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In order to form a valid contract, the offer made by the offeror must be supported with an acceptance by the offeree.
It is an action from the offeree which shows the agreement towards the offer.
Once acceptance is made, an agreement is created between the parties which would be the basis of a valid contract.
It is stated in section 2 (b) of the Contracts Act 1950:
"When a person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted; a proposal, when accepted becomes a promise".
RULES OF ACCEPTANCE
1) Acceptance must be made within the prescribed time or reasonable time
2) Acceptance must be absolute and unqualified
3) Acceptance must be communicated to the other party
WITHIN THE PRESCRIBED TIME, OR REASONABLE TIME
Acceptance must be made within the fixed time or duration, if it is stated in the proposal. If no time is fixed, the acceptance must be made within reasonable time.
Section 6(b) of the Contracts Act 1950 states:
"A proposal is revoked ... by the lapse of time prescribed in the proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance"
What amount to 'reasonable time'?
It is a question of fact. The Contracts Act 1950 does not mention clearly on this matter. Generally, we have to take some consideration, depending on the circumstances of the case.
In Article 18 (2) of the United Nations Convention on the International Sales of Goods mentions, "... within reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror..."
Macon Works & Trading Sdn Bhd v Phang Hon Chin [1976]
In this case, Hashim Yeop A. Sani J. ruled that the Court can take into account the conduct of the parties after the offer was made in deciding whether the offeree has allowed too long a time to lapse before accepting.
ABSOLUTE AND UNQUALIFIED
This requirement is mentioned in Section 7(a) of the Contracts Act 1950 which reads:
"In order to convert a proposal into a promise, the acceptance must be absolute and unqualified".
Is is also known as 'mirror image rule'.
A promisee/ offeree must accept the terms of the offer exactly the same terms as proposed by the promisor/ offeror without any addition, modification, variation or amendment.
Any addition, modification, variation or amendment does not amount to acceptance. It is known as counter-offer. As a result, the original offer will be terminated and it can no longer be accepted in future.
For example, Dollah is offered a Honda City car for RM45,000.00 by Solehah. In this situation, he has to accept the offer as it is.
If Dollah asks Solehah to reduce the price to RM40,000.00, he is making some modification to the terms of the proposal. Dollah is said to make a counter-offer. This counter-offer acts as a new offer from Dollah to buy the car at RM40,000.00. Automatically, the original offer has been terminated and can no longer be accepted in the future.
Hyde v. Wrench [1840]
On 6 June, the defendant offered to sell his estate to the plaintiff for £1000. The plaintiff replied on 8 June and made a counter-offer to purchase the estate at £950. On 27 June, the defendant refused to accept this. Two days later, the plaintiff wrote to the plaintiff that he accepted to purchase the estate and prepared to pay £1000. The defendant refused and the plaintiff sued the defendant for specific performance.
The court held that there was no acceptance between the parties. The counter-offer made by the plaintiff on 8 June had rejected the original offer which could not be revived.
However, request for further information does not fall under counter-offer. If someone seeking for clarification, the proposal will not be rejected by doing so.
Stevenson v. Mclean (1880)
The defendant offered to sell iron at 40s per ton. Plaintiff sent a telegram to the defendant requesting to know whether the defendant would accept 40s to be paid over two months or if not, the longest limit the defendant would give.
There was no response from the defendant and the defendant then sold to the third party, thinking that the plaintiff had rejected the offer. The plaintiff sued for breach of contract. The defendant pleaded in defence that the telegram sent by the plaintiff on Monday morning was a rejection to the defendant's offer and constitute a new proposal on the plaintiff's part.
The Court held that the plaintiff's telegram on Monday morning was meant only as an inquiry and was not a counter-offer. There was no rejection to the offer and therefore, there was a valid binding contract between the parties when the plaintiff accepted the offer of the defendant.
ACCEPTANCE MUST BE COMMUNICATED
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