressee of an electronic communication has not designated an information system to receive electronic communications, then, unless otherwise agreed between the originator of the communication and the addressee, the time of receipt of the communication is the time when it comes to the attention of the addressee.
    • Are provisions dealing only with time (eg for service of documents) or also effectiveness of acceptances?
    • Model Law Guide discusses:
      • You do not ‘designate’ merely by giving an email address;
      • The acceptance is deemed to receive when ‘retrieved’ by A (not to A’s ‘attention’)
      • The acceptance system when it becomes available for processing in that system.

Acceptance communicated to or by agent

  • Brinkibon
    • Examples of agents being used
  • Authority of agent is crucial:
    • Did agent have authority?
      • Acceptance communicated by agent of offeree.
      • Acceptance communicated to agent of offeror.
    • Law of agency
      • Actual authority
  • Apparent (ostensible) authority.

‘Battle of the forms’

Butler v Ex-Cell-O

  • 23 May: Seller quotes price.
    • (1) ‘Orders subject to our conditions which shall prevail.’
    • (2) Price variation clause.
  • 27 May: Buyer replies with order.
    • (a) ‘On terms below and overleaf’.
    • (b) Tear off slip ‘Acknowledgment’ of buyer’s terms: ‘We accept [B] order on terms stated thereon’.
  • 5 June: Seller replies.
    • Returns acknowledgment slip.
    • Covering letter, delivery ‘in accordance with our revised quotation of 23 May’.
  • Lord Denning
    • Look at documents as whole.
  • Lawton LJ
    • Wide ranging modern warfare; or
    • Classic 18th C battle?
    • If acknowledgment was a counter-offer
      • Never was any acceptance: no delivery.
  • Held:
    • Acknowledgment was an acceptance (18th C approach?)
    • If you say that you accept and then add more terms (that don’t completely alter the contract), that is treated as acceptance.
  • Australian courts’ struggle:
    • Control is key (eg Empirnall)
    • If no performance (contrast with Butler), there may be no contract at all.
    • Vienna Convention Art 19(3)
      • Purported acceptance with new terms;
      • Treated as an acceptance unless:
  • Terms do not ‘materially alter’ offer.
  • Offeror objects to discrepancy without undue delay.
      • Contract is then offer subject to modifications.

Acceptance by conduct

  • Kriketos v Livschitz:
    • Not all contracts fit classical analysis.
    • Essential question (Allsop P at [14]):
      • Whether parties’ conduct reveals an understanding or agreement or a manifestation of mutual consent which bespokes an intention to be legally bound to the essential elements of a contract.
    • May look at subsequent conduct.

Termination of offer

General rules of revocation

Byrne v Van Tienhoven

  • Can revoke offer any time before acceptance.
  • Revocation to be communicated to offeree.
  • Letter of revocation effective on receipt (not posting)
1 Oct D offers by letter
8 Oct D posts letter of revocation
11 Oct P receives offer and telegraphs acceptance
15 Oct P confirms by letter
20 Oct D‘s letter of revocation arrives.

Held: Contract was made either on 11 or 15 October.

Evidence of revocation

  • Q1 Is evidence necessary?
    • Any method possible: ‘reliable source’?
    • Dickinson v Dodds
      • Plaintiff ‘knew as clearly as if the defendant had told him I withdraw’.
  • Q2 What of a ‘promise’ to keep an offer open?
    • eg. ‘Offer open for 6 weeks’ (Firm offers)
      • Dickinson v Dodds
  • Can withdraw offer as it is not binding.
  • Solution?
    • Make the offer contractually binding: separate obligation.
      • Collateral ‘offer’ contract.
  • eg. Blackpool case and process contracts.
  • Aspects of offer may be binding: can we create a collateral obligation?
    • Purchase or create an ‘option’
  • Contract subject to exercise of option.
    • Rely on ‘estoppel’
      • Waltons Stores v Maher.

Nature of an option

  • Purpose of Option: For buyer (you’re not in a rush); for seller (you can think it through)
  • Option to buy: Standing controversy: is it
    • Contract of sale (now)
      • Single contract
      • Conditional on exercise of option in stated period
      • Laybutt v Amoco.
    • Binding irrevocable offer?
      • Two contracts
        • (i) irrevocable offer contract
        • (ii) later sale contract
      • O’Halloran v Williamson
    • sui generis concept?

Firm offers: International solutions

  • UN Convention on Contracts for the International Sale of Goods (the Vienna Convention)
    • Enacted in Sale of Goods (Vienna Convention) Act 1986 (Qld)
      • Art 16(1) revoke before acceptance is despatched.
      • Art 16(2) Cannot revoke if:
  • there is indication that it is irrevocable (eg fixed time)
  • it is reasonable for the offeree to rely on the offer as being irrevocable and offer acted in reliance.
    • US Uniform Commercial Code (UCC) s 2-205:
      • Binding if:
        • (1) Signed writing;
        • (2) Time stated; or
        • (3) Reasonable time (max = 3 months).

Lock-out agreements

  • How far can the offeror lock-out competing offeror?

Walford v Miles

  • Seller decides to sell business.
    • £1.9 million offer from X.
    • Plaintiff offers £2 million.
      • Seller says it will not deal with any third party if the plaintiff provides a ‘comfort letter’ from the Bank.
      • Seller later refuses offer and sells to X.
      • Was S in breach of the lock-out ‘agreement’?
  • Held:
    • Lock-out for specified time (eg 2 weeks) potentially enforceable.
    • Lock-in agreement to negotiate for unspecified period was not enforceable (too uncertain.
      • Australian case law may not go so far (eg if express clause to negotiate in good faith).

Revocation and unilateral contracts

  • Withdrawing rewards offers
    • Give same degree of notoriety
    • Even if offeree does not actually see.
  • The ‘Walking to York’ problem
    • If ‘acceptance’ by completion of performance
    • Revocation after offeree starts performance?
      • Abbott v Lance (suggests that there is an implied promise that you won’t withdraw your offer while the other party is beginning performing their side).
      • Errington v Errington
      • Daulia v Four Millbank Nominees
        • Goff LJ: Implied obligations not to prevent performance being satisfied.
      • *Mobil v Wellcome

Mobil v Wellcome

  • 1991 Convention address.
    • Was also broadcasted via video, magazines and a brochure.
  • Statements to potential franchisees.
    • Reach various performance levels (90%)
    • Franchise will be extended at no cost.
      • ‘9 years for 6’ if 90% levels in each year.
      • Brochure tear off slip: ‘Yes … I want to participate’.
    • By 1995, Mobil had stopped judging excellence and refused to extend.
    • Plaintiff’s claim:
      • [Presumably no express term in normal franchise contract]
      • Had 1992-1995 performed at 90% levels.
  • No chance to continue for remainder.
  • Acceptance of offer was not by tear off slip.
  • But by performing and achieving the 80% levels.
    • Held on contract point:
      • 1991 address not an offer: too tentative and preliminary.
      • Obiter statements p 500– on revocation.
    • Acceptance by performance?
      • Would have been in 1997 (6 years).
    • Mobil
      • Revoked expressly (1995)
      • Prevented performance by stopping judging excellence (1996)
    • Not self evidently unjust to allow revocation:
      • Knowledge offeree has commenced performance?
      • Offeree may know of risk of revocation
      • “Commencement” is unclear – could be unjust
      • Act may be of benefit to both (here) or only detriment of offeree
      • Offeree not bound to continue; offeror does not know
      • May be evidence of an intent
    • Remedies available?
      • Damages if can prove achievement
      • [Injunction to stop interference?]
    • Correct position?
      • May be an implied ancillary contract not to revoke [or estoppel]
      • But not intended [objectively] here, as
      • What is commencement?
      • Performance was for benefit of both
      • Franchisees already had obligation to perform to high standards

Lapse of offer

  • Express time limit
  • If no express limit
    • Manchester Diocesan Case
      • Must accept offer in reasonable time.
    • Bartolo v Hancock
      • ‘Here and now offer’
  • Offer subject to a continuing or pre-existing condition
    • eg about offeree’s status (nationality, position).
  • Death of offeree
    • Carter v Hyde
      • Offeree’s PRs can accept.
      • Unless personal contract.
  • Particular skill or discretion needed (eg painter).
  • Death of offeror
    • Laybutt v Amoco
      • Assumed that offeree cannot accept if knows?
      • But option (as conditional contract) could be enforced against Personal Representatives (PRs)
  • Unless ‘personal’ contract.