Acceptance in Contract

ACCEPTANCE IN CONTRACT (Explanation, Invalid Forms & Communication)

ACCEPTANCE

Another constituent part of a contract is acceptance, i.e, for there to be a contract, there have to be acceptance. In (Zackem Construction Nig. Ltd v. Emmanuel Nneji), the court held thus:“An offer must be accepted in order for a transaction to crystalize into a contract”.

Acceptance can be define as the final and unqualified expression of assent to the terms of an offer. It was defined in Akin Akinyemi v. Odu’A Investment Co. Ltd thus:
‘’ Acceptance is the agreement of the offeree to enter into a legally binding contract with the offeror in the terms of the offeror’s offer’’

To be effective and valid, an acceptance must be plain, unequivocal, unconditional and without variance of any sort to the offer. In (Bilante International Lrd v Nigeria deposit Insurance corporation), the court held: “An offer must be unconditionally and unequivocally accepted”.
any deviation or distraction from the terms of the offer does not amount to an acceptance.

In Dalek Nig Lrd v Ompadec), the court held that:
“A qualified acceptance of an offer cannot give rise to a binding agreement between the parties”.
Furthermore, an acceptance must be communicated either expressly or impliedly for it to be able to stand as valid or effective. Silence does not constitute Acceptance.

Thus, in (Felt House v Bindley), the court dismissed the application of the plaintiff to rely on a silence acceptance given by his Nephew who wants to sell a house to him.

An acceptance can however be impliedly accepted. In this situation, the court will have to determine objectively from the conduct of the parties whether there have been an acceptance to constitute a contract. In (Brodgen v Metropolitan Railway Co.), the court established that both parties had been acting on the terms of an unsigned contract over a reasonable period of time.

Invalid Forms of Acceptance

However, it has been established that some acceptance are invalid despite their purported form of validity. These include:

(a) COUNTER OFFER

In (Bilante International lrd v Nigeria Deposit Insurance Corporation), it has been established that an offer must be unconditionally and unqualifiedly be accepted.

A valid acceptance is one which does not vary the terms of the offer in any form. Where an offeree claims to accept an offer made to him by the offeror but it turns out that he did not totally agree with the term contained in the offer and goes further to subtract or add to the terms of the offer, it is known as a counter offer. In (Invite v Ferando Agro Consortium Ltd), the plaintiff replied an offer with:
“Thank you for the offer but we will kindly request that period of payment be extended”
It was held that the statement was a counter offer.

A counter offer when presented does two things. It destroys the previous offer and present a new offer.

Thus, in Hyde v Wrench, Wrench offered to sell his farm to Hyde for 1200 euros, an offer which Hyde declined. Days after, Wrench wrote to Hyde offering to sell the farm for 1000 euros, stating that it was the final offer. Hyde offered 950 euros which Wrench rejected. Hyde later accepted to buy the farm 1000 euros but Wrench refused.
The court held that when a counter offer is made, this destroys the original offer. A new offer is a new offer which follows the rule of offer and Acceptance.

B. CONDITIONAL ACCEPTANCE
A conditional acceptance is not a valid acceptance, when acceptance of an offer is predicated on a condition, there is no contract between the parties until the specified condition has been fulfilled. Conditional acceptance can be in two forms:

1. SUBJECT TO CONTRACT
In (I.T.I v Aderemi), it was held:
“When the phrase ‘subject to contract is employed in an appropriate situation, with a clear measure of intention, there cannot be valid contract until formal contracts are exchanged”
Based on the foregoing, where agreement is made “subject to contract”, a binding contract does not ensure between the parties until a formal contract has been executed between them. This is a rule of long standing and has been regularly applied since the 19th century.

In Win v Bull, the court held that the clause that makes the agreement subject to preparation of a formal contract prevents the contract from being enforced.

2. PROVISIONAL AGREEMENT
The interpretation of the term provisional agreement has been a source of some uncertainty, confusion and controversy due to the fact that the court has held it to constitute a non binding contract and binding contract in some other instances.

Thus, in (Brance v Cabarro), the defendant agreed to sell a farm to the plaintiff. The agreement contained the following clauses

“This is a provisional agreement until a fully legalized agreement drawn up by a solicitor and embodying all the conditions herein stated signed”.

The plaintiff cancelled the contract and brought this proceeding to recover the deposit he made on the ground that there was no concluded agreement.

It was held that the parties intended to be bound from beginning. This was based on the words used in conjunction with the term “provisional” and other factors like the payment of a deposit and the use of a witness to the agreement all which pointed towards the intention of the parties that the agreement should be binding from the beginning.

Also, in the Nigerian case of (Attorney General of the Federation v Awodu), an offer of scholarship was made to the defendant by the plaintiff with a clause which reads.
“your acceptance of the provisional award does not place you under any obligation whatsoever with the Federal Government until you sign and execute this bond to that effect”.

The defendant accepted on these terms, but did not sign the bond during the 4 years of his course of study. When he refused to observe the requirement of him serving the federal government, the plaintiff sued to recover the cost of his sponsorship. The court held that he was bound to make the refund that the word “provisional” in the agreement indicated that the agreement was binding from the beginning such that failure to sign the bond was immaterial.

The above court decision has led to various logical debates. Although the court relied on the decision in Branca V. Cabawo, it can be observed that the context which the word “provisional” is used in both cases are not similar. Hence, the decision of the High court of Lagos could be criticized.
On the other hand, a line of reasoning can also opine that since the defendant understood the terms of the offer to serve the Federal Government for 5 years after the completion of his scholarship and nevertheless accepted by his conduct, he cannot feign pretense of ignorance by playing on the words in the clause of the offer.
From the foregoing, it can be concluded that the word “provisional” in an agreement does not automatically make the agreement binding on the parties. The context of its usage should be carefully considered.

C. CROSS OFFERS
Cross offers occurs when two offers, identical in terms are sent by two parties to each other. When an offer proceeds from one party to another by some coincidence and in total ignorance by both parties, it is known as cross offers and there is no contract yet between the parties because for a contract to emerge, there must be a meeting of the minds (Consensus adidem).

In (Tinn v Hofman $ Co), the defendant wrote to the plaintiff offering to sell him 800 tons of iron at 69 shillings per ton. He requested a reply to this offer by post. On the same day without knowing of this offer, the plaintiff wrote to the defendant offering to buy 800 tons at 69 shillings per ton. The letters crossed in the part.
It was held that there was no contract. There must be offer and acceptance in order to have a valid contract.

D. ACCEPTANCE IN IGNORANCE OF OFFER
This is a situation where someone claims to accept an offer he was not aware of. Someone ignorantly acts based on the terms of an offer but he does not have the knowledge of the offer.

The problem arises mainly from the “reward” cases or unilateral contracts. There can be no acceptance in ignorance of offer, not even if what a person did was exactly what the offeror has requirement to be done in acceptance of his offer, it will amount to an invalid acceptance.

Therefore, in (Fitch v Snedaker), in consequence of the murder of a woman the defendant promised a monetary award to any person who gives information leading to the apprehension and conviction of the murderers. Jones, one of the plaintiffs claimed that he gave the information the day the woman was found dead. The court held that he was unaware of the offer, he did it for public good and therefore cannot lay claim to the benefits.

E. ACCEPTANCE OF TENDERS
Advertisement for tenders by contractors are known to be invitation to treat. The submission of the tender by a party is the offer. Acceptance is when the contractors chooses the bid. When it is communicated; a contract is thereby made.

However a distinction has been made between when a tender for the supply of a number of goods is specific and when it is not specific.

When it is specific, there would be a firm contract right from the beginning for the supply of the specified quantity.

In the other situation where it is not specific, there is no binding contract. The supplier’s tender is merely a standing offer and a contract merely comes into existence on each occasion the contractor makes a specific order. The implication of this is that in between order, any of the parties is at liberty to bring an end to the agreement but there must be notification.

In (Great Northern Railway v. Witham), the court held that the defendant failed to give notice of their refusal to supply the goods at the fixed price anymore. They are therefore bound by the contact.

COMMUNICATION OF ACCEPTANCE

1. WHERE PRESCRIBED
Where the offeror stipulated a particular means of communication of the acceptance, the offeree must comply with this mode if it is mandatory except the offeror is willing to wave his prescription. The mode of communication where stated by the offeror is part of the terms of the offer, it is not meant for the offeree to deviate from it by adopting another means of acceptance unless it will amount to something else other than acceptance.

In (Eliason v Henshaw), the court held that an offer is not meant to be qualified or deviated from when accepted. And that the offer were entitled to reject the acceptance since the offeree did not abide by the means of communication prescribed.

Although, the English law looks a bit different from this. Contrary to the position in Nigeria, English cases suggests that where a mode of acceptance is prescribed but the offeree choose to accept the offer by an equally faster means, the acceptance does not become invalid in so far as the means adopted is not less advantageous to the offeror.

In (Tinn v Hofman & Co), acceptance was requested by return post. The court held that it does not mean exclusively a reply by return post, but that you may reply by any other means not later than a letter written by return post.

2. WHERE MODE OF COMMUNICATION OF ACCEPTANCE IS NOT PRESCRIBED.
Where no form of communication of acceptance is prescribed by the offeror, it suffices if the offeree communicated the acceptance by the same means used by the offeror in making the offer. Thus, an oral offer implies an oral acceptance.

If the offer is by telegram, fax, or email then a prompt reply is indicated and acceptance should be by the same means.

In most cases, acceptance does not occur until received by the offeror.

ACCEPTANCE BY POST

Acceptance by post has been treated as a different form of acceptance entirely. Unlike other modes of acceptance where agreement does not take effect until communication of acceptance reaches the offeror, the rule with acceptance by post is that acceptance takes effect and therefore the contract comes into existence the moment a letter of acceptance is posted.

This rule was laid down in the locus classicus case of Adams v Linsell. The defendant, a wool merchant, through a letter on September 2 offered to sell a quantity of wool to the plaintiffs and required a reply by post. The defendant misdirected the letter and it did not reach the plaintiff until September 5.

That same day, the plaintiff posted a letter of acceptance which reached the defendant on September 9th Meanwhile on September 8, not having received a reply from the plaintiffs, the defendants sold the wool to another person. The plaintiff argued for breach of contract.

The question for the court to determine was whether a contract of sale had been entered into before 8 September when the wool was sold to the third party. The court held that in a contract concluded by post, the contract comes into existence the moment the letter of acceptance is ported and so a valid contract had come into existence on the 5th.

Subsequently, similar cases have been decided the same way. Thus, in (Household fire Insurance v Grant), the defendant applied for shares in the plaintiffs company. The shares were allotted and letter of allotment was duly posted.

The letter was lost in the post and never delivered and so the defendant was not aware that he was already a share holder in the plaintiff’s company. When the company went into liquidation, the defendant refused to pay for his shares claiming that he was not a shareholder.

The court held that acceptance of the defendant’s offer was held to be completed the instant the letter was ported and that the fact that the letter was never delivered did not change the legal position of both parties.
Generally, due to the error-prone nature of posting, acceptance of offer should not be communicated by post except it was stipulated in the terms of the offer.

Exceptions to the Rule in Adams v Lindsell include:

  1.  The rule will not apply where the offeror indicated, expressly or impliedly, that acceptance will not be effective until received.
  2. Where the application of the rule will produce manifest inconvenience and absurdity
  3. Where the letter of acceptance was wrongly addressed or inadequately stamped.
  4. Where the letter was not properly posted.
    Thus, in (Re London & Northern Bank, ex p. Jones), Dr. Jones makes an offer to the bank. At 7.00AM, a letter of acceptance was handed by the bank’s employee to a post man at a General Post Office who had no authority to receive letters. The post man posted it at a district office and the letter was not delivered till 7:80pm. Meanw3hile, earlier that day, Dr. Jones had written a letter withdrawing his offer. This letter was received at the bank at 9:30am. The court held that postal rule did not apply due to incorrect posting.

Contributor: Adedokun Samuel

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