Law of Contract was actually my most favourite subject among all of other law subjects. It was because this particular subject was quite straight forward and all the problems were based on an unquestionable facts, not like in Criminal Laws in which there were different facts argued from different parties.
Tonight, I am going to share part of my assignment answer during my first year in Faculty of Law, UiTM. (I don't know why I had to be so 'academician' tonight.)
As far as I'm concern, people around me were so amazed when I told them that I actually studied law. Most of them pictured that law subjects were quite tough and law students were smart enough to be accepted as a law student. HAR HAR. I had no ideas at all (but I was quite a top student during my high school, so maybe, yeah) LOL.
Personally, I chose law because I was not good in calculation and I was not interested in Mathematics since I was like 7 or 8 years old. I had to admit that I really love readings and by choosing this course, I had to admit another fact that, I really enjoyed doing research and stuffs.
Apart from being exposed to the extreme English language (which is not my first language in daily communication), I felt that law really brought me to travel to the entire world without having to board an airplane - for example, I did learned on the Scandinavian customs during my International Law class as well as in my Jurisprudence lectures. I also had being told during my International Law lectures that, there were actually more than hundred ships did passed our Malaysian waters everyday and Melaka was one of the busiest water passage in the whole world! (This is also one of the main reason for attending classes, as I barely read the newspaper and watching news on tv.)
Next, as I enjoy watching National Geographic and some other documentary tv channel, I was so fascinated to watch how the Scandinavian people survived during winter and did I mention that during my pregnancy, I love to watch the River Monster series! (I don't know why...but my husband did enjoy fishing, so now, part of him was like, with me sometime!) HAHA.
Okay let's see...my first year assignment answer sheet of, Law of Contract 1.
QUESTION
On 1 January 2005, Doris proposed to sell a computer to Andrew at RM3,000.00. It was stated in the proposal that acceptance must be made at the latest by 15 January 2005. Andrew wrote a letter to Doris accepting the proposal and posted the said letter on 5 January 2005.
Meanwhile, Doris received a letter from Kim offering to buy the said computer at RM3,800.00.
On 6 January 2005, Doris called Andrew to revoke her proposal. Since Andrew was not at home, Doris left a message with Andrew's wife, Fiona.
The letter of acceptance by Andrew was misdirected and it reached Doris on 16 January 2005.
Fiona had forgotten to inform Andrew about the revocation and only told him about it on 8 January 2005.
Based on the above facts, answer the followings:
i) Advise Andrew whether he is entitled to the computer. (20 marks)
ii) Would your answer to (i) above be different if the letter of acceptance by Andrew was posted on 9 January 2005? (10 marks)
ANSWER (i)
There are several issues arise in the case given. Firstly, whether the communication of acceptance by Andrew is complete; secondly, whether the communication of the acceptance by the postal rule constitute a legally binding contract between Doris and Andrew; thirdly, whether the revocation made by Doris on 6 January 2005 being affected; and finally, whether there is a legally binding contract between Doris and Andrew in which, whether Andrew is entitled to the computer.
In solving the above issues, the relevant provisions involve are Section 3, Section 4(2)(a), Section 4(2)(b), Section 5(1) and Section 4(3) of the Contracts Act 1950.
SECTION 3 OF THE CONTRACTS ACT 1950 provides that, the communication of the acceptance of proposals is deemed to be made by any act or omission of the party accepting by which he intends to communicate the acceptance and which has the effect of communicating it. Like the proposal, an acceptance can be made in writing, or orally or by conduct or by combination of these methods.
While SECTION 4(2)(a) and (b) OF THE CONTRACTS ACT 1950 provides, for the communication of acceptance where there is a gap of time between the communication of acceptance by the acceptor and the receiving of that communication by the proposer, for example, by post or telegraph. With regard to postal communication and telegraph, acceptance is complete upon posting or dispatch of the telegram.
Under SECTION 5(1) OF THE CONTRACTS ACT 1950, a proposal may be revoked at any time before the communication of its acceptance is complete against the proposer, but not afterwards.
SECTION 4(3) OF THE CONTRACTS ACT 1950 provides that, the communication of revocation of a proposal is complete (a) as against the proposer, when it is put into a course of transmission to the promise so as to be out of the power of the proposer; and (b) as against the promise, when it comes to his knowledge.
There are also relevant cases regarding the above issues.
As in the case of Entores Ltd v. Miles Far East Corporation (1955), the Plaintiff's company in London made an offer by Telex to the agents in Holland of the defendant's corporation, whose headquarters were in New York, for the purchase of a quantity of copper cathodes, and their offer was duly accepted by a communication received on the plaintiff’s Telex machine in London. The Plaintiff company sought leave to serve notice of a writ on the defendant's corporation in New York claiming damages for breach of contract. The Court held that, although where a contract is made by post, acceptance is complete as soon as the letter of acceptance is put into the post box, where a contract is made by instantaneous communication, for example, by telephone, the contract is complete only when the acceptance received by the offeror, since generally an acceptance must be notified to the offeror to make a binding contract; and that since communications by Telex were virtually instantaneous, the contract in this case was made in London. Accordingly it was proper case for service out of the jurisdiction.
While in the case of Adams v. Lindsell (1818), the Defendant wrote to the Plaintiff proposing to sell wool on certain terms. The Defendant misdirected the letter and it reached the Plaintiff later than usual. Not receiving a reply, the Defendant sold the wool to a third party. The Plaintiff, upon receiving the proposal letter, immediately posted acceptance. The Court held that, the acceptance was complete upon posting and that there was a valid contract between the parties.
In Ignatius v. Bell (1913), the Defendant gave an option to the Plaintiff to purchase a piece of land on the condition that the option must be exercised on or before 20 August 1912 by a notice in writing. The plaintiff exercised the option by posting a letter on 16 August. The Defendant only received the letter on 25 August. The Plaintiff sued the Defendant for specified performance. The Court of Appeal held that, the parties had contemplated the use of the post as a means of communication and thus Section 4 of the Contract Enactment applies. The acceptance was complete as against the proposer, Bell (the Defendant), when it was out in a course of transmission to him as so as to be out of the power of the acceptor, in other words, when it was put into the post on 16 August 1912.
Next, in the case of Byrne v. Van Tienhoven (1880), by letter of the 1st October, the Defendants wrote from Cardiff offering goods for sale to the Plaintiffs in New York. The Plaintiffs received the offer on the 11th and accepted it by telegram on the same day, and by letter on the 15th. On the 8th of October, the Defendants posted to the Plaintiffs a letter withdrawing the offer. This letter reached Plaintiffs on the 20th October. The Court held that, the withdrawal was inoperative, a complete contract binding both parties having been entered into on the 11th October when the plaintiffs accepted the offer of the 1st October, which they had no reason to suppose was withdrawn.
In the given situation above, Andrew wrote a letter to Doris accepting the proposal of buying a computer at the price of RM3,000.00 and posted the said letter to Doris. Andrew had communicated his acceptance of Doris's proposal in writing. There was a communication of acceptance made by Andrew according to SECTION 3 OF THE CONTRACTS ACT 1950 because Andrew had indicated his willingness to accept the offer to buy the computer for RM3,000.00. However, by indicating the acceptance by putting it in writing, did not actually amount to the effective or completing the contract.
The question arise is when does the communication of acceptance is complete. In the other words, when does Andrew’s communication of acceptance is complete. The general rule is that an acceptance has no effect unless it is communicated to the proposer. An acceptance is ‘communicated’ when it is actually brought to the notice of the proposer. So here, Andrew’s letter of acceptance must come to the knowledge of Doris then, the acceptance by Andrew would have considered as complete.
Somehow, in the situation given, it is to be highlighted that Andrew is using the post method in which the principle of the general rule is not applicable. Here, the exception of the general rule is called the ‘postal rule’ or ‘the course of transmission’. The communication of acceptance where there is a gap of time between the communication of acceptance by the acceptor (Andrew) and the receiving of that communication by the proposer (Doris), for example, by post. With regard to postal communication and telegraph, acceptance is complete upon posting or dispatch of the telegram; this principle has been laid down by virtue of SECTION 4(2)(a) and (b) OF THE CONTRACTS ACT 1950.
When Andrew’s wrote his letter of acceptance, the communication of acceptance between him towards Doris is considered as complete starting at the point when Andrew posted the letter to Doris. So in this case, there was a complete communication of acceptance by Andrew on 5 January 2005. Which in the other word, Doris cannot revoke her offer towards Andrew anymore (but she did revoking her offer on the 6 January 2005 because she got a better offered price by Kim). This is because there was a legally binding contract between Doris and Andrew and Doris could not have breach the promise to sell the computer at the price of RM3,000.00.
The above mentioned situation can be referred to the case of Adams v. Lindsell (1818) where the Defendant wrote to the Plaintiff to sell wool on certain terms. The Defendant misdirected the letter and it reached the Plaintiff later than usual. The Defendant failed to receive the Plaintiff’s reply and sold the wool on certain terms to a third party. As the Plaintiffs actually accepted the offer by the Defendant, they immediately posted acceptance. The Court held that, the acceptance was complete upon posting and that there was a valid contract between the parties.
So, as Andrew agreed to buy the computer offered by Doris, Andrew posted a letter of acceptance before Doris could revoke her offer is consider the completion of an acceptance and therefore there was a valid contract between them. This rule is called the postal rule and is an exception to the general rule that acceptance is only complete when it is communicated to the proposer (Doris).
In the case of Adams v. Lindsell, the Court had three choices of determining when acceptance was complete. Firstly, when the letter was posted; secondly, when the letter was delivered to the proposer’s address; and thirdly, when the proposer reads the letter (the general rule). So as in this situation, Andrew’s acceptance is complete when he posted the letter of acceptance on 5 January 2005. The second and third choices pose the difficulty of proving the exact time of receiving the communication of acceptance. The first choice (when the letter was posted) poses no such problem as the postal service stamps the envelope to show the date and time of posting. The reason for the postal rule may be further explained on the ground that the proposer who chooses to start negotiations by post takes the risk of delay and accidents in the post. So in the situation between Andrew and Doris, Doris as the proposer could have been protected from such incidents by expressly stipulating in her proposal that she is not bound in contract until actual receipt of the acceptance.
In the case of Ignatius v. Bell (1913), the fact that the Defendant received the letter of acceptance by the Plaintiff after the duration of the time given, which is on 20 August, therefore received the letter on 25 August. The Court held that, the acceptance was complete as against the proposer, Bell (the defendant), when it was put in a course of transmission to him so as to be out of the power of the acceptor, in other words, when it was put into the post on 16 August. It is clearly to be applied in the above case, once Andrew had posted the letter of acceptance on 5 January 2005, the acceptance is complete although Doris had just received Andrew’s letter on 16 January 2005. They contended, that at the moment of the acceptance of the offer of Doris by Andrew, the former became bound.
The next issue arise is when Doris revoke the offer and Andrew does not even know about the revocation in which he just knew about it on the 8 January 2005. Until the proposal has been accepted, no legal rights arise and a proposer can withdraw to terminate his proposal by giving notice of revocation to the other party. Under SECTION 5(1) OF THE CONTRACTS ACT 1950, a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.
In this situation, Doris can only revoke her offer if Andrew did not post his acceptance by 6 January 2005. But in the circumstances, Andrew had replied Doris earlier on 5 January 2005 which Doris could no longer revoke her offer towards Andrew. Where the communication of acceptance is made by the acceptor (Andrew) through the course of transmission – by post, then the communication of the acceptance is deemed complete as against the proposer (Doris), when it is put into a course of transmission to her (the proposer-Doris), so as to be out of the power of the acceptor (Andrew). The illustration to SECTION 5 OF THE CONTRACTS ACT 1950 provides as if the situation applied, Doris and Andrew: 1. Doris proposes, by a letter sent by post, to sell his house to Andrew; 2. Andrew accepts the proposal by a letter sent by post; and Doris may revoke her proposal at any time before or at the moment when Andrew posts his letter of acceptance, but not afterwards (after 5 January 2005). This rule that the communication of acceptance is complete as against the proposer, Doris upon posting is called the postal rule. Once the letter of acceptance is posted, the proposer, Doris is prevented from revoking her proposal even though she has yet to receive and has no knowledge of the posting of the letter of acceptance.
The law is if the communication of acceptance is not yet complete as against the proposer and he intends to revoke his proposal, the proposer must communicate his revocation of the proposal to the promise. The revocation or modification of a proposal is not effective unless brought to the mind of the promise. SECTION 4(3) OF THE CONTRACTS ACT 1950 provides that, the communication of revocation of a proposal is complete (a) as against the proposer, when it is put into a course of transmission to the promise so as to be out of the power of the proposer; and (b) as against the promise, when it comes to his knowledge. Therefore once Doris, the proposer told Andrew’s wife, Fiona the revocation of the proposal is complete as against her (Doris) only. At that point of time, Andrew may still accept Doris’s proposal by posting, the revocation of a proposal is only complete as against Andrew, the promise (acceptor), when it comes to his knowledge. Therefore if Doris called Fiona by telephone, revoking the proposal and before the information of Doris’s revocation received by Andrew, Andrew post a letter to accept Doris proposal, the acceptance is effective.
As in the case of Byrne v. Van Tienhoven (1880), on the 1st October defendant posted a letter from Cardiff to the plaintiff in New York making an offer. On 8th October defendant posted a letter to the plaintiff revoking the offer. 11th October, the Plaintiff received the Defendant’s offer and at once telegraphed their acceptance. On 20th October the plaintiff received the defendant’s letter of revocation. The Court held that, the revocation was inoperative as against the plaintiff until it comes to his knowledge, which on 20th October and therefore the plaintiff’s acceptance on 11th October was effective and could not be affected by the fact that the defendant’s letter of revocation was already on its way. The court pointed out the inconvenience that would result from any other conclusion: “It appears to me that both legal principles and practical convenience require that a person who has accepted an offer not known to him to have been revoked, shall be in a position safely to act upon footing that the offer and acceptance constitute a contract binding on both parties.” The result is that, in law, a proposer may be bound by an agreement that he does not believe himself to have made.
So here in applying the above cases, Andrew accepted Doris’s offer as he does not know that Doris had revoked the offer. Andrew is innocent as he was in a position that the offer might have been revoked thus acting by posting the letter of acceptance clearly indicates that he is interested and intended to create a legally binding contract between him and Doris. Thus, Doris is bound by the contract and Doris cannot breach her promise to Andrew as Andrew had in fact believe that the offer is still not have been revoked.
The English authority seems to point to the need for consideration to make the promise to keep the proposal open binding, in which the proposer must get some benefit or that the acceptor incurs some detriment in respect of the promise to keep the proposal open. The promisee is then said to purchase an option and can hold the proposer to his promise throughout the period. Otherwise, if the promise is gratuitous, the proposer, can at anytime revoke his proposal even though the time limit has not yet expired.
In the situation of Andrew and Doris, Doris could have said to revoke her promise if Andrew did not yet indicate to accept the offer before the duration of time given which is on by latest on 15 January 2005. If Andrew indicates his acceptance after 15 January 2005 then the revocation made by Doris on 6 January 2005 is complete because there was no acceptance made by Andrew; even if Andrew knew about it on the 8th January 2005.
In conclusion, Andrew is entitled to the computer because there was a legally binding contract made between him and Doris as his letter of acceptance had been posted on the 5 January 2005 before Doris could have revoking her offer which before the revocation of offer took place, there was a complete acceptance made by Andrew upon Doris’s offer.
Hence, the principle of the postal rule which started when Andrew had post the letter to Doris on 5 January 2005, is valid even though the letter reached Doris on the 16 January 2005. This is due to the postal rule itself which stated, the complete acceptance took place once the acceptor had put the letter of acceptance in the communication of transmission (in this case Andrew posted the letter of acceptance); and both Doris and Andrew had been legally bound by the contract.
Andrew is entitled for the computer offered by Doris at the price of RM3,000.00; and the revocation made by Doris is not affected the contract. So, Andrew in this case, is entitled for the computer.
ANSWER (ii)
Indeed, my answer would be different if the letter of acceptance by Andrew was posted on 9 January 2005.
This is due to the fact that, Doris's revocation is complete towards Andrew on the 8th January 2005 which the revocation had come to the knowledge of Andrew and the revocation made by Doris is complete because Andrew had just posted the letter of acceptance on 9 January 2005 in which on this date, the proposal of Doris is being revoked thus the acceptance by Andrew do not amount to a complete acceptance and Doris is not bound by the offer anymore.
SECTION 5(1) OF THE CONTRACTS ACT 1950 had clearly stated that a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. So, as in the illustration to SECTION 5 OF THE CONTRACTS ACT 1950 provides that, Doris proposes, by letter sent by post, to sell a computer at the price of RM3,000.00 to Andrew; Andrew accepts the proposal by a letter sent by post; and Doris may revoke her proposal at any time before or at the moment when Andrew posts his letter of acceptance, but not afterwards.
This is clear that Doris's revocation on the 6 January 2005 is complete and hence terminated the offer because Andrew did sent a letter of acceptance on the 9 January which he did knew about the revocation on the 8 January. In addition, Doris had communicated the revocation through Fiona and Fiona had told Andrew about the revocation.
SECTION 6(a) OF THE CONTRACTS ACT 1950 applied in which provides, a proposal is revoked by the communication of notice of revocation by the proposer to the other party. Therefore, it is not enough that the proposer changes his mind and does not tell anyone about it. He must communicate his intention to revoke the proposal by any act or omission by which he intends to communicate the revocation and which has the effect of communicating it to the promisee.
In this circumstances, Andrew had the knowledge of the revocation made by Doris on 8th January and his letter of acceptance had been posted on the 9 January which there is no legal effect of the acceptance because the offer had been revoked at the first place and there was no binding contract existed between Doris and Andrew. So, Andrew is not entitled for the computer.
As oppose in the case of Byrne v Van Tienhoven (1880), the plaintiff did not know about the revocation letter before they posted the letter of acceptance; so that the defendant is bound to the promise.
It differs when Andrew posted the letter of acceptance after having the knowledge that Doris had revoke the offer. The promise is gratuitous, Doris can at any time revoke her proposal even though the time limit has not yet expired; as been stated in the case of Rouledge v Grant (1828). In conclusion, Andrew is not entitled for the computer as Doris is not bound to keep the promise.
...
Phew~
Geez. that was my first year assignment answer sheet and luckily I did not vomit to read them again today. So, if some of people were like wondering what we were doing during our first year in law school, here's the answer. HAHA. It was funny because by comparing this answer sheet with my fifth year (yes, I am in my fifth year) answer sheet, there were definitely different in the sense that, I was no longer excited as before and I had learned not to repeat the exact same phrase to highlight all the relevant cases. As time goes by, I keep learning on how to keep my assignments as well as my examination answer script to be short and precise. Somehow, in law, the more you write, the more marks you will be given and that were considered as arguments. 😎
Here's the reason I got hungry each time I was preparing my assignments, test and so on; and here's the perfect time for McDonalds' fresh golden french fries! Yummy~
Okay, maybe I'll be sharing my assignments answer script later - another two months, I guess. I'm so freaking exhausted. Good night.🌙