Household Insurance Co V Grant

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An offer must be accepted to form a valid contract. Acceptance clearly shows the recipient’s commitment to the offer. Acceptance should be the negative, “mirror image” of the offer. Any attempt to alter the text is a repudiation (Hyde v Wrench (1840) (HC)).

Household Insurance Co V Grant

Wrench offered to sell the farm to Hyde for £1,000. It was not a “mirror image” of the proposal and therefore not an official confirmation. This was an objection and rejection of the original proposal.

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Sometimes in business there can be confusion about who gives and who offers. In Butler Machine Tool Co Ltd v Ex-Cell-O Corporation Ltd (1979) (CoA), the court held that in commercial negotiations, the contract is based on the parties’ final offer. This is called the “last shot” rule.

At this point, Butler sent Ex-Cell-O a chance to deliver the mech weapon. Ex-Cell-O replied, agreeing, but in a different way (the counter proposal is to donate them). Butler signed and returned the Ex-Cell-O affidavit. The court ruled that the parties entered into a contract under the terms of Ex-Cell-O because they fired the “final shot” that Butler agreed to by signing and returning the slip.

In the case of Tekdata Interconnections Ltd v Amphenol Ltd (2009), the court held that the “last strike” rule can be waived if the contract documents show a common purpose over other things.

If the terms of the offer are not clear, the contract will not be enforceable by a court and any acceptance will not be valid. In Scammell v Ouston (1941) (HoL) the words “on the terms of the hire purchase” were not defined and therefore too vague to be enforced.

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However, there are times when vague or ambiguous terms can be given a clear meaning by the courts. In order to achieve the intention of the parties, the court may refer to the commercial practice or past practice of the parties to clarify unclear situations. Courts must interpret the terms of a contract in such a way as to preserve rather than destroy its subject matter (Hillas v Arcos (1932) (HoL)).

Hillas bought wood from Arkos. The contract included an option to buy an additional 100,000 units at a discounted price to be negotiated the following year. Arcos refused to honor it because the terms were too difficult to meet, it was simply an agreement to accept the price. However, the court disagreed, saying the wording (reduced price/price fixing) was clear enough to be enforceable. The price uncertainty was due to the fact that the price of timber fluctuated over time, which was not enough to eliminate the entire contract.

It is important to define the meaning of each word. In Baird Textiles Holdings v Marks & Spencer (2001) (CoA), the definition of “reasonable” amount and value was not defined by the court because it lacked an objective basis for judgment. The agreement between the parties was not legally established and therefore it was not possible to interpret what the parties intended to accept the terms. It was easy to make a contract with words.

The offeror must respond to the offer upon acceptance. They cannot casually accept an offer without knowing it exists (R v Clarke (1927) (Australian HC)).

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The Australian government has offered a reward for information about the crime. Clark was a prisoner who gave a lot but forgot there was a reward. That’s why he couldn’t accept it.

“There can be no consent without knowledge of an offer, and ignorance of an offer is the same, whether through ignorance or forgetting after hearing,” Higgins J.

Another example is Gibbons v Proctor (1891) (HC). Officer Gibbons passed this information on to a friend. No reward has been given at this time. The information given by Gibbons was passed on to the Superintendent through several of his friends. By this time, the award was given. Grant requested that specific information be provided to the Superintendent, and most of Gibbon complied with this request (albeit through others) after studying the grant. Therefore, the court concluded that Mr. Gibbons had validly consented and could receive the award.

The offeree’s intention to accept is not necessary as long as he is aware of the offer (Williams v Cavardin (1833) (HC)).

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On the eve of her death, Ms. Cavardin told police the details of the murder because she wanted to die without thinking too much about it. When his descendants tried to claim the award, the award was rejected because the notice was not specifically issued to claim the award. The court found that it made no difference and he could receive the award.

If acceptance is posted, it is effective at the time of posting (see Post rule below). If the mode of communication is immediate, acceptance is effective upon acceptance by the offeror (Entores Ltd v Miles Far East Corp (1955) (CoA)).

The acceptance was telexed from Holland to England. The court ruled that a telex was a valid form of immediate communication by the recipient (such as face-to-face or telephone) and did not follow the postal law applicable to telegrams. This was an important decision because it decided where the treaty was made, England or Holland.

It was further emphasized that it is the sender’s responsibility to make every effort to receive the message. For example, if an airplane flies overhead while the acceptance is being received, the offeree will repeat himself to confirm that the offeror has heard. If they are not fulfilled, the acceptance will not be valid. However, if the message was not received through the sender’s fault (for example, the sender’s phone is faulty or the telex machine ran out of ink), the acknowledgment is valid. Acceptance is not required if the party is not at fault.

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Another point was made in Brinkibon Ltd v Stahag Stahal (1983); Acceptance is effective if the offeror has taken all reasonable steps to ensure that the message is delivered to the offeree when the offeror could reasonably be expected to do so.

Donor’s silence does not equate to acceptance. It was not clearly understood that silence constituted a public admission (Felthouse v Bindley (1862) (Court of Common Pleas)).

Felthouse offered to buy a horse for his nephew (Bindley). He said that if he doesn’t hear from his nephew, he will think it belongs to the horse. Bindley accidentally sold the horse at auction and his uncle sued for breach of contract. However, the court ruled that Bindley’s silence was a void contract and therefore no valid contract.

In limited circumstances, silence may be equally admissible (Rust v Abbey Life Insurance Co (1979)). Rust began negotiations and sent money for the purchase with Abbey Life. Then they sent him the documents to sign, but he did not return them for 7 months and asked for a refund. The court held that Rust’s silence and past conduct indicated consent even if he had not returned the signed order.

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The behavior of the invitee may indicate acceptance. If the offeror says nothing, but their conduct shows that they intend to accept, it may be a valid acceptance (Brogden Metropolitan Railway Co (1877) (HoL)).

Brogden provided a generous supply of coal to the Metropolitan Railway. The two parties decided to make a contract, but it was not properly signed. Nevertheless, the subsequent behavior of the parties (they continued to ship and receive large quantities of coal) forced them to agree to the agreement.

If consent is sent during business hours (approximately 9:00am to 6:00pm), it is considered published when it arrives, even if it is not read later (The Brimnes (1975) (CoA)).

The telex was sent during office hours (at 5.45 p.m.) but was not read until the following Monday. They were considered valid on arrival, even if not counted, because the donor would have expected to count them on arrival.

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Note that in this case it was a rescission, not an acceptance, but the law applies to both parties.

If the confirmation is sent outside business hours, it will not be received until the beginning of the next day. The donor cannot assume that the donor has seen it before. In Mondial Shipping v Astarte Shipping (1995) (HC) a telex sent at 11.41pm is effective on this day only.

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