LAW OF CONTRACT ELEMENTS OF CONTRACT ACCEPTANCE Prepared

LAW OF CONTRACT: ELEMENTS OF CONTRACT (ACCEPTANCE) Prepared by: NURUL NASIHIN ARIFFIN KPMBP

Definition • It is a final expression of assent to the terms of a proposal • S 2(b) of CA provides definition for acceptance • Also decides that only whom the proposal • The person accepting the proposal is called the ‘promisee’ or the ‘acceptor’.

Cont… • As with the proposal, acceptance can be made in writing, or orally or by conduct or by a combination of these methods. • General rule, acceptance must be communicated to the proposer.

Terms of acceptance • In order to convert an offer into a promise, the acceptance must fulfill an order as in sec 7(a) and sec 7(b). 1. Absolute and unqualified- sec 7(a) - if an offer is accepted by the introduction of a new term, then the acceptance is void and automatically will destroying the original offer. - the offeree does not make an acceptance, but is making a counter-offer. case: Hyde v Wrench

Cont… 2. Be expressed in some usual and reasonable manner -sec 7(b) - every acceptance must be made in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. case: Ignatius v Bell D give option to P to buy D estate before or on 20 August 1912 and acceptance must be in writing. P wrote acceptance letter and post it on 16 August 1912, but D receives the letter on 25 August 1912. P sued D when he refused to honour the contract. held: D is bind by the contract since parties to the contract agree to use postal service as manner of acceptance.

Cont… - usual n reasonable manner can be described by referring to: case: Lee See Heng v The Guardian Assurance Co. Ltd. Court in this case held that cancellation of P insurance policy by letter is valid since postal service is the most usual manner at the place where P lives and is commonly use while P holds the insurance policy.

Cont… • IS SILENCE CAN BE TREATED AS ACCEPTANCE TO AN OFFER? - silence is a situation when offeree refuse to give answer an offer. - the law has decided that silence CANNOT be treated as an acceptance to an offer. Case: Felthouse v Bindley D who is an auctioneer, is under duty to auction J. Felthouse property. P, J Felthouse uncle interested to buy a horse that is supposed to be auction. He wrote a letter to his nephew that reads, “ If I receives no news from you, I will consider the horse to be mine at the price of 30 pound. J felthouse does not answer the letter but has instructed the D to pull away the horse from being auction. By mistake the D sold the horse. P filed a claim. Held: it is true acceptance may be made according to prescribed manner. But someone has no right to prescribe silence as an acceptance.

Cont… - however, there is a situation where a silence can be treated as a valid acceptance. case: Weatherby v Banham where silence after received and reads a magazine after a the expired date of subscription is consider to be a valid acceptance.

Types of acceptance • An express acceptance can be made by express or implied. express by verbal or in writing implied by one’s action or behavior. case for implied: Western Electric v Welsh Dev. Agency.

Communication of acceptance • Generally, communication of an acceptance completes when it comes to the knowledge of offeror. • Eg; if A make an offer to B from the other side of river and A fails to hear acceptance by B because of the noise from the boat’s engine that passing the river, B’s acceptance is not valid. • But, if the offeror prescribed that doing some action is enough to show acceptance to him. • When letter and telegrammed are use as the manner of communication, a special rule will be used. The rule is ‘The Postal Rule’.

Postal Rule • The manner of acceptance for a letter or a telegrammed. • It is because the communication of an acceptance completes as against the offeror and against the offeree at a different time. • Sec 4(1)- the communication is complete when the offeree knows about the offer/proposal. • Sec 4(2)(a) , communication of an acceptance completes as against the offeror when offeree put the acceptance letter in a course of transmission, so as to be out of the power of the offeree. • Sec 4(2)(b), communication of an acceptance completes as against the offeree, when it comes to the knowledge of the offeror.

Cont… • Eg; A wants to sell his house to B for RM 200 thousand. A sent an offer letter to B on 1 July 2000. B received the letter on 4 July 2000. on 6 July 2000, B put acceptance letter in a post box at the post office. The acceptance letter received by A on 10 July 2000. • Before TPR introduced, a lot of questions arise. It might be unjust to the acceptor when the prescribe manner of acceptance is by post but then the acceptance letter has been delivered later than it supposed to be delivered or lost in post.

Cont… • However, if acceptance completes when acceptance letter is put in a course of transmission that would be unfair to the offeror. He has no knowledge of the acceptance, he fails to perform according to the contract, but later find out that he is responsible for a breach of contract. • Therefore, the postal rule is introduced. case: Household Fire Insurance v Grant The D has made an offer to buy shares in P company. P accepted the offer and sent the acceptance letter by post. The acceptance letter is lost in post. When P asked the money from D, D refused to pay and claims that there was no acceptance. held that there was acceptance as it completes when the acceptance letter is put in a course of transmission to him.

Cont… • TPR is appropriate in the sense that it is easier to obtain the sending proof rather than to obtain the receiving proof. • The acceptance letter consider put in a course of transmission to the offeror when it is put in to a post box or surrender to the post officer who has power to do so. • An offeree cannot easily accept a proposal by letter then claims that the acceptance completes.

Cont… • TPR applies only if the offeror prescribed the manner of acceptance is by post or when it is the most usual and reasonable manner to use. • Normally if the offer is made by post, the acceptance will be by post, unless the offer prescribed other manner of acceptance. • For the acceptance using facsimile machine, it is more to an express communication, therefore, it is consider as telephone conversation. *what if the facsimile delivering after office hour?

Revocation of acceptance & communication of acceptance • Sec 5(2)- acceptance may be revoked at any time BEFORE the communication of the acceptance is complete as against the offeree, but not afterwards. • Case: Dunmore (Countess of) v Alexander. Held: if the revocation letter delivered together with the acceptance letter, the revocation is effective. Sec 4(3)(a) the communication of revocation of either an offer or acceptance, is complete as against the person who make the revocation when he put the notice of revocation in a course of transmission, so as to be out of the power of the sender.

Cont… • Under sec 4(3)(b)- the communication of revocation is complete as against the person to whom it is made, when it comes to his knowledge. • Illustration: 1) A offers to sell his house to B for RM 200, 000 by a letter that send by post. Sec 4(1)- communication of an offer completes as against A and B when B receives the letter. 2) B accept A’s offer by sending an acceptance letter through post. Sec 4(2)(a) & Sec 4(2)(b)

Cont… 3) A revokes his offer by a telegrammed. sec 5(1), sec 4(3)(a) & Sec 4(3)(b) 4) B revokes his acceptance by a telegrammed Sec 5(2), Sec 4(3)(a) & Sec 4(3)(b) END ~~~THANK YOU~~~