Acceptance - Powerpoint

LAW2101 CONTRACT A
ACCEPTANCE
Lisa Di Marco
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Acceptance:
– introduction;
- objective test
Topics to be covered – Contract A
• Formation of Contract • Estoppel
– Agreement: Offer &
Acceptance • Terms and interpretation
– Consideration – Express Terms
– Intention to Creation Legal • Incorporation/
Relations identification
– Certainty • Construction
– Implied Terms
– Formalities – Australian Consumer Law
– Capacity
– Privity/ parties
4
Is there a contract?
• The question “Is there a contract?” requires the establishment of 4 material
elements:
– an agreement between the parties (often expressed as “offer” and “acceptance”);
– consideration (each party must give something in return for the other’s promise);
– an intention to create legal relations between the parties;
– the agreement must be complete and certain (i.e., there should not be any doubt
as to exactly what each party is obliged to do in terms of the agreement).
• Other aspects of formation:

– Certain formalities required for some types of contract
– A party must have capacity to contract to be bound
– Privity - only parties to the contract are bound
5
Agreement
• The traditional approach to establishing Agreement is through Offer and
Acceptance.
– Offer made by one party (the “Offeror”)
– Offer Accepted by the other party (the “Offeree”)
– Agreement occurs when acceptance is communicated by the Offeree
to the Offeror.
• But there are limits to this approach and there may be Agreement without
Offer and Acceptance.
6
Acceptance - definition
– “Unqualified assent to the terms of an offer”

Paterson, Robertson & Duke, Principles of Contract Law (5th ed, 2016) [3.75]
7
Acceptance – overview of issues
• Conduct constituting an acceptance • Silence and acceptance inferred from conduct
– What if the offeree says they didn’t intend to – Can an offeror prescribe silence as
accept, or misunderstood, the offer? acceptance?
– What if acceptance was a coincidence and – Can silence and conduct amount to an
not in response to the offer? acceptance?
• Communication of acceptance • Correspondence between offer and

– Acceptance must generally be acceptance
communicated. But at what time does – What if the terms of the offer and terms of
communication of acceptance occur in acceptance are not the same?
different mediums?
– Ticket cases: O and A under stress
• General rule
• Postal acceptance rule • Agreement without offer and acceptance
• Electronic comms – There may be agreement without O and A
– When is communication not required?
8
Conduct constituting acceptance
• Questions:
– What conduct amounts to acceptance?
– What if an offeree appears to be assenting to the offer but

was mistaken as to the terms?
– What if the offeree did not familiarise himself or herself with

the full terms of the offer?
9
Acceptance – modern approach - the objective
test prevails
• TEST: Would the reasonable person consider the parties to have
reached agreement having regard to their external manifestations.
– Fitness First (Australia) v Chong (2008) NSW SC
10
Fitness First v Chong NSW SC 2008
“But I didn’t
know about
Mrs Chong signed a written
contract for gym membership the $200 early
(without reading) terms. termination
Issue: Was Mrs Chong bound to fee!”
pay the $200 even though the
parties were not ad idem?
11
Facts:
• Mrs Chong became a member of Fitness First and signed a
contract.
• After several weeks she was unable to continue exercising
because of health problems and terminated her membership.
• Under the contract she was charged a $200 termination fee.
• She argued she did not know about the fee and never agreed to it.
Issue:
• Was Mrs Chong bound to pay the $200 even though the parties
were not ad idem?
12
Held:
• A valid contract does not require the parties to be of the same mind, or for
each to fully understand the terms of the agreement.
• The general rule is that a person who signs a document which is known by
that person to contain contractual terms and to affect legal relations is bound
by those terms and it is immaterial that the person has not read the
document (citing Toll v Alphapharm: Express Terms – Week 8).
• By signing the form, Mrs Chong behaved in such a way that a reasonable
person would believe she was assenting to the printed terms.
• Mrs Chong is bound by the contract, and to pay the $200 fee.
13
Unilateral contracts - consciousness of the offer
If a person returns a lost dog and

subsequently learns of the reward
that had been offered by the owner,
can the finder of the dog claim the
reward?
Question from Principles Book [3.80]
14
Unilateral contracts - consciousness of the offer –
an exception to the objective test
• In the case of unilateral contracts – the acceptance must be
in response to the offer.
– This is an exception to the general rule that external
manifestations of acceptance are conclusive. The subjective
intention of the offeree is relevant in unilateral contracts.
• The Crown v Clarke (1927) HCA
15
The Crown v Clarke (HCA 1927)
• Clarke (a suspect) gave
information that led to
REWARD conviction.
• He admitted he did this to

£1000 defend himself and not in
response to the reward.
For information as shall lead
to the arrest and conviction
of the person or persons • Issue – Could Clarke claim the
who committed the reward?
murders of John Walsh and
Alexander Pitman
16
Facts:
• Two Policemen murdered
• Reward of £1000 offered to anyone who gives information that leads to successful prosecution
• Clarke was arrested and charged
• Clarke gave information that led to conviction of Coulter. Admitted he did this to defend himself
and not in response to the reward.
• Clarke claimed the reward
Issue:
• Was there a valid contract between the Crown and Clarke?
Held:
• Clarke not entitled to the reward because the act of giving the information was not done in
response to the offer but for other purposes.
• By performing the act of acceptance, a presumption is generally raised that it is done in
response to the offer. However in this case Clarke’s own admission rebutted that presumption.
17
• Isaacs CJ: The person accepting and performing must act on the offer. Example: “an offer of 100
pounds for swimming in the harbour on the first day of the year would be met by voluntarily
performing the feat with reference to the offer, but would not in my opinion be satisfied by a
person who was accidentally or maliciously thrown overboard on that date and swam the distance
simply to save his life, without any thought of the offer. The offeror may feel morally impelled to
give the sum in such a case but would be under no contractual obligation to do so”.
• Higgins J: Clarke did not act on the faith of, or in reliance on the reward. Although the exact
fulfilment of the conditions stated in the reward would raise a presumption, that Clarke was acting
on the faith of, or in reliance upon, the reward, the presumption was rebutted by his own express
admission.
• Starke J: Ordinarily it is true that the law judges the intention of a person in making a contract by
outward expression only by words or acts communicated. The objective approach in determining
whether there was an agreement is usually applied. But, the position is different in a unilateral
contract where communication of acceptance is dispensed with. In such a case, evidence of
subjective intention can be taken into account.
18
Conduct constituting acceptance - review
• General rule - objective test applies:
– Fitness First v Chong
• Exception – unilateral contracts – act must be done “in response” to the offer:
– Crown v Clarke
[Reflect/consider? How do the objective and subjective approaches link to

theories and themes in contract law?]
19
Acceptance:
communication of
acceptance

different mediums?
• General rule
21
Communication of acceptance – the issue
• Why do you think communication of acceptance is necessary?
• Why might the time of communication of acceptance be important?
Consider this scenario: Sarah offers to sell her car to Barry for $10,000. Do you think Sarah
should be bound to sell her car to Barry in the following scenarios?
– Barry agrees but doesn’t tell her.
– Barry agrees and sends her an email to communicate his acceptance. Sarah sells the
car to someone else before she sees the email.
22
Communication of acceptance
• General rule - Acceptance must be communicated to the offeror by the offeree (Latec
Finance) – in any reasonable way unless a particular method of acceptance is prescribed by
the offeror.
– Exceptions:
• Acceptance inferred from conduct (eg Empirnall Holdings, Brambles)
• Offeror may dispense with need to communicate acceptance (eg Carbolic Smoke
Ball, many unilateral contracts).
• General rule – communication of acceptance is effective when and where it is

received by the offeror - (Latec Finance; Brinkibon)
– Qualifications:
• Postal acceptance rule: acceptance occurs when letter posted (Adams v Lindsell)
• Electronic Transactions Act – presumes time and place of receipt of electronic
communications
23
Latec Finance v Knight (1969 NSWCA)
• Hire purchase application form

completed by Knight.
• Latec Finance countersigned but

did not communicate acceptance.
24
Latec Finance v Knight (1969 NSWCA)
Facts:
• Knight signed hire purchase agreement for TV set.
• Form specified that it was an “offer” from customer (Knight) and not binding until signed by
LF (not affected by any pre-payment or delivery).
• LF processed and accepted the offer but did not communicate it to Knight.
• Knight returned the TV because it was unsatisfactory (ie purported to revoke the offer).
• LF sued for breach of contract and sought payment of instalments.
Issue:
• Had LF accepted Knight’s offer even though it had not communicated acceptance?
25
Latec Finance v Knight cont
Held (Jacobs JA)
• General rule: The ordinary rule is that an offer is not accepted until acceptance has been
communicated and actually received by the offeror.
• Qualifications: This requirement may be expressly or impliedly dispensed with by an
offeror, generally in one of two ways:
– Where an act is deemed effective acceptance (eg unilateral contracts, Carbolic)
– Where acceptance deemed effective by dispatch of communication in a particular way,
regardless of whether actually received (eg postal acceptance cases)
• Signing not acceptance here: LF argued that mere signing of form was acceptance (ie first
category above)
– NO – Clear language would be required to dispense with requirement to communicate
acceptance – otherwise LF could retain form without signing and choose if and when to
be bound.
• No inference of acceptance: Nor could one infer that Knight knew of the acceptance by
LF. Knight did not retain the TV for a significant length of time that it could be inferred from
his enjoyment that he knew Latec had effectively accepted (similar to inference from conduct
cases).
• There was no contract.
26
When and where is acceptance communicated?
• Not an issue when parties are in the same room (or location).
• But what if parties communicate other than face to face (eg post, email, telephone)?
• General rule - a contract is formed when acceptance is communicated to the offeror - when
(ie time) and where (ie place) the acceptance was received (Brinkibon)
• Qualifications:
– Postal acceptance rule – if it applies – acceptance effective on posting of acceptance.

Applicable only to non-instantaneous communication (eg post, telegraph – email?)
– Deemed times of receipt for “electronic communications” to a “designated address”
under the Electronic Transactions Act
27
Postal acceptance rule
• Relevant to non instantaneous communications (eg postal mail,
telegraph)
• The postal acceptance rule may apply depending on the intentions of the
parties:
– If it applies, a contract is made when and where the acceptance is posted,
even if it is received some time later or is lost in the post (Adams v
Lindsell (1818))
• Postal acceptance rule does not apply under the CISG:

– Articles 18(2) and 24 – ie general rule applies
28
Adams v Lindsell (1818 UK)
2 Sep Offer sent - The defendants wrote to the plaintiffs: offer to sell wool
(requested that the plaintiffs reply ‘in course of post‘).
5 Sep Offer arrived & acceptance sent - Letter of offer arrived (it was sent
to wrong address and arrived later than expected). The plaintiff
posted letter of acceptance that day.
8 Sep Wool sold to third party - The defendants sold the wool to someone
else (they had expected to receive any letter of acceptance from the
plaintiff by then).
9 Sep Acceptance received - Letter of acceptance was received two days

later than the defendants expected to receive it.
Issue: Had a contract of sale had been entered into?
29
Adams v Lindsell (1818 UK)
Held:
• The offer had been accepted as soon as the letter had been posted. So,
there was a contract in existence before the sale of the wool to the third
party, even though the letter had not actually been received by the defendant.
• [Note the parties had contemplated the mode of acceptance in the offer].
30
Postal acceptance rule – when does it apply?
Depends on the type of communication
• Does not apply to instantaneous communications (eg fax, telex) – Brinkibon Ltd v Stahag Stahl (1983 HL)
• Can apply to non–instantaneous communications – eg post, telegram
• What about near-instantaneous communications (eg email)?
Depends on the intention of the parties
• UK position – when postal acceptance contemplated:
– “Where the circumstances are such that it must have been within the contemplation of the parties that, according to
ordinary usage of mankind, the post may be used as a means of communicating the acceptance of an offer, the
acceptance is complete as soon as it is posted”
• Per Lord Herschell, in Henthorn v Fraser [1892] 2 Ch 27, at 33
• Australian position – narrower – when offeror contemplated and intended acceptance effective by post:
– “a finding that a contract is contemplated by the posting of a letter of acceptance cannot be justified unless it is to
be inferred that the offeror contemplated and intended that his offer might be accepted by the doing of that act”
• Per Dixon CJ and Fullagar J in Tallerman v Nathan’s Merchandise (1957) 98 CLR 93
No postal acceptance rule under CISG:
• “receipt” rule for acceptance – Articles 18(2) and 24
31
Email? (texts? interactive websites?)
“What is the position where a contract is agreed between parties communicating by electronic
mail? There are two opposing views:
(1) since the parties are negotiating at a distance, and an electronic mailbox is analogous to a
letter box, the postal acceptance rule should be applied by analogy; or
(2) since communication by electronic mail is more or less instantaneous, there is no analogy
with the postal acceptance rule.
Similar issues arise in relation to other modes of electronic communication, such as text
messages.
The better view is that the general rule of actual receipt applies. To begin with, the rationale for
not applying the normal requirement of acceptance by post, namely, delay in receipt, is not as
relevant to communication by electronic mail as it is to postal communication. In addition, it is
consistent with recent legislation dealing with certain aspects of electronic transactions.
However, the legislation does not expressly resolve the issue.”
Carter’s Guide to Contract Law (2016) [2-34]
32
Communication of Acceptance – ETA
The Electronic Transactions (Victoria) Act 2000 (Vic) (“ETA”) prescribes the time of dispatch and receipt of electronic
communications. This will in turn determine the time of communication of electronic communications for the purposes
of determining whether there has been acceptance:
• “Electronic communications” - Section 3 - definition
• Time of dispatch – Section 13
• Time of receipt: Section 13A
– sent to a designated address are effective when capable of being retrieved by addressee
– not sent to a designated address are effective when both capable of being retrieved by addressee and the
addressee is aware that the electronic communication has been sent to that address.
• Background: Based on key international conventions:
– United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce
(1996)
– United Nations Convention on the Use of Electronic Communications in International Contracts (2005)
[Linkage to other topics: We looked at the ETA in Week 1 (Offer) in relation to proposals to form contracts online
(invitations to treat), and we will also look at the ETA in Week 6 (Formalities) - formalities and the writing requirement]
33
ETA – “electronic communication”
Section 3 Definition:
• “electronic communication” means:
(a) a communication of information in the form of data text or images by means of ......
electromagnetic energy...; or
(b) a communication of information in the form of sound by means of .... electromagnetic
energy... where the sound is processed at its destination by an automated voice recognition
system”
• What does this mean?

– will cover email, text, online communications, fax, voice mail converted into text
– does not cover ordinary “oral” communications – eg telephone, voicemail
34
ETA – time of dispatch – s13
(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between
the originator and the addressee of an electronic communication, the time of dispatch of
the electronic communication is—
(a) the time when the electronic communication leaves an information system under the
control of the originator or of the party who sent it on behalf of the originator; or
(b) if the electronic communication has not left an information system under the control of
the originator or of the party who sent it on behalf of the originator—the time when
the electronic communication is received by the addressee.
(2) Subsection (1) applies even though the place where the information system supporting an
electronic address is located may be different from the place where the electronic
communication is taken to have been dispatched under section 13B.
Note: In a case where the postal rule applied to an electronic communication (rare/unlikely),
this section would be relevant to determining the time of dispatch.
35
ETA – time of receipt – s13A
Time of receipt of electronic communication:
• If an electronic address has been designated by the addressee:
• the time the electronic communication becomes capable of being retrieved by the
addressee* (13A(1)(a)).
• If no electronic address has been designated: The time when both (13A(1)(b)):
• The electronic communication becomes capable of being retrieved by the addressee*;
AND
• The addressee has become aware that the electronic communication has been sent to
that address.
• Parties may agree otherwise

* Assumed to be when it reaches the addressee’s electronic address unless otherwise agreed: (13A(2))
36
When is an electronic address “designated”?
• “By “designated information system”, the Model Law is intended to cover a system that has
been specifically designated by a party, for instance in the case where an offer expressly
specifies the address to which acceptance should be sent. The mere indication of an
electronic mail or telecopy address on a letterhead or other document should not be
regarded as express designation of one or more information systems.”
• Paragraph 102 of the Guide to Enactment of the UNCITRAL Model Law on Electronic
Commerce (1996)
37
Communication of acceptance – “receipt” rule applies under CISG
Postal acceptance rule does not apply:

• Article 18(2) – acceptance effective when it reaches offeror
– An acceptance of an offer becomes effective at the moment the indication of assent reaches
the offeror……
• Article 24 – when communication “reaches” addressee
– …. an offer, declaration of acceptance or any other indication of intention “reaches” the
addressee when it is made orally to him or delivered by any other means to him personally,
to his place of business or mailing address or, if he does not have a place of business or
mailing address, to his habitual residence.
– CISG Advisory Council Opinion No 1 – Electronic Communications under CISG: The term
“reaches” corresponds to the point in time when an electronic communication has entered
the addressee’s server, provided the addressee expressly or impliedly has consented to
receiving electronic communications of that type, in that format, and to that address. (ie
similar to our ETA).
38
Communication of acceptance - recap
• General rule - Acceptance must be communicated to the offeror by the offeree (Latec
Finance) – in any reasonable way unless a particular method of acceptance is prescribed by
the offeror.
– Exceptions:
• Acceptance inferred from conduct (eg Empirnall Holdings, Brambles)
• Offeror may dispense with need to communicate acceptance (eg Carbolic Smoke
Ball, many unilateral contracts).
• General rule – communication of acceptance is effective when and where it is

received by the offeror - (Latec Finance; Brinkibon)
– Qualifications:
• Postal acceptance rule: acceptance occurs when letter posted (Adams v Lindsell)
• Electronic Transactions Act – presumes time and place of receipt of electronic
communications
39
Acceptance:
silence and acceptance
inferred from conduct

different mediums?
• General rule
41
Silence and acceptance inferred from conduct
• Acceptance may not be inferred from silence

– Felthouse v Bindley (1862)
• But silence plus conduct may amount to acceptance

– Empirnall v Machon Paull (1988)
– Brambles Holdings Ltd v Bathurst City Council (2001)
42
Felthouse v Bindley (1862)
“If I hear no
more about
him, I consider
the horse mine
at £30 15s”
43
Felthouse v Bindley (1862)
Facts
• Negotiations between uncle and nephew over purchase of horse.
• Uncle wrote to his nephew offering to buy the nephew’s horse and said: “If I hear no more
about him, I consider the horse mine at £30 15s”.
• Nephew intended to accept the offer and instructed his auctioneer that the horse had been
sold and should be excluded from the other stock, but never told uncle.
• Auctioneer mistakenly sold the horse.
• Uncle sued auctioneer for conversion (ie auctioneer had no right to sell the horse because
property had passed to the uncle).
Held:
• No agreement because acceptance had not been communicated to the offeror/uncle.
Contract cannot be forced on offeree by stipulating silence as the prescribed method of
acceptance.
44
Empirnall Holdings v
Machon Paull (NSWCA 1988)
Empirnall –
Verbal makes
engagement of progress Further progress
MP as project payments. payments made
manager for But refuses to and work
property sign contract: continued.
development. MP “Eric does not Contract never
commences work. sign contracts” signed.
MP invoice for MP – continues work. Empirnall

progress “We are proceeding insolvent. MP
payments + on the understanding wants to rely on
written that the conditions of charge clause in
contract (with the contract are unsigned contract
charge accepted”. – so as to be a
clause) secured creditor.
45
Conduct as acceptance –
Empirnall Holdings v Machon Paull (NSWCA 1988)
Facts:
• Empirnall engaged MP (architects) to draw plans, obtain approvals and do other work in relation to a
property development.
• Empirnall then verbally engaged MP to be project manager for the development. Work commenced.
• MP sent an invoice for progress payments and submitted a written contract for the works. Two
progress payments were made but Empirnall did not sign the contract because (Mr Jury) “does not
sign contracts”.
• MP proceeded with works and wrote to Empirnall saying “we are proceeding on the
understanding that the conditions of the contract are accepted”.
• Further progress payments made and work continued but contract never signed.
• Empirnall became insolvent and MP sought to rely on contract clause that its fees were secured by
a charge over the land.
Issue:
• Did Empirnall accept MPs terms and conditions of the contract?
46
Empirnall v Machon Paull cont
Held
• Apply an objective test: Would a reasonable bystander regard the conduct of the offeree,
including silence, as signalling to the offeror that the offer has been accepted?
• Silence in conjunction with other circumstances may indicate that the offer has been
accepted.
• It is a question of fact:
– “where an offeree with a reasonable opportunity to reject the offer of goods or services
takes the benefit of them under circumstances which indicate that they were to be paid
for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was
accepted according to its terms” (McHugh).
• A contract had been concluded. Inferred by accepting benefit of services with knowledge of
the terms and conditions on which it was offered.
47
Brambles Holdings v Bathurst CC (2001 NSWCA)
Brambles operated
Council’s waste disposal
depot.
Dispute over Brambles’

entitlement to keep waste
disposal fees collected
from customers.
48
Brambles Holdings v Bathurst CC
Background:
• Brambles operated the Council’s waste disposal depot. Brambles was paid a monthly fixed
fee by Council, and also collected and retained waste disposal fees from customers.
• Dispute over the fees collected by Brambles for “liquid waste” between 1991 and 1995.
Brambles kept the fees, and Council argued that they should have been passed on to
Council.
• 19 September 1991 letter from Council to Brambles: stating that it had resolved to increase
the liquid waste fees payable by customers and that the increased fees should be passed on
to Council. Set out details of specific fees and timetable for increases.
• 3 October 1991 letter from Brambles in reply to Council’s 19 September letter: denying that
the contract between the parties covered liquid waste.
49
Brambles - what to read
• Note: Much of the case deals with whether or not a 12 July 1990 contract covered liquid
waste and interpretation of the 19 September 1991 letter. That is an issue of construction
and implication of terms which you do not need to worry about at this stage.
• You should focus on the discussion of acceptance and formation.
50
Brambles
• Trial Judge held that Brambles was required to pass on all the liquid waste fees collected as
a result of a contract formed by:
– An offer contained in a 19 September 1991 letter from Council to Brambles stating that it
had resolved to increase the liquid waste fees payable to customers and that the
increased fees should be passed on to Council.
– Acceptance of that offer by Brambles by way of proceeding to charge increased liquid

waste fees according to the amounts and timetable proposed in the 19 September letter
(ie by conduct).
• Brambles appealed.
51
Brambles
• Issues on appeal:
– Were the terms of the 19 September letter accepted?
• Was the 3 October letter a rejection of the 19 September offer?
• Had the 19 September offer been accepted by conduct?
• Note: The facts of this case exemplify a typical scenario where commercial parties operate
without a clear contract (either in terms of existence or content). This happens all the time.
Contract law does not neatly fill the gap.
52
Brambles
• Per Mason P and Ipp A-JA
– The 3 October letter was not a rejection of the offer but merely part of the posturing that often
accompanies negotiation (citing Stevenson Jacques).
– Brambles accepted the offer in the 19 September letter by charging the increased fees from
October 1991.
• Per Heydon JA
– The 3 October letter was a rejection of the Council’s offer.
– However the general principle that a rejection of an offer brings it to an end is not universal. A
rejected offer may remain operative if it were repeated or otherwise revived or if in the
circumstances it should be treated despite its rejection as remaining on foot, and available for
adoption as the basis of mutual assent manifested by conduct.
– By charging the higher fees according to the rates and timing in the 19 September letter, it
would appear to a reasonable person that Brambles had assented to those terms, despite its
initial rejection.
53
Brambles
• Per Heydon JA – discussed the limitations of offer and acceptance analysis in the classical
theory of contract formation and reviewed authorities:
– “ ..offer and acceptance analysis is a useful tool in most circumstances... But limited
recognition has been given to the possibility of finding that contracts exist even though it
is not easy to locate an offer or acceptance”
– “… it is relevant to ask: in all the circumstances can an agreement be inferred? Has
mutual assent been manifested? What would a reasonable person in the position of the
Council and a reasonable person in the position of the defendant think as to whether
there was a concluded bargain?”
54
Silence and acceptance inferred from conduct -
review
• Acceptance may not be inferred from silence
– Felthouse v Bindley (1862)
• But silence plus conduct may amount to acceptance

– Empirnall v Machon Paull (1988)
– Brambles Holdings Ltd v Bathurst City Council (2001)
55
Acceptance:
correspondence between
offer and acceptance

different mediums?
• General rule
57
Correspondence between offer and acceptance
• General rule - acceptance must correspond exactly with the offer
– If the offeree attempts to vary (or add to) the proposed terms, then the purported acceptance is a
“counter-offer” (ie a fresh offer) and the original offer is terminated
• Recall difference between counter-offer and clarification (Stevenson Jacques)
• Rule difficult in practice

– An initial offer is rarely accepted or rejected in its entirety – some terms accepted and some new
ones proposed.
– It is also common for parties to exchange their “standard terms” of contracting – in a “Battle of the
Forms” – see Butler Machine Tool Co.
• Other jurisdictions allow for acceptance with non-material alterations, subject to a right of the
offeror to object:
– CISG, Article 19
– UNIDROIT Principles of International Commercial Contracts 2016 (UPICC), Article 2.1.11
58
Butler Machine Tool Co v Ex-Cell-O Corp (UK CA 1979)
5 June - Seller letter says they
23 May - Quote will supply “in accordance with
our quotation”; and signs and
from seller returns buyer’s tear off slip:
(Butler), “we accept your order on the
includes price terms and conditions stated
variation clause thereon”
27 May - Reply from buyer Seller supplies

(ExCellO) with order: machine. Tries to
“please supply on terms claim under price
and conditions as below variation clause in
and overleaf”; and tear off 23 May quote.
slip for seller to sign. (No
price variation clause)
59
Butler Machine Tool Co v Ex-Cell-O Corp
Facts:
• Negotiations re sale of machine.
• 23 May - Seller’s quotation to sell machine included price variation clause
• 27 May - Buyer replied with order and tear off slip for seller to sign:
– “Please supply on terms and conditions as below and overleaf”. No price variation clause.
– Tear off slip for seller to sign: “we accept your order on the terms and conditions stated
thereon”
• 5 June - Seller signed and returned tear off slip with cover letter that they would supply machine
“in accordance with our ... quotation”
• Seller supplied machine and attempted to apply additional charge on basis of the purported price
variation clause.
Issue:
• Did the seller’s price variation clause in its 23 May quotation apply?
60
Butler Machine Tool
• Court was unanimous that the price variation clause did not apply but applied substantially
different reasoning.
• Lawton and Bridge LJJ: Conflict approach – ie find a winner (“last shot” approach)
– Applied the classic offer and acceptance approach.
– Seller’s 23 May quotation was an offer.
– Buyer’s 27 May order was a counter offer (the effect of which was “to kill the original
offer”).
– Seller’s 5 June letter with signed tear off slip was acceptance of the counter offer.
• The words “this being delivered in accordance with our.. quotation of 23 May” referred
to the price and identity of the machine, not the terms and conditions on the back
– Therefore the price variation clause did not form part of the contract.
61
Butler Machine Tool
Lord Denning – a “synthesis” approach – may be a combination of terms
– “In many ...cases our traditional analysis of offer, counter-offer, rejection, acceptance and so forth is
out of date... The better way is to look at all the documents passing between the parties - and glean
from them, or from the conduct of the parties, whether they have reached agreement on all material
points – even though there may be differences between the forms and conditions printed on the back
of them”.
– Described it as a “battle of the forms”
• In most cases the battle is won by whoever fires the last shot – who puts forward the latest terms
and, if not objected to, the other party is taken to have agreed to them.
But in some cases:
• the battle is won by whoever gets in first – whoever makes an offer on certain terms ought not to be
disadvantaged if the other party places an order on their own form with materially different terms
unless the different terms are specifically drawn to the offeror’s attention.
• the battle depends on the shots fired by both sides – terms and conditions of both sides are to be
construed together/reconciled to give a harmonious result (or conflicting terms replaced by
reasonable implication).
62
Butler Machine Tool
Denning cont – application to facts
• In this case, considering the documents as a whole – the 5 June letter (with signed
acknowledgement slip) is the decisive document. It makes it clear that the contract was on
the buyer’s terms which did not include a price variation clause.
Consider and reflect: Which approach is better?
63
Discrepancies between offer and acceptance -
CISG
• Allows for certain discrepancies between offer and acceptance:
Article 19:
1) A reply to an offer which purports to be an acceptance but contains additions, limitations or other
modifications is a rejection of the offer and constitutes a counter-offer.
2) However, a reply to an offer which purports to be an acceptance but contains additional or different
terms which do not materially alter the terms of the offer constitutes an acceptance, unless the
offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If
he does not so object, the terms of the contract are the terms of the offer with the modifications
contained in the acceptance.
3) Additional or different terms relating, among other things, to the price, payment, quality and quantity
of the goods, place and time of delivery, extent of one party’s liability to the other or the settlement of
disputes are considered to alter the terms of the offer materially.
• UPICC takes a similar approach to CISG (Article 2.1.11).
64
CISG: Battle of the forms – It’s a “knock out”
• The issue of battle of the forms is within the ambit of CISG (which deals with formation of contract),
however there is no specific provision on conflicting standard terms.
• While on its face, CISG appears to essentially adopt a “last shot” approach (Arts 18, 19), there is
growing acceptance of the “knock out” rule where the contract has already been performed &
conflicting standard terms were exchanged.
• Under Advisory Council Opinion No. 13. Rule 10 (2013) the “knock out” rule (not “last shot” approach)
applies under CISG, and contract is concluded on the basis of negotiated terms and any common
standard terms (conflicting terms are ‘knocked out’)…
– “Where both parties seek to incorporate standard terms and reach agreement
except on those terms, a contract is concluded on the basis of the negotiated
terms and of any standard terms which are common in substance unless one party
clearly indicates in advance, or later on but without undue delay objects to the
conclusion of the contract on that basis.”
65
Battle of the Forms - observations
• Traditional “last shot” approach prevails in the UK and probably Australia (Butler Machine
Tool).
• Where buyer and seller terms conflict, options are:

– There may be no contract
– There may have been acceptance by conduct
– There may be non contractual relief available (estoppel, misleading and deceptive
conduct, restitution)
• Under CISG:
– “knock-out” approach applies to international contracts for the sale of goods
– Article 19(2) allows for acceptance with non material changes
66
Ticket cases – offer and acceptance under stress
67
Ticket cases – O&A under stress
• Pose problems for identification of the offer (and acceptance), for a number of reasons.
– The process of contracting and ticketing vary
– Often contain new terms
– Often contain sweeping exclusion clauses
• However, the “conventional analysis”, considered the usual approach, is that the ticket is an
offer which the purchaser can accept or reject after he or she has had reasonable
opportunity to accept or reject
68
Mac Robertson v Commissioner of State Tax (WA)
(1975 HCA)
Facts;
• The airline’s passengers reserve a seat on flight, pay fare, and then receive a ticket
• Ticket contained conditions giving the airline the right to cancel a flight or a booking without
incurring any liability
Issue:
• Whether airline ticket is an agreement (for tax purposes)? (In particular whether the ticket
was chargeable with stamp duty as an “agreement” or a “memorandum of agreement”)
Held:
• Ticket did not record the terms of an agreement (but for different reasons…)
69
MacRobertson v Commissioner of State Tax
Stephen J: - no – ticket is the offer
• Adopted “conventional analysis” - ticket constitutes an offer by the airline capable of
acceptance or rejection by the passenger when he/she has had reasonable opportunity to
read the condition.
• Thus ticket only records terms of an offer.
Barwick CJ: - no because of exemption clause
• Sweeping exemption left no room for obligation to carry the passenger
• In any case, passenger makes the offer by presenting at the airport, and airline accepts by
carrying (ie, no contract until passenger provided with a seat on airplane). The ticket is a
receipt of the prepaid fare.
Jacobs J: - no – both of the above reasons
• Ticket is not a contract, based on reasons advanced by Stephen J and Barwick J.
70
Ticket cases - review
• The “conventional” approach isn’t always taken (courts have taken various analyses as to
when a contract is formed in ticket cases). There is no one-size-fits-all approach to
determine when a contract is formed in a ticket scenario. The particular facts need to be
carefully considered.
• Ticket cases often arise in context of incorporation of terms – (Week 8 – Express Terms):
– Baltic Shipping – contract formed when ticket issued to passenger
– Oceanic Sun Line – contract formed when exchange order issued in NSW by travel
agent to passenger (to be exchanged for ticket when boarding ship in Greece)
71
Ticket cases - review
When advising what approach you think a court would take as to when a contract is formed in a
ticket scenario, consider:
• the particular facts
• what arguments each party would make
• the conventional approach
• the different approaches taken by the judges in MacRobertson
• the approaches taken in Baltic and Oceanic Sun Line
• the fact that ticket scenarios raise the issue of how the technical approach of pinpointing a
moment of “offer” and “acceptance” can be difficult and artificial
72
Correspondence between offer and acceptance -
review
• General rule – acceptance must correspond exactly with offer
– Application – battle of the forms – conflict approach – Butler Machine
(majority)
• Comparison – CISG – battle of the forms – “knock out” approach

– Non material modifications allowed – Article 19
• Ticket cases
– “conventional approach” – ticket is offer, accepted through retention
without objection
– but often inappropriate – Week 8 cases – incorporation of terms
73
Acceptance:
- agreement without offer
and acceptance;
- review

different mediums?
• General rule
75
Agreement without offer and acceptance
What if you cannot identify a clear offer and acceptance?
• Consider possibility of acceptance inferred from conduct – Empirnall v Machon Paull,
Brambles v Bathurst CC
• A contract may be made without an identifiable offer and acceptance. Remember: this is a
last resort approach – first look to see whether you can identify a distinct offer and
acceptance.
– Test for agreement without offer and acceptance from Heydon JA in Brambles:
• In all the circumstances can agreement be inferred?
• Has mutual assent been manifested?
• What would a reasonable person in the position of the parties think as to whether
there was a concluded bargain?
76
Agreement without offer and acceptance
Other judicial comments in support of agreement without offer and acceptance:
• Lord Denning (minority) in Butler Machine Tool - “synthesis” approach to battle of the forms – “look at
all the documents passing between the parties and glean from them or their conduct whether they have
reached agreement on all material points”.
• Denning’s approach (Court of Appeal/disapproved by HL) in Gibson v Manchester City Council - “look
at the correspondence as a whole and at the conduct of the parties and see therefrom whether the
parties have come to agreement on everything that was material”.
• Lord Diplock (House of Lords), in Gibson v Manchester City Council - noted the possibility of
exceptional types of contracts “which do not fit easily into the normal analysis of offer and acceptance”
• Stephen J, in MacRobertson Miller Airline Services v Commissioner of State Taxation, noted that the
traditional offer and acceptance analysis “encounters difficulties when sought to be applied, outside the
realms of commerce and conveyencing, to the everyday contractual situations which are a feature of
life in modern urban communities”, for example ticket cases.
• Read [3.145] of Principles Book
77

different mediums?
• General rule
78
Acceptance – what you need to know
• What is acceptance?
• Must the parties be ad idem?
• How acceptance of a contract is to be determined?
– Bilateral v unilateral
• Rules concerning communication of acceptance

– When is communication of acceptance effective?
– When does the postal acceptance rule apply and what is its effect?
– What are the different rules for instantaneous v non-instantaneous communication
– What are the rules for the time of receipt of electronic communications?
• What conduct constitutes an acceptance of an offer?

– Silence and conduct
• What are the different approaches to resolving a “Battle of the Forms”?

• Can there be agreement without offer and acceptance?
• What are the different rules applying to offer and acceptance under the CISG?
79

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LAW2101 CONTRACT A

• Other aspects of formation:

– “Unqualified assent to the terms of an offer”

• Communication of acceptance • Correspondence between offer and

– What conduct amounts to acceptance?

– What if an offeree appears to be assenting to the offer but

– What if the offeree did not familiarise himself or herself with

If a person returns a lost dog and

Question from Principles Book [3.80]

• He admitted he did this to

[Reflect/consider? How do the objective and subjective approaches link to

• Communication of acceptance • Correspondence between offer and

• Why might the time of communication of acceptance be important?

– Barry agrees but doesn’t tell her.

• General rule – communication of acceptance is effective when and where it is

• Hire purchase application form

• Latec Finance countersigned but

– Postal acceptance rule – if it applies – acceptance effective on posting of acceptance.

• Postal acceptance rule does not apply under the CISG:

9 Sep Acceptance received - Letter of acceptance was received two days

Issue: Had a contract of sale had been entered into?

• What does this mean?

• Parties may agree otherwise

Postal acceptance rule does not apply:

• General rule – communication of acceptance is effective when and where it is

• Communication of acceptance • Correspondence between offer and

• Acceptance may not be inferred from silence

• But silence plus conduct may amount to acceptance

MP invoice for MP – continues work. Empirnall

Dispute over Brambles’

• You should focus on the discussion of acceptance and formation.

– Acceptance of that offer by Brambles by way of proceeding to charge increased liquid

– Were the terms of the 19 September letter accepted?

• Was the 3 October letter a rejection of the 19 September offer?

• Had the 19 September offer been accepted by conduct?

• But silence plus conduct may amount to acceptance

• Communication of acceptance • Correspondence between offer and

• Rule difficult in practice

27 May - Reply from buyer Seller supplies

Denning cont – application to facts

Consider and reflect: Which approach is better?

• UPICC takes a similar approach to CISG (Article 2.1.11).

• Where buyer and seller terms conflict, options are:

• Comparison – CISG – battle of the forms – “knock out” approach

• Communication of acceptance • Correspondence between offer and

• Communication of acceptance • Correspondence between offer and

• Rules concerning communication of acceptance

• What conduct constitutes an acceptance of an offer?

• What are the different approaches to resolving a “Battle of the Forms”?

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