Question 1

Discuss the term Acceptance under the Contracts Act 1950 (Revised 1974) and common law.
Support your answer with decided cases.

Section 2(b) of the Contracts Act 1950 (Revised 1974) (hereinafter referred to as CA 1950)
provides that when the 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.
By virtue of s. 2(b) of CA 1950, acceptance is the exercise of the power by the person to
whom the offer has been made, to enter into a contract by manifesting asent in return. When
the offeree manifests such an intention, the offeree is said to have accepted the offer. Upon
acceptance, the offeror becomes bound by the contract proposed by him in the offer. The
general rule under English Law is that only the person to whom the offer is made may accept
it. Thus, similarly it appears from the opening words of s. 2(b) that only the addressee of a
proposal may accept a proposal. According to s. 2(c) of CA 1950, the person accepting the
proposal is called the promisee.
Acceptance may be within a reasonable time. This rule is embodied in s. 6(b) of CA 1950,
whereby it states that a proposal is revoked by the lapse of the 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 amounts to a reasonable time is a question of fact
depending on such matters as the nature of the subject matter or method by which the offer is
communicated.
For instance, in the case of Ramsgate Victoria Hotel Co Ltd v Montefiore [1866] LR 1
EXCH 109, the defendant was not told until November that his application (offer) for shares
on June has been accepted. The issue was whether the offer lapsed through passage of time.
The Court held that the offer to purchase shares had not been accepted within reasonable time
(it is unreasonable to take so long for the offer on June to be accepted on November) and the
offer had therefore lapsed. Besides, in the case of Fraser v Everett [1889] 4 Ky 512, it
involves a contract for shares expected to be mailed about the end of March and which if
mailed would have arrived at the end of April. However, the scrips was mailed early in April
and to be offered on 15 May. The issue was whether the delivery was within a reasonable
time. The Court held that it is not a delivery within reasonable time for the fact that the
mining shares were of a very fluctuating character so that one would expect prompt delivery.

In the case of Macon Works & Trading Sdn Bhd v Phang Hon Chin & anor [1976] 2
MLJ 177, Hashim Yeop A Sani J from the High Court stated the rationale for this rule. He
stated that an offer lapses after a reasonable time not because this must be implied in the offer
but because failure to accept within a reasonable time implies reaction by the offeree. As a
consequence, 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 lapse before accepting.
Besides, acceptance must be absolute and unqualified. S. 7(a) of CA 1950 reads that a
proposal is converted into a promise when the acceptance is absolute and unqualified.
According to Chitty on Contracts, General Principles, an acceptance is a final and
unqualified expression of assent to the terms of the offer. However, where the reply is
qualified or attempts to vary the terms of the offer or attempts to accept an offer on new
terms, then such a reply is not a communication of an acceptance but may be rejection
accompanied by a counter-offer which the original offeror can accept or reject.
In the following three situations, the acceptance is not absolute and unqualified.
Firstly, an acceptance is not absolute and unqualified when there appears s counter-offer by
the offeree. In the case of Hyde v Wrench [1840] 3 Beav 334, the plaintiff made a counteroffer to purchase the defendants farm for 950 pounds, in which the defendant offered to sell
for 1,000 pounds initially. After the defendant rejected the offer, the plaintiff wrote to the
defendant accepting the defendants earlier offer of 1,000 pounds. The issue was whether a
contract had been concluded between the parties. Lord Langdale MR then ruled that there
exists no valid binding contract between the parties for the purchase of the property because
by proposing a different figure of 950 pounds, the plaintiff had rejected the defendants offer
and now makes a new offer. This counter-offer destroys the original offer and he cannot now
revive it by tendering a subsequent acceptance.
Additionally, in the case of Malayan Flour Mills Bhd v Saw Eng Chee & Anor [1997] 1
MlJ 763, the plantiffs managing director proposed to purchase all the flour lots, which could
only be for an increased consideration. The issue was whether the proposal for the sale of the
additional three lots amounted to a counter-offer. Kang Hwee Gee J from the High Court held
that by proposing to purchase all the four lots, the plaintiffs managing director had in fact
taken upon himself not only to vary the temr but also subject matter of the original offer. By
doing so, he had made a counter-offer and thus, there was no concluded contract between the
parties.

Secondly, the acceptance is not absolute and unqualified when the terms of offer is amended
at time of acceptance. In this context, if the acceptance contains clauses adding on or
amending the terms of the offer, it is not absolute and unconditional and there is no valid
acceptance. For example, in the case of Jones v Daniel [1894] 2 Ch 332, in reply to a written
offer by the defendant to purchase the plaintiffs property, the plaintiffs solicitors wrote
accepting the offer, and continued stating that there would be an addition of an enclosed
conract, The issue was whether the additional enclosed contract constituted an unqualified
acceptance. The Court held that by the addition of a new document (the enclosed contract),
the acceptance was not absolute but amounted to a counter-offer which was never accepted
by the defendant.
Thirdly, acceptance made subject to contract or to fulfil condition precedent is not an
absolute and unqualified acceptance. However, there are two approaches to this matter. The
first view is that there is no contract and the court will construe suchwords so as to postpone
liability until the formal document is signed. This can be shown in the case of Kam Mah
Theatre Sdn Bhd v Tan Lay Soon [1994] 1 MLJ 108, whereby the alleged contract
continued a proviso that the sale and purchade agreement shall incorporate other usual terms
and conditions. The issue was whether there was a binding and conclude agreement. The
Supreme Court held that the proviso would have the same effect as if the formula subject to
contract had been in the document. Thus, there was no contract at all and that the document
was dependent on the signing of a formal contract to be further negotiate and approved by
both parties.
The second view, on the other hand, is that the parties have already entered into a legally
binding contract and the execution and signing of the document is a mere formality. This
could be shown in the case of Charles Grenier Sdn Bhd v Lau Wing Hong [1996] 3 MLJ
327, whereby the appellant contended that the phrase subject to the sale and purchase
agreement relating to two shophouses appearing int eh first letter showed that the parties
were still negotiating, and that there were many terms which they had not agreed upon. The
issue was whether there was a valid and enforceable agreement between the appellant and the
respondent. The Federal Court held that the phrase did not point to an intention that no
contract was to come into existence until a formal sale and purchase agreement had been
prepared and executed, but it was indicative of an intention to merely formalise the
agreement already concluded between the parties all the essential terms had been identified
with sufficient clarity.

Furthermore, in order to convert a proposal into a promise, the acceptance must be expressed
in some usual and reasonable manner, by virtue of s. 7(b) of CA 1950. According s. 7(b), the
acceptance need only be expressed in some usual and reasonable manner, unless he propser
prescribes a specified manner in which the proposal is to be accepted. For instance, in the
case of Hitchens v General Corporation Ltd [2001] All ER (D) 246, whereby a hire
purchase agreement, which did not contain a term that acceptance could only be made in
writing by signature, had been orally approved by the finance company. The issue was
whether offer accepted orally by finance company before signing lease purchase agreement
was valid. The Court of Appeal held that where there was no requirement that the acceptance
must be in writing, an oral acceptance sufficed to create the contract.
According to s. 7(b), if the proposal prescribes a manner in which it is to be accepted, and the
acceptance is not made in that manner, the proposer may, within a reasonable time after the
acceptance is communicated to him, insist that his proposal shall be accepted in the
prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance. In
other words, an offeror under the Contracts Act must not keep silent if the acceptor deviates
from the prescribed manner. If the offeror fails to insist upon the prescribed manner he is
considered uder s. 7(b) to have accepted the acceptance in the modified manner.
In Carlyle Finance Ltd v Pallas Industrial Finance [1999] 1 All ER 659, the finance
company contended that the delivery of the car was only a preliminary bailment and not an
acceptance of respondents offer to purchase the car. The issue was whether the offer had
been accepted, where it had not been signed or dated by finance company. The Court of
Appeal held that there was no reason to assume that the respondent had any reason to suppose
that delivery on payment of the deposit was other than the owners contractual acceptance of
the bargain between them. This shows that where the manner of acceptance had been in a
different form, the offeror may, however, waive the prescribed manner, as in this case the
respondent may treat the delivery of the car as an acceptance of offer by the finance company
although the agreement mad it clear that delivery did not constitute acceptance of the offer.
Furthermore, by virtue of s. 8 of CA 1950, performance of the conditions of a proposal, or the
acceptance of any consideration for a reciprocal promise which may be offered with a
proposal, is an acceptance of the proposal. This shows that statutory recognition is given to
unilateral contracts. For example, in the case of Carlil v Carbolic Smoke Ball Co [1893] 1
QB 256, the plaintiff after seeing an advertisement offering to pay 100 pounds to any person

who contracted influenza after using the smoke ball in a specified manner for a specific
period, bought and used the ball in the manner prescribed and caught influenza. He sued the
defendants for 100 pounds. The issue was whether there was a binding contract between the
parties. Lindley LJ from the Court of Appeal held that a promise is binding even though it is
not made to anyone in particular like a unilateral offer. It becomes contract when anybody
comes forward and performs the conditions.
In conclusion, acceptance is an important element in the formation of contract. A proposal
would never be converted into a promise and there would never exist a contract when there is
no acceptance in the first place.

Question 2
What are the requirements of acceptance as provided under Contracts Act 1950
(Revised 1974) and decided cases.
There are 6 essential elements to form a contract which is offer, acceptance, consideration,
intention to be legally bound, capacity to contract and legality of promises. Offer and
acceptance used to determine whether there is an agreement exists between two parties which
is offeror and offeree. According to section 2(b) of the Contracts Act, an acceptance can be
defined as when the 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. Besides,
section 7 of the Contracts Act provides that In order to convert a proposal into a promise
the acceptance must (a) be absolute and unqualified; (b) be expressed in some usual and
reasonable manner. Therefore, an acceptance must be clear, unambiguous, unequivocal and
assent to the offer and all of its terms. Also, an acceptance must be expressed in some usual
and reasonable manner and it must be communicated. Acceptance is important in formation
of contract because once acceptance takes place, an agreement is formed. At the same time, a
contract comes into existence. Thus, there are several requirements of acceptance of a
contract offer.
First and foremost, an acceptance, to be valid, must be absolute and unqualified. This means
that one cannot only accept some part of offer and reject some part of the offer. Also, the
effect of s 7(a) of the Contracts Act is that an acceptance must be an unconditional assent to
the terms proposed in the offer. This principle was stated in The Ka Wah Bank Ltd v
Nadinusa Sdn Bhd & Anor [1998] 2 MLJ 350, FC, where it provided that According to
Chitty on Contracts, 26th Ed (1989) Vol 1, para 54, p 44, 'an acceptance is a final and
unqualified expression of assent to the terms of the offer'. But, where the reply is qualified or
attempts to vary the terms of the offer or attempts to accept an offer on new terms (not
contained in the offer), then such a reply is not a communication of an acceptance but may be
a rejection accompanied by a counter-offer which the original offeror can accept or reject.
Thus, there are three situations in which the acceptance is not absolute and unqualified,
namely counter-offer by offeree, terms of offer amended at time of acceptance and
acceptance made "subject to contract" or to fulfil condition precedent.
The first situation is that when there is a counter-offer by offeree, the acceptance is
considered as not absolute and unqualified. This can be illustrated in Hyde v Wrench (1840)

3 Beav 334. In this case, the defendant wrote to the plaintiff on June 6 offering to sell his
farm for 1,000. The defendant immediately called on the defendant and offered to purchase
the farm for 950. On June 27, the defendant replied to the plaintiff that he was unable to
accept the plaintiff's offer. Upon receipt of the letter on June 29, the plaintiff immediately
wrote to the defendant accepting the defendant's earlier offer of 1,000. The question was
whether a contract had been concluded between the parties. The Court held that there was no
binding contract between the parties as the counter-offer destroys the original offer and the
plaintiff cannot now revive it by tendering a subsequent acceptance.
Moreover, these principles have been applied by the Malaysian courts in Malayan Flour
Mills Bhd v Saw Eng Chee (Administrator of the estate of Saw Cheng Chor, deceased)
& Anor [1997] 1 MLJ 763 wherein the relevant portions have been reproduced as In
deciding whether there is a concluded contract in a given case, the court will have to examine
all the circumstances to see if a party may be assumed to have made a firm offer and if the
other may likewise be taken to have accepted that offer - a situation often referred to as a
meeting of the mind upon a common purpose or consensus ad idem Hence, the offeree's
intention to accept must be conclusive and he must not treat the negotiation between the
parties as still open to the process of bargaining. He must unreservedly assent to the exact
terms of the offerer. If while purporting to accept the offer as a whole, he introduces a new
term which the offeror has not the chance of examining, he is in fact making a counter-offer.
The effect of this in the eyes of the law is to destroy the original offer.
However, a counter-offer needs to be distinguished from a mere request for information,
which does not reject or destroy an offer. According to Stevenson, Jaques & Co v McLean
(1879-1880) 5 QBD 346, the parties were negotiating for the sale of iron and ultimately the
defendant wrote to the plaintiffs fixing 40s, per ton, net cash, as the lowest price for the sale,
and stating that he would hold the offer open till the following Monday. The plaintiffs
telegraphed to the defendant: "Please wire whether you would accept forty for delivery over
two months, or if not, longest limit you could give". The defendant sold the iron to someone
else and telegraphed the plaintiffs that he had done so. Before the arrival of the defendant's
telegram, the plaintiffs, found a purchaser for the iron, sent a telegram to the defendant
stating that they had secured his price. Upon the defendant's refusal to deliver the iron, the
plaintiffs brought an action against him for non-delivery of the same. Lush J held that
Here there is no counter proposal. The words are, 'Please wire whether you. There is

nothing specific by way of offer or rejection, but a mere inquiry, which should have been
answered and not treated as a rejection of the offer.
The second situation is that if the acceptance contains clauses adding on or amending the
terms of the offer, it is not absolute and unconditional and there is no valid acceptance. This is
illustrated in Jones v Daniel [1894] 2 Ch. 332, where the fact is in reply to a written offer by
the defendant to purchase the plaintiff's property, the plaintiff's solicitors wrote accepting the
offer, and continued: "We enclose contract for your signature. On receipt of this signed by
you across the stamp and deposit we will send you copy signed by him". The enclosure was a
contract with the usual conditions of sale providing for a deposit of 10%, fixing a date for
completion, and limiting the period of the defendant's title. The Court held that by the
addition of a new document (the enclosed contract), the acceptance was not absolute but
amounted to a counter-offer which was never accepted by the defendant. Thus, there is no
absolute acceptance if the terms of offer amended at time of acceptance.
The third situation is when the acceptance made "subject to contract" or to fulfil condition
precedent, the acceptance is conditional and qualified. In this matter, the question arises
whether these qualified statements constitute a valid acceptance bringing forth legal
obligations to the parties. There are two approaches to this matter. First, there is no contract
and the court will construe such words so as to postpone liability until the formal document is
signed. Second, the parties have already entered into a legally binding contract and the
execution and signing of the document is a mere formality. This issue is discussed in Daiman
Development Sdn Bhd v Mathew Lui Chin Teck & Anor Appeal, [1978] 2 MLJ 239, FC;
[1981] 1 MLJ 56, PC (Appeal from Malaysia), the Privy Council held that the express
terms of the purchase contained in the booking pro forma were not made "subject to
contract". The clauses pointed strongly towards obligations presently accepted rather than to
a suspension of obligations until some further event or agreement had occurred or been made.
Furthermore, in Kam Mah Theatre Sdn Bhd v Tan Lay Soon, [1994] 1 MLJ 108, SC, the
alleged contract contained a proviso that the sale and purchase agreement shall incorporate
"other usual terms and conditions". The Court held that the formula "subject to contract"
gives rise to a strong presumption of the necessity of a further formal contract. Cogent
evidence is required to displace this strong presumption. On the facts, the Court held that
there was no contract at all and that the document was dependent on the signing of a formal
contract to be further negotiated and approved by both parties. Also, in Lim Chia Min v

Cheah Sang Ngeow & Anor [1997] 2 CLJ 337, the Federal Court held that when the parties
"proposed that a formal agreement would be prepared and executed", they must have meant
what they said.
However, there are cases where the court held that the execution and signing of the
agreement is a mere formality. In Prism Leisure Sdn Bhd v Lumut Marine Resort Bhd 16
[2002]5 CLJ 391, Abdul Malik Ishak J stated that In the context of the present case, it
was my judgment that the requirement of a 'formal agreement' was merely intended as a
solemn record of an already complete, valid, legal and binding contract The Court held
that there was a valid, legal and binding contract between the parties and that the defendant
had breached that concluded contract. Besides, in Charles Grenier Sdn Bhd v Lao Wing
Hong [1996] 3 MLJ 327, the Federal Court held that the phrase "subject to the sale and
purchase agreement" relating to two shop houses did not point to an intention that no contract
was to come into existence until a formal sale and purchase agreement had been prepared and
executed. Rather, when read in the context of correspondence and the objective aim of the
transaction, it was indicative of an intention to merely formalise the agreement already
concluded between the parties.
Moreover, the second requirement of acceptance is that the acceptance must correspond to
offer. This part considers some of the issues that arise from this requirement. It is provided
that there can be no valid acceptance if there are two cross offers. In Tinn v Hoffman & Co
(1873) 29 LT 271, the Court discussed the effect of two offers, identical in terms, which had
crossed in the post. Blackburn J held that The promise or offer being made upon each side in
ignorance of the promise or the offer made on the other side neither of them can be construed
as an acceptance of the other. Besides, there are two conflicting decisions whether
acceptance can take place if the acceptor is not aware of the offer. In Gibbons v Proctor,
(1891) 64 LT 594, the Court allowed the claim for a reward even though the claimant was not
aware of the offer of the reward. The Court ruled that the plaintiff was entitled to the reward,
since the information had reached Penn after the publication of the handbill and the
announcement therein contained the defendant's offer of the reward to the informant.
In contrast, a different decision was given in regard to the knowledge of offer before
acceptance, in a similar case in Fitch & Anor v Snedaker 38 NY 248 (1868). In this case,
Woodruff J stated that To the existence of a contract there must be mutual assent, or in
another form offer and consent to the offer. The motive inducing consent may be immaterial,

but the consent is vital. Without that there is no contract. How then can there be consent or
assent to that of which the party has never heard? ... An offer cannot become a contract unless
acted upon or assented to. On a strict analysis, the latter decision is more in accord with
contractual principles of offer and acceptance and the need for a consensus ad idem, although
the actual outcome may appear harsh.
Besides, a similar challenge arises in relation to the issue of motive when making an
acceptance. In Williams v Carwardine 5 C7 P 566, the plaintiff knew of a reward but gave
the information leading to the discovery of the murderers, not for the reward, but to "ease her
own conscience and in hopes of forgiveness". The Court held that her motive was not
material; as long as she came within the terms of the handbill, it was sufficient. However, a
different decision was arrived at by the Australian court in R v Clarke (1927) 40 CLR 227.
In this case, the Court held that the government was under no contractual obligation to pay
him the reward: in giving the information he was not acting on or in pursuance of or in
reliance upon or in return for the consideration contained in the proclamation, but exclusively
in order to clear himself from a false charge of murder... he has, in my opinion, neither a legal
nor a moral claim to the reward .
In conclusion, there are two requirements of the acceptance of an offer, firstly, acceptance
must be absolute and unqualified and secondly, acceptance must correspond to offer. under
the first requirement of acceptance, the acceptance is not absolute and unqualified when there
is counter-offer by offeree, terms of offer amended at the time of acceptance and lastly, when
the acceptance made subject to contract or to fulfil condition precedent. Besides, as related
to the second requirement, there are three issues to be considered. Firstly, cross offers is not
an acceptance, secondly, knowledge of offer before acceptance and lastly, the motive of
acceptor at the time of acceptance.

Question 3
What are the modes of acceptance recognized under the Contracts Act 1950 (Revised
1974) and common law? Support your answer with reference to decided cases.
An acceptance to be effective must be communicated. There must be some external
manifestation of acceptance as mental assent is insufficient. According to Section 3 of
Contracts Act 1950, the communication of proposals, acceptance of proposals, revocation of
proposals and acceptances are deemed to be made by any act or omission of the party
proposing, accepting or revoking, by which he intends to communicate the proposal,
acceptance or revocation or which has the effect of communicating it. Also, under S.4(2) of
Contracts Act 1950 (hereinafter refer to CA 1950), communication of acceptance is
complete as against proposer when it is put in a course of transmission to him, so as to be out
of the power of acceptor and against the acceptor when it comes to knowledge of proposer. In
addition, S.9 of CA 1950 provides that promise is said to be express when acceptance is made
in words while the promise is said to be implied when acceptance is made otherwise than in
words.
Apart from that, S.7(b) of CA 1950 provides that the acceptor must communicate his
acceptance in particular mode if the mode of acceptance is specified in the offer. If no mode
is specified, acceptance by any reasonable manner which shows intention to accept is
sufficient. In general, the modes of acceptance can be divided into six types which include
acceptance by post or telegram, acceptance by telex or telephone, acceptance by conduct,
acceptance by performing conditions stipulated in offer, acceptance by silence and mode of
acceptance stipulated by offeror.
The first type is acceptance by post or telegram. Communication of acceptance has posed
difficulties where there is a time lag between sending and receiving and in situations where
the acceptance is not received by offeror without fault of either party. However, while the
general rule at common law is that acceptance is complete when it is brought to the notice of
offeror, an exception is the postal acceptance rule. This rule stipulates that acceptance is
complete when the letter containing such acceptance is posted, or when the telegram
containing such acceptance is handed in.
The example of case is Lee Seng Heng & Ors v Guardian Assurance Co Ltd [1932] MLJ
17. In this case, the plaintiffs insured their stock in trade with the defendants against fire.

Subsequently, a fire broke out on insured premises and the plaintiffs made a claim under the
policy. The defendants solicitors wrote to plaintiffs saying that the policy has ceased to exist
on the date of fire. They had previously written a letter to cancel the policy. However, the
plaintiffs never received such letter as there was no post office at Buloh Kasap. The letter was
only brought by the postman after the fire. The issue was whether the post was properly used
as agent by defendants in sending their letter of 27 th March. Murison CJ held that the
rescission of policy was effected at the moment that letter of 27 th March was posted.
Therefore, the policy is non-existent at the date of fire.
Secondly, it followed by acceptance by telex or telephone. Communication through telex ad
telephone are different. Therefore, the posting and postal acceptance rules does not apply.
They are considered as instantaneous communication where parties are regarded to be in each
others presence and is complete only when it is received. The leading case is Entores Ltd v
Miles Far East Corporation [1955] 2 QB 327. The plaintiffs were an English company and
the defendants were an American corporation with agents all over the world, including a
Dutch company in Amsterdam. The plaintiffs wished to make contract with the defendants
Dutch agents. A counter offer made by plaintiffs on September 8, 1954 and acceptance of that
offer by the Dutch agents on behalf of defendants received by the plaintiffs in London by
telex on September 10, 1954. However, the plaintiffs later alleged that there had been a
breach of contract by defendants. The Court of Appeal held that the communication through
telex in this case was instantaneous and the contract was made at the place where acceptance
was received which is in London.
Besides, the third mode of acceptance is by conduct. An acceptor may by his conduct indicate
his intention whether he has or has not accepted an offer. For instance, in EMS Bowe (M)
Sdn Bhd v KFC Holdings (M) Bhd & Anor [2000] 1 AMR 677, the plaintiffs submitted a
tender for some works to defendant. The second defendant issued to plaintiffs a draft letter of
award for the works and instructed plaintiffs to order in advance materials for works.
However, the award was given to another contractor even though the plaintiffs ordered the
materials. In the end, the High Court ruled that a draft offer acted upon by one party with
knowledge and concurrence of the other has converted into an agreement. Hence, there was a
valid and binding contract.
The other case is Taylor v Allon [1966] 1 QB 304. The appellants motorcar had been
insured by an insurance company called The Federated Employers Insurance Association

Ltd. The policy is expiring on April 5, 1964 and he obtained a temporary cover note for 30
days from a new insurance company on April 16. He never intended to renew it with old
insurance company. Subsequently, the appellant was convicted of using a motorcar on road
without insurance against third party risks. He argued that he was covered by cover note
which was offered to him on April 16 and he had accepted it by conduct. In this case, it was
held that a contract came into existence when the parties conduct themselves in a manner
which indicates that they consider themselves bound by an agreement between them.
Furthermore, the fourth mode goes to acceptance by performing conditions stipulated in offer.
When the parties involved perform the conditions stipulated in offer, it would be regarded as
an acceptance. For example, in Carlill v Carbolic Smoke Ball Co [1892] 2 QB 484; [1893]
1 QB 256, the Carbolic Smoke Ball Co offered 100 to anyone who contracted influenza
after using the smoke ball. Mrs Carlill in fact had contracted influenza after using the smoke
balls in the manner specified in advertisement. The defendants submitted that Mrs Carlill did
not inform them her intention to accept the offer. The Court of Appeal ruled that Mrs Carlill
had indicated her acceptance by performing conditions set out in advertisement.
Other than that, the fifth mode would be acceptance by silence. There is always argument
about whether silence can amount to acceptance. It can be seen through the case of Re
Selectmove Ltd [1995] 2 All ER 531. In this case, the Crown demanded 25000 in tax from
Selectmove Ltd as they had underpaid. Selectmove agreed with a tax collector that payment
could occur in 1000 monthly instalments. After accepting 7 monthly instalments, the Crown
sought a winding up order of Selectmove as they owed 18000 in tax. The issue was whether
there was a consideration in agreement to pay in monthly instalments. The Court of Appeal
held that there was no consideration. Silence could be interpreted as acceptance in
exceptional circumstances.
Besides that, in Felthouse v Bindley (1862) 11 CBNS 869; 142 ER 1037. The plaintiffs wrote
to his nephew offering to buy nephews horse and addint that If I hear no more about him, I
consider the horse is mine at 301.15s. The nephew did not reply. Six weeks later, the
defendant who was employed by the nephew to sell farming stock, was directed by nephew to
reserve the horse, but by mistake had sold it. The plaintiff sued for conversion of horse. It
was held that there was no contract to sell the horse to plaintiff, but this was not
communicated and silence does not amount to acceptance.

Lastly, the mode of acceptance is stipulated by the offeror. An offeror may prescribe the mode
of acceptance. For example, in Manchester Diocesan Council for Education v
Commercial & General Investments Ltd [1970] 1 WLR 241, Manchester Diocesan called
for tenders relating to property. The defendant submitted a tender (offer to buy). The tender
stated that acceptance was to be notified to the person whose tender was accepted by letter
sent by post addressed to the address given in his tender. The plaintiff decided to accept
tender but eventually sent the acceptance to defendants solicitor, which was not the address
given in offer. The issue was whether the mode of acceptance made by plaintiff is valid or
not. Buckley J ruled that the method of acceptance prescribed in tender was not mandatory.
The offeror in fact was aware of the acceptance thus the acceptance is valid.
To sum up, there are six modes of acceptance in general. The modes of acceptance also may
vary dependent upon circumstances. Different circumstances have to be look into then only
consider whether this particular mode can be amended to acceptance or the otherwise.

Question 4
Explain the issues of revocation of acceptance under the Contracts Act 1950 (Revised
1974) and decided cases.
A revocation of acceptance must be communicated to the proposer. The same rule applies to
the communication of revocation of a proposal. By the virtue of section 5(2) of the
Contracts Act 1950, it states that an acceptance may be revoked at any time before the
communication of the acceptance is complete as against the acceptor, but not afterwards. The
communication of acceptance is complete as against the acceptor when it comes to the
knowledge of the proposer based on section 4(2) of the Contracts Act 1950. Therefore, an
acceptance may be revoked at any time before or at the moment the letter of communicating
the acceptance reaches the proposer, but not afterwards. Both parties to a contract are bound
to the revocation at two different times.
It is provided under section 4(3) of the Contracts Act 1950 that the communication of a
revocation is complete as against the person who makes it, when it is put into a course of
transmission to the person to whom it is made, so as to be out of the power of the person who
makes it; and as against the person to whom it is made, when it comes to his knowledge.
When the letter of revocation is posted, the communication of revocation is complete against
the promisee whereas when the letter of revocation arrives, the communication of revocation
is complete against the proposer. Revocation of acceptance can only be done before the
proposer received the acceptance by the promisee or at the moment the letter communicating
the acceptance reaches the proposer.
For instance, Ali accepts Bennys offer by a letter dated on 8 th of April. However, Ali then
revoked his acceptance through telegram on 10th of April. The communication of revocation
is complete as against Ali. However, the communication of revocation of acceptance is still
not complete until Benny receive the telegram sent by Ali. If Benny receive the letter of
acceptance by Ali before the revocation letter arrives, then Ali cant revoked as a contract had
been made. Revocation can only be done before the acceptance of the offer by the proposer.
Illustration (d) in section 4 of the Contracts Act 1950 provides an example of when
communication of a revocation is said to be complete, that is where B revokes his acceptance
of As proposal through telegram, it is complete as against himself when he dispatches it, and
as against the proposer when it reaches the proposer. Hence, once B has dispatched the

telegram, the revocation of acceptance is complete as against B only. The revocation is not
yet effective until A receive the revocation by telegram. A may still receives the letter of
acceptance if the revocation has not reached A. A contract will then be made.
In the case Bryne & Co v Leon Van Tienhoven & Co. [1874-1880] All ER 1432, the
defendants posted a letter in Cardiff on October 1, addressed to the plaintiffs in New York,
offering to sell 1000 boxes of tinplates. It takes 10 to 11 days for the letter posted to reach
each other. However, on October 8, the defendants posted a letter revoking the offer. The
plaintiffs telegraphed their acceptance of offer on October 11 and confirmed it in a letter
posted on October 15. The letter of revocation reached the plaintiffs on October 20. It was
held that the revocation is not allow as the plaintiffs have accepted the offer. This principle is
applicable for communication of acceptance. The court in this case held that a notice of
revocation will only be effective if its comes to the knowledge of the proposer. If the
revocation is not communicated to the proposer before there was a contract, it is therefore not
complete and will not revoke an existing contract. Communication of a revocation will only
be complete as against the person whom is made, when it comes to his knowledge as stated in
section 4(3) of the Contracts Act 1950.
In a nutshell, revocation of acceptance can only be made before the proposer receive the letter
of acceptance by the acceptor or at the moment the letter of acceptance reaches the proposer.
Once there is a contract, revocation is not allowed.

Question 5
Requirements of Acceptance
The Kah Wah Bank Ltd v Nadinusa Sdn Bhd & Anor [1998] 2 MLJ 350
Fact:
The appellants (the bank) granted banking facilitis to the respondents (customers of the
bank), and upon the respondents failure to repay various sums of money owned under these
facilities, the appellants commenced three suits against the respondent. The appellants
contended that the conditions put forward by thr respondents, that they gave an undertaking
to withdraw the two suits and that each party was to pay their own costs, which terms were
not in the original offer, did not constitute a final accpetance of the appellants terms of offer.
Issue:
Whether there was a concluded contract?
Judgement:
The Federal Court held that an acceptance is a finala nd unqualified expression of assent to
the terms of the offer. Where the reply is qualified or attempts to vary the terms of the offer or
attempts to accept an offer on new terms (not contained in the offer), then such a reply is not
a communication of an acceptance but may be a rejection accompanied by a counter-offer
which the original offeror can accept or reject.
Counter-offer by Offeree
Hyde v Wrench [1840] 3 Beav 334
Fact:
The palintiffmade a counter-offer to purchase the defendants firm for 950 pounds, in which
the defendant offered to sell for 1,000 pounds initially. After the defendant rejected the offer,
the plaintiff wrote to the defendant accepting the defendants earlier offer of 1,000 pounds.
Issue:
Whether a contract had been concluded between the parties?

Judgement:
Lord Langdale MR ruled that there exists no valid binding contract between the parties for
the purchase of the property because by proposing a different figure of 950 pounds, the
plaintiff had rejected the defendants offer and now makes a new offer. This counter-offer
destroys the original offer and he cannot now revive it by tendering a subsequent acceptance.
Malayan Flour Mills Bhd v Saw Eng Chee (Administrator of the estate of Saw Cheng
Chor, deceased) & Anor [1997] 1 MLJ 763
Fact:
The palintiffs managing director proposed to purchase all the flour lots, which could only be
for an increased consideration.
Issue:
Whether the proposal for the sale of the additional three lots amounted to a counter-offer?
Judgement:
Kang Hwee Gee J from the High Court held that by proposing to purchase all the four lots,
the plaintiffs managing director had in fact taken upon himself not only to vary the temr but
also subject matter of the original offer. By doing so, he had made a counter-offer and thus,
there was no concluded contract between the parties.
Tan Chee Hoe & Anor v Ram Jethmal Punjabi [1983] 2 MLJ 31
Fact:
The appellants purported to accept the respondents pffer of seling his property and aded the
words who will then held the same as stakeholders in the Acceptance Copy.
Issue:
Whether this amounted to fresh term and material variation of offer, and therefore amounted
to a counter-offer or unqualified acpetance?
Judgement:

Wee Chong Jin CJ from OCJ Singapore held that the additon of the words who will then
hold the same as stakeholders introduced a fresh term by the appellants, the grantees of the
option. It was a material variation of the offer snd it amounted to a counter-offer on the part
of the appellants which was not accepted by th respondent.
Stevenson, Jaques & Co v McLean [1879-1880] 5 QBD 346
Fact:
The parties were negotiating for the sale of iron and ultimately the defendat wrote to the
plaintiffs ficing, 40s, per ton, net cash, as the lowest price for the sale. The plaintiffs then
telegraphed to the defendant asking if he would accpet forty for delivery over two months, or
if not, longest limit he could give. The defendnat did not reply and sold the iron to someone
else.
Issue:
Whether there existed a counter-offer by the plaintiffs?
Judgement:
Lush J held that there is no counter proposal. The form of the telegram is a mere inquiry,
which should have been answere and not treated a s a rejection of the offer.
Prism Leisure Sdn Bhd v Lumut Marine Resort Bhd 16 [2002] 5 CLJ 391
Facts:
The defendant owned and operated a proprietary club known as the Lumut International
Yatch Club (LIYC). The defendant offered the plaintiff by letter to operate the water based
and marina facilities at LIYC on 4 October 1995 and the plaintiff accepted it the next day.
The plaintiff then moved its employees into the premises of the LIYC and commenced
operations. The parties had agreed that in pursuance of the contract, a formal agreement will
be signed based on the terms set out in the offer letter. On 26 February 1996, the plaintiff
received a draft formal agreement from the defendant which included the terms and also
several new conditions which was not stated previously. The plaintiff was unhappy. The
defendant responded that the defendant would not signing the formal agreement and the
plaintiff was given notice to vacate the LIYC grounds. The plaintiffs worker were then
harassed to leave the defendant building.

Issue:
Whether there was a valid, legal and binding contract?
Judgement:
Abdul Malik Ishak J held that the execution of a formal agreement would only amount to a
mere formality based on the conduct of the parties pursuant to the exchange of the two
documents between the parties and the fact that the contract had already become an executed
contract by the conduct of the parties. There was a valid, legal and binding contract in
existence between the parties and it was the defendant who breached the contract. The
defendant shall be held liable.
Ayer Hitam Tin Dredging Malaysia Bhd v YC Chin Enterprise Sdn Bhd [1994] 3 CLJ
133
Facts:
The respondent entered into negotiation with the appellants shareholders to construct lowcost houses and shop for the appellants worker, and in the process put up some proposals to
the latter for the implementation of the project. On 19 September 1984, the appellant wrote a
letter to the respondent in which stated that the appellant was agreeable to the proposals
subject to the following terms and conditions. The letter then outlined several terms and
conditions. No agreement was executed by the parties. The respondent was optimistic about
executing a formal contract, with the knowledge but not the request of the appellant, went to
engage architects, engineers and many more. Insoluble problems then arouse and the
appellant wrote to the respondent instructing to cease all work. An action for damages for
breach of contract was instituted by the respondent. The judge ruled that the letter of 19
September 1984 aforesaid, in the circumstances, constituted a binding contract and awarded
the respondent the damages applied for. The appellant appealed.
Issue:
Whether letter constituted a binding contract?
Judgement:
Tun Dato Seri Haji Abdul Hamid Bin Haji Omar LP held that the letter of 19 September
1984, on its proper construction, did not constitute a contract binding in law upon parties. It
was only a record of terms upon which they were agreed as a basis for the negotiation of

contract and which aptly be called as a Letter of Intent and nothing more. The judge ought to
have dismissed the respondents claim for damages for breach of contract as there was never
a concluded contract entered into by the parties. The appeal was allowed.
Charles Grenier Sdn Bhd v Lao Wing Hong [1996] 3 MLJ 327, FC
Facts:
The appellant vendor, who is the registered proprietor of two shop houses the property,
engaged the services of estate agents to search for purchaser for the property at the price of
RM450,000. In November 1989, the estate agents found the purchaser and communicated
with the vendors solicitors, who accepted the purchasers offer on behalf of the vendor, with
condition where purchaser have to pay 10% deposit by 28 November and the balance amount
to be pay within 3 months. On 28 November 1989, the estate agent sent the 10% deposit in
cheque with a letter confirming the purchasers offer to purchase the property. On the next
day, a third party issued a writ from High Court against the estate agent and vendor. The third
party obtained an ex parte injunction restraining the vendor from entering into any agreement
for sale of the property. On 29 October 1994, the appellant took out a summons claiming a
declaration to the effect that if there was an agreement between it and the purchaser, such
agreement had been frustrated by the injunction. The High Court dismissed the application.
The vendor appealed and contending that the agreement to sell was subject to contract, and
there was no contract concluded between the purchaser and him.
Issue:
Whether there was a valid and enforceable agreement between the vendor and the purchaser?
Judgement:
Gopal Sri Ram JCA from the Federal Court held that the phrase subject to the sale and
purchase agreement relied on by the vendor did not point to an intention that no contract was
to come into existence until a formal sale and purchase agreement had been prepared and
executed. Rather, it was, when read in the context of the correspondence and the objective
aim of the transaction, indicative of an intention to merely formalize the agreement already
concluded between the parties.
Lim Keng Siong & Anor v Yeo Ah Tee [1983] 2 MLJ 39

Facts:
The appellant wrote to C.H. Williams, Talhar & Wong Sdn. Bhd. on March 1, 1976 stated that
the lowest price he is willing to sell is $5.40 per square foot in Singapore Currency and the
sale and purchase too be completed latest by March 24, 1976. 10% to be paid in next few
days if the buyer Mr. Yeo Ah Tee agrees to the price and the terms. There were further
negotiation and eventually C.H. William, Talhar & Wong Sdn. Bhd. wrote on March 3, 1976
to confirm the sale where Mr. Yeo further offer regarding the above, with vacant possession at
a price of $5.20 per square foot for $454,391.60. The sale include all buildings, plant,
machinery and all ancillary facilities. The appellant refused the complete the agreement and
the respondent applied for specific performance. The respondent claim that there was a
concluded contract and was specifically admitted by the appellants in their statement of
defence. The appellants in their defence stated that the sale was subject to contract and they
had informed the respondents solicitors that they do not wish to sell the property.
Issue:
Whether there was concluded contract?
Judgement:
Wan Yahya J ordered that the agreement of sale be specifically performed and carried into
execution. It was the intention of the parties to come to a definite and complete agreement on
subject of sale and the mere fact is that a written agreement had to be drawn up. A legally
binding and enforceable agreement was concluded on March 3, 1976 and the learned Judge
had not erred either in law.
Tinn v Hoffman & Co (1873) 29 LT 271
Facts:
Hoffman wrote to Tinn offering to sell him 800 tons of iron at 69s per ton and asked for a
reply by return. However, on the same day, Tinn wrote to Hoffman offering to buy on the
same terms.
Issue:
Whether there is acceptance of offer?
Judgement:

Balckburn J held that the promise or offer made on each side in ignorance of the promise or
the offer made on the other side neither of them can be constructed as an acceptance of the
other. Thus, there is no acceptance of the offer they made.
Gibbons v Proctor (1891) 64 LT 594
Facts:
In this case, the defendant published on May 29 a handbill for a reward of 25 to any person
giving information to the arrest of a criminal. The information must be given to a
superintendent of the police named Penn. The plaintiff was a police officer and asked a
colleague named Coppin to forward some useful information to Penn before the bill was
published. The information was eventually conveyed to superintendent, Penn. The
defendants counsel submitted that the plaintiff was not entitled to the reward since he knew
nothing of any promise, nor was any in existence at the time he gave the information.
Issue:
Whether the plaintiff is entitled to claim for the reward?
Judgement:
The court held that the plaintiff is entitled to the reward, since the information reached Penn
after the publication of the handbill and the announcement contained the defendants offer for
the reward of 25 to the informant.
Fitch & Anor v Snedaker 38 NY 248 (1868)
Facts:
A woman was murdered in the country of Wayne on 25 September 1859. On October 3, the
Governor offered a reward $500 to anyone who would give information as should lead to the
apprehension and conviction of the murderers. On 14 October, the defendant who was the
sheriff, in addition to the Governors offer, offered another reward of $200, to any persons
upon similar terms. The plaintiffs claimed that on 26 September 1859, the day the dead body
of the woman was found, they gave all information that led to Fees who is the murderer
arrests before they were aware of the Sheriff offer of reward. However, the information given
by them is before the offer of reward.
Issue:
Whether the plaintiffs is entitled to claim for the offer of rewards?

Judgement:
Clerke J from the New York Court of Appeal held that the plaintiffs were not entitled to the
reward because the information given that led to Fees arrest before they were aware of the
sheriffs offer of a reward. Thus, the plaintiffs could not have assented to the offer.
R v Clarke (1927) 40 CLR 227
Facts:
The Police Commissioner gave notice by offering a reward of 1000 for information that
would lead to the arrest and conviction of the person or persons who committed the murders
of two police officers. A free pardon was also promised, if the informer was an accomplice, as
long as he had not actually committed the murders. Clarke who had seen the offer, gave
information that led to the arrest of one person, and the conviction of that person and one
other. He was under arrest when giving the information. He then claimed for the payment of
the reward.
Issue:
Whether Clarke entitled to claimed for the reward offer by the police commissioner?
Judgement:
Higgins J held that the government was under no contractual obligation to pay Clarke the
reward.
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666
Facts:
Mr. Brogden supplied the Metropolitan Railway Co with coals for a number of years.
Brogden then suggested that a formal contract should be entered into between them for long
term supply of coal. After their agents had met, the terms of the agreement were drawn up by
Metropolitans agent and sent to Brogden. Brogden wrote in some parts which had been left
blank, inserted an arbitrator who would decide upon differences which might rise. He wrote
approved at the end of the page and sent the document back to the Metropolitans agent,
who put it in his desk. Nothing further was done to execute the agreement. The defendants,
Brogden declined to continue the supply of coals in this manner. The plaintiffs, Metropolitan
Railway Co brought an action for damages for breach of contract. Brogden argued that there
had been no formal contract actually established.

Issue:
Whether the communication of acceptance is valid or not?
Judgement:
Lord Chancellor Cairns from the House of Lords held that there was no acceptance of the
offer. Although there may be mental assent, the act of the plaintiffs agent putting the
document into his desk would not amount to communication of the acceptance. However, in
this case, the House of Lords held that by virtue of the course of dealings of the parties in the
ordering and supply of the coals, such conduct amounted to an acceptance.
Acceptance by post/telegram
Household Fire and Carriage Accident Insurance v Grant (1879) 4 EX D 216; 41 LT
298, CA
Fact:
Mr. Grant applied for shares in the Household Fire and Carriage Accident Insurance
Company. The company allotted the shares to the defendant, and duly addressed to him,
posting a letter containing the notice of allotment. The letter was lost in the post and he never
received the acceptance. Later the company went bankrupt, and asked Mr. Grant for the
outstanding payments on the shares, which he refused saying there was no binding contract.
The liquidator sued.
Issue:
Whether Mr Grant's offer for shares had been validly accepted?
Judgment:
The Court of Appeal held that the defendant was liable as a shareholder. In this case, the
Court applied the postal rule. Thus, the communication of the company's acceptance of the
defendant's application for, and allotment of shares which was sent by post was complete
once it was posted.
Thesiger LJ held that if the post office be such common agent then it seems to me to
follow that as soon as the letter of acceptance is delivered to the post office, the contract is
made as complete and binding as if the acceptor had put his letter into the hands of a

messenger sent by the offeror himself as his agent to deliver the offer and receive the
acceptance...
Motive of acceptor at time of acceptance
Williams v Carwardine 5 C7 P 566
Fact:
Walter Carwardine was murdered in Hereford. The plaintiff, Mrs Williams, gave evidence at
the Hereford Courts of Assize against two suspects, but withheld information. The suspects
were subsequently acquitted. On April 25, 1831, the victim's brother and defendant, Mr
Carwardine, published a handbill stating there would be a 20 for whoever would give such
information as would lead to the conviction of the murderer of his brother,.
It was apparent that after the first murder trial, Mrs Williams had been savagely beaten by Mr
Williams. Mrs. Williams believed that she did not have long to live and in order to ease her
conscience, she gave a statement that led to conviction of Mr. Williams for the murder of
Walter. Afterwards, she tried to claim the reward but Mr Carwardine refused to pay.
Issue:
Whether there is a contract whereby Defendant was obligated to pay Plaintiff the money
promised?
Judgment:
The Court of King's Bench held that the plaintiff was entitled to recover the 20. The
advertisement amounted to a general promise or contract to pay the offered reward to any
person who performed the condition mentioned in it, namely, who gave the information. Two
judges clearly stated that motives were irrelevant.
Denman, C. J. - As the plaintiff is within the terms of the handbill, she is entitled to the
reward.
Mr. Justice Patteson.- The plaintiff being within the terms, her motive is not material.
R v Clarke (1927) 40 CLR 227
Fact:

The Government of Western Australia offered a reward "for such information as shall lead to
the arrest and conviction of the person or persons who committed the murders" of two police
officers. Clarke, who had seen the offer, gave information that led to the arrest of one person,
and the conviction of that person and one other. When giving that information, he was under
arrest on a charge of murder. He then claimed payment of the reward.
Issue:
Whether there is a contract between Clarke and the Crown?
Judgment:
The High Court held that Clarke could not claim the reward because it was necessary to act in
"reliance on" an offer in order to accept it, and therefore create a contract.[1] Isaacs ACJ and
Starke J held that he had not intended to accept the offer.
Isaacs ACJ said that in giving the information he was not acting on or in pursuance of or
in reliance upon or in return for the consideration contained in the proclamation, but
exclusively in order to clear himself from a false charge of murder... he has, in my opinion,
neither a legal nor a moral claim to the reward .
Adams v Lindsell (1818) 1B & Ald 681
Fact:
The defendants wrote to the plaintiffs on 2 September, offering to sell them some wool and
requested that the plaintiffs reply in course of post'. The letter which contained the offer was
wrongly addressed and therefore the plaintiffs did not receive it until 5 September. As a result
of this delay, the letter of acceptance was not received until 9 September by the defendants,
and this was two days later than the defendants would have expected to receive it. Because of
this, on 8 September the defendants had sold the wool to a third person.
Issue:
Whether a contract of sale had been entered into before 8 September when the wool was sold
to the third party?
Judgment:

The court held that the offer had been accepted as soon as the letter had been posted. Thus,
there was indeed 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. The defendant was
therefore liable in breach of contract.
Henthorn v Fraser [1892] 2 Ch 27, CA
Fact:
The defendant and the claimant were situated at Liverpool and Birkenhead respectively. The
defendant called at the office of the claimant in order to negotiate the purchase of some
houses. The defendant handed the claimant a note giving him the option to purchase some
houses within 14 days. On the next day, the defendant withdrew the offer by post, but this
withdrawal did not reach the claimant until 5 P.M. Meanwhile, the claimant responded by
post with an unconditional acceptance of the offer, which was delivered to the defendant after
its office had closed. The letter was opened by the defendant the next morning.
Issue:
Whether the acceptance of the offer by the claimant is valid?
Judgment:
The Court of Appeal ordered that the claimant was entitled to specific performance.
Lord Herschell set out the postal rule in contract situations: Where the circumstances are
such that it must have been within the contemplation of the parties that, according to the
ordinary usages of mankind, the post might be used as a means of communicating the
acceptance of an offer, the acceptance is complete as soon as it is posted.
Holwell Securities Ltd v Hughes [1974] 1 WLR 155, CA
Fact:
The defendant granted the plaintiffs an option to purchase certain property. The option
provided that it "shall be exercisable by notice in writing to the [defendant]". The plaintiff's
solicitor sent a written notice exercising the option by ordinary post to the defendant but it
never reached the defendant.
Issue:

Whether the postal rule is applied?

Judgment:
Lawton Lj referred to the postal rule and to Henthorn's case above but held that it would not
apply if the offer expressly specifies that the acceptance must reach the offeror and if
application of the rule causes "manifest inconvenience and absurdity".
Lee Seng Heng & Ors v Guardian Assurance Co Ltd [1932] MLJ17
Fact:
The plaintiffs insured their stock in trade with the defendants against fire. Subsequently, a fire
broke out on the insured premises and the plaintiffs made a claim under the policy. The
defendants' solicitors wrote to the plaintiffs saying that on the date of the fire, the policy had
ceased to exist as they had previously written to the plaintiffs cancelling the policy. This letter
was never received by the plaintiffs as there was no post office at Buloh Kasap (where the
insured property was situated). The nearest post office was at the town of Segamat and the
practice at Segamat was to send a postman to Buloh Kasap only when the amount of
correspondence justified a special journey. The letter in question had been kept at Segamat
and had only been brought to Buloh Kasap by the postman after the fire. As the plaintiffs'
premises had been burnt down, the addressee could not be found.
Issue:
Whether the post was properly used as an agent by the Defendants in sending their letter of
the 27th March?
Judgment:
Munson CJ stated that The only point, therefore, left for me to decide is whether the post
was properly used here as an agent by the Defendants in sending their letter of the 27th
March. The Plaintiffs acted from Buloh Kasap five miles from Segamat which is some 125
miles from Singapore and some 50 miles from Malacca. It is difficult to see how they were
ordinarily to communicate if not by post ...I hold as Farwell J. did in Bruner v. Moore, that
"the parties in this case contemplate that the post might be used as a means of communicating
on all subjects connected with the contract." In these circumstances it is clear that the sender
of the letter is not responsible for any delay in the post. I hold, therefore, that the rescission of

the policy was effected at the moment that the letter of the 27th March was posted, that is on
the 27th March, 1931, and that the policy was non-existent at the date of the fire
Acceptance by telex/telephone
Entores Ltd v Miles Far East Corporation [1955] 2 QB 327, CA
Fact:
Entores was a London-based trading company that sent an offer by telex for the purchase of
copper cathodes from a company based in Amsterdam. The Dutch company sent an
acceptance by telex. The contract was not fulfilled and so Entores attempted to sue the owner
of the Dutch company for damages. The controlling company, Entores, was based in the UK
and under English law. Entores could only bring the action in the UK (serve notice of writ
outside the jurisdiction) if it could prove that the contract was formed within the jurisdiction,
i.e. in London rather than Amsterdam.
Issue:
Whether at what point the contract come into existence?
Judgment:
The Court ruled that the communication through telex in this case was instantaneous and the
contract was made at the place where acceptance was received, in this case, in London.
Denning LJ held that My conclusion is, that the rule about instantaneous communications
between the parties is different from the rule about the post. The contract is only complete
when the acceptance is received by the offeror and the contract is made at the place where the
acceptance is received.
Brinkibon Ltd v Stahag Stahl [1983] 2 AC 34, HL
Fact:
Brinkibon was a London company that bought steel from Stahag, a seller based in Austria.
Brinkibon sent their acceptance to a Stahag offer by Telex to Vienna. Brinkibon later wanted
to issue a writ against Stahag and applied to serve an out of jurisdiction party. They would
only be able to do so if the contract had been formed in England. The question at issue was
where the contract was formed.

Issue:
Whether at what point the contract come into existence?
Judgment:
The Judges decided that the contract was formed in Vienna. They accepted the principle in
Entores v Miles Far East Co where in the case of instantaneous communication, which
included telex, the formation generally occurs in the place where the acceptance is received
Acceptance by conduct
Taylor v Allon [1966] 1 QB 304
Fact:
The appellant's motorcar had been insured by an insurance company called "The Federated
Employers Insurance Association Ltd", the policy expiring on April 5, 1964. He obtained a
temporary cover note for 30 days from a new insurance company on April 16. It was found as
a fact that on the expiration of the old policy he never intended to renew it with the old
insurance company. His old insurance company sent him a temporary cover note for 15 days
from April 6. The appellant was convicted of using a motorcar on the road without insurance
against third party risks. He argued that he was covered by the cover note which was offered
to him on April 6 and that he had accepted it by conduct.
Issue:
Whether driving the car constitute acceptance of the notice of 15 days of cover?
Judgment:
The court held that there is no contract between the parties. Although a contract can be
accepted by conduct, it may not be accepted by such conduct if it is not clear that the parties
both intended there to be such an agreement.
Acceptance by telex/ telephone
Woon Yoke Lin (Berniaga sebagai Syarikat Ceritaku) v United Estate Projects Berhad
[1998] 4 AMR 4052
Facts:

In 1987, the plaintiff submitted a booking form to rent a kiosk in shopping complex owned
by defendants. The form stated that if the application of plaintiff was not accepted, the
booking deposit should be refunded within 14 days. In April 1988, the plaintiff forwarded 3
copies of tenancy agreement used for rental of kiosks. The plaintiff sued defendants for
breach of contracts as the deposit is only returned in June 1988. The defendant contended that
there was no contract in respect of kiosk.
Issue:
Whether conduct of the defendants amounted to an acceptance of offer or not?
Held:
High Court- The defendants had accepted the plaintiffs offer to rent a kiosk in Subang
Parade which was owned by the defendants.
EMS Bowe (M) Sdn Bhd v KFC Holdings (M) Bhd & Anor [2000] 1 AMR 677
Facts:
The plaintiffs submitted a tender for some works to the defendants. Subsequently, the second
defendant issued to the plaintiffs a draft letter of award for the works and instructed the
plaintiffs to order in advance the materials for the works. However, the award was given to
another contractor although the plaintiffs ordered the materials.
Issue:
Whether is there any binding contract between the plaintiffs and defendants?
Held:
High Court- A draft offer acted upon by one party with the knowledge and concurrence of the
other party has converted it into a written agreement and thus there was a valid and binding
contract.
Acceptance by performing conditions stipulated in offer
Carlill v Carbolic Smoke Ball Co [1892] 2 QB 484; [1893] 1 QB 256
Facts:

Carbolic Smoke Ball Co (defendant) manufactured and sold smoke ball. The company placed
advertisement in newspapers offering a reward of 100 pounds to any person who contracted
influenza after using the smoke ball according to prescription. Carlill(plaintiff) bought and
contracted influenza after using the smoke ball. He made a claim for the reward.
Issue:
Whether the conduct of plaintiff amounted to acceptance of offer or not?
Held:
Court of Appeal(Lindley J)- The promise made by the company is binding. It is an offer to
anybody who perform the conditions stipulated. The performance of conditions by plaintiff is
equivalent to an acceptance.
Acceptance by silence
Fraser v Everett (1899) 2 SLJ 81; (1889) 4 Ky 512
Facts:
The defendant had contracted for the purchase of transfer and scrip shares but were
tendered bearer-warrant shares. The contract was for shares expected to be mailed would
have arrived on 23 April. However, the scripts had been mailed early in April but only offered
to defendants on 15 May. The plaintiff contended that by not replying to brokers letter of
bearer-warrants, the defendant must be taken to have waived his objection.
Issue:
Whether silence can amount to acceptance?
Held:
1) The defendant who had contracted for the transfer of scrip was entitled to obtain what he
had bargained for and could not compelled to accept a bearer-warrant.
2) Omission to reply does not constitute a waiver or there is no rule of law saying silence
gives consent in this case.
Felthouse v Bindley (1862) 11 CBNS 869; 142 ER 1037

Facts:
The plaintiff wrote to his nephew offering to buy nephews horse and adding that If I hear no
more about him, I consider the horse is mine at 301.15s. The nephew did not reply. Six
weeks later, the defendant who was employed by the nephew to sell farming stock, was
directed by nephew to reserve the horse, but by mistake had sold it. The plaintiff sued for
conversion of the horse.
Issue:
Whether there was a concluded contract between plaintiff and his nephew for sale of horse?
Held:
Willes J- There was no contract formed. Although the nephew had intended to sell the horse
to plaintiff, but this was not communicated and silence does not amount to acceptance.
Weatherby v Banham (1832) 5 C&P 228
Facts:
The plaintiffs were publishers of Racing Calendar. They had supplied a copy of Racing
Calendar to one Mr Westbrook for some years. The plaintiffs not knowing of Mr Westbrooks
death, continued to send the calendar. There was no evidence that the defendant had ever
offered to return them. The plaintiffs subsequently brought an action to recover the price of
Racing Calendar.
Issue:
Whether silence can amounted to acceptance and have legal consequences?
Held:
Lord Tenterden CJ- silence was held to have legal consequences especially where reasonable
opportunities exist to reject the offer but the acceptor had failed to do so.
Re Selectmove Ltd [1995] 2 All ER 531
Facts:

The Crown demanded 25000 in tax from Selectmove Ltd as they had underpaid. Selectmove
agreed with a tax collector that payment could occur in 1000 monthly instalments. After
accepting 7 monthly instalments, the Crown sought a winding up order of Selectmove as they
owed 18000 in tax.
Issue:
Whether there was a consideration in agreement to pay in monthly instalments?
Held:
Court of Appeal(Gibson LJ)- There was no consideration. Silence could be interpreted as
acceptance in exceptional circumstances.
Mode of acceptance stipulated by offeror
Manchester Diocesan Council for Education v Commercial & General Investments Ltd
[1970] 1 WLR 241
Facts:
Manchester Diocesan called for tenders relating to property. The defendant submitted a tender
(offer to buy). The tender stated that acceptance was to be notified to the person whose tender
was accepted by letter sent by post addressed to the address given in his tender. The plaintiff
decided to accept tender but sent the acceptance to defendants solicitor, which was the
address given in the offer.
Issue:
Whether the mode of acceptance made by plaintiff is valid or not?
Held:
Buckley J- The method of acceptance prescribed in tender was not mandatory. The offeror
was aware of the acceptance thus the acceptance is valid.

Question 7
Tan offers to sell his ACER computer to Muthu and stated that acceptance in writing
must reach his office by the 15th January 2011. Explain the legal situation in the
following circumstances:
(a). Muthu posted a letter of acceptance to Tan on 10 th January 2011 which arrives at
Tans office on 16th January 2011.
(b). Muthu telephones Tan on 14th January 2011 accepting the offer but Tan imsisted
that Muthu must accept in writing.
(c). Muthu sends a telex to Tan at 4 p.m. on 15 th January 2011, but Tans telex machine
was out of order at the time. By the time Muthu rushed to Tans office, the office
was already closed.
Support your answers with under the Contracts Act 1950 (Revised 1974) and decided
cases.
A
The issue is whether the communication of acceptance made by Muthu is valid.
Section 4(2) of Contracts Act 1950 (hereinafter referred to as CA 1950) provides that the
communication of an acceptance I complete as against the proposer, when it is put in a course
of transmission to him, so as to be out of the power of the acceptor; and as against the
acceptor, when it comes to the knowledge of the proposer. This is similar to the common law
postal acceptance rule, whereby it stipulates that acceptance is complete when the letter
containing such acceptance is posted, or when the telegram containing such acceptance is
handed in.
This is further explained in Illustration (b) that the communication of the acceptance is
complete as against A, the proposer, when the letter is posted; and as against B, the acceptor,
when the letter is received by A, the proposer.
In Household Fire and Carriage Accident Insurance v Grant [1879] 41 LT 298, the
plaintiffs company did accept the defendants application for shares, and posted a letter duly
addressed to him containing the notice of allotment, but it was found as a fact that the letter
never reached its destination. Subsequently, the company went into liquidation and the

official liquidator applied for the unpaid price of the shares from the defendant. The issue was
whether the defendant was liable as a shareholder. Thesiger J from the Court of Appeal held
the the defendant was liable as a shareholder as the communication of the companys
acceptance of the defendants application for shares which was sent by post was complete
once it was posted.
Besides, in Lee Seng Heng & Ors v Guardian Assurance Co Ltd [1932] 1 MLJ 17, a fire
broke out on the plaintiffs insured premises and the plaintiffs made a claim under the policy.
However, the defendants solicitors contended that the policy had ceased to exist as they had
previously written to the plaintiff canceling the policy. This letter was never received by the
plaintiffs. The issue was whether the cancellation of policy was valid. Murison CJ from OCJ
Singapore held that the rescission of the policy was effected when the letter was posted.
Moreover, in Ignatius v Bell [1913] 2 KMSLR 115, the defendant had granted to the
plaintiff an option to purchase certain land he owned. The plaintiff exercised the option by
sending a notice in a registered letter before the specified date, but the letter was obtained by
the defendant only after the specified date. The issue was whether the notice sent by the
plaintiff to the defendant was a valid acceptance. Woodward JC held that the option was duly
exercised by the plaintiff when the letter was posted. Thus, it ws a valid acceptance.
Hence, by applying s. 4(2) to our case, the communication of Muthus acceptance is complete
as against Tan, the proposer, when it is put in a course of transmission to Tan on 10 TH January
2011, so as to be out of the power of himself, the acceptor. However, the communication of
Muthus acceptance is only complete as against himself on 16 th January 2011, when it comes
to the knowledge of Tan, the proposer.
Furthermore, based on the case of Household Fire and Carriage Accident Insurance v
Grant, the case of Lee Seng Heng & Ors v Guardian Assurance Co Ltd, and the case of
Ignatius v Bell, Muthus communication of acceptance is complete and thus his acceptance is
valid as he posted the letter of acceptance before 15th January 2011.
In short, the communication of acceptance made y Muthu is valid.
B
The issue is whether Muthus acceptance of the offer is valid.

S. 7(b) of Contrcats Act 1950 (hereinafter referred to as CA 1950) states that in iorder to
convert aproposal into a promise the acceptance must be expressed in some usual and
reasonable manner, unless the proposal prescribes the manner in which it is to be accpeted. If
he proposal prescribes a manner in which it is to be accepted, and the acceptance is not made
in that manner, the proposer may, within a reasonable time after the accpetance is
communicated to him, insist that his proposal shall be acepted in the prescribed manner. And
not otherwise; but if he fails to do so, he accepted the acceptance.
In Hitchens v General Guarantee Corporation Ltd [2001] All ER (D) 246, a hire purchase
agreement, which did not contain a term that acceptance could only be made in writing by
signature, had been orally approved by the finance company. The issue was whether offer
accepted orally by finance company before signing lease purchase agreement was valid. The
Court of Appeal held that where there was no requirement that the acceptance must be in
writing, an oral acceptance sufficed to create the contract.
In Carlyle Finance Ltd v Pallas Industrial Finance [1999] 1 All ER 659, the finance
company contended that the delivery of the car was only a preliminary bailment and not an
acceptance of respondents offer to purchase the car. The issue was whether the delivery of
the car constituted an acceptance of offer. The Court of Appeal held that there was no reason
to assume that the respondent had any reason to suppose that delivery on payment of the
deposit was other than the owners contractual acceptance of the bargain between them. This
shows that where the manner of acceptance had been in a different form, the offeror may,
however, waive the prescribed manner, as in this case the respondent may treat the delivery of
the car as an acceptance of offer by the finance company although the agreement made it
clear that delivery did not constitute acceptance of the offer.
By referring to s. 7(b), as Tan has stated initially that the acceptance of the offer must be in
writing, he may insist that Muthu must accept in writing, after receiving Muthus acceptance
through telephones. On the other hand, in order to convert Tans proposal into a promise,
Muthu must accept the offer in the prescribed manner, that is in writing.
Additionally, according to Hitchens v General Guarantee Corporation Ltd, as there is
requirement made by Tan that the acceptance must be in writing, an oral acceptance through
telephones by Muthu did not suffice to create the contract.

Not only that, based on Carlyle Finance Ltd v Pallas Industrial Finance, as Tan did reject
Muthus acceptance by insisting him to accept in writing, this shows that Tan did not waive
the prescribed manner.
In conclusion, the acceptance by Muthu is invalid. No contract is concluded between Muthu
and Tan.
C
The issue is whether Muthus communication of acceptance is complete.
Firstly, in the case of Entores Ltd v Miles Far East Corporation [1955] 2 QB 327, CA may
be referred. In this case, a series of communication passed by telex between the plaintiffs in
England and the defendants Dutch agents in Amsterdam, the material one being a counteroffer made by the plaintiffs and an acceptance of that offer by the Dutch company received
by the plaintiffs in London by telex. The issue is whether the contract was made in England
or Holland. Denning LJ from the Court of Appeal held that the communication through telex
was instantaneous and thus the contract is only complete when the acceptance is received by
the offerer and the contract is made at the place where acceptance was received in London.
Secondly, in Brinkibon Ltd v Stahag Stahl [1983] 2 AC 24, HL, an offer was made by telex
in Vienna and was accepted by a telex message from London to Vienna. The issue is whether
the contract was formed in Vienna or London. The House of Lords ruled that the contract was
made in Vienna, which was the place where acceptance was received. This shows that the
contract was only complete when the acceptance was received by the offeror in Vienna.
Thirdly, in Bhagwandas Goverdhanda Kedia v Girdharlal Parshottamdas and Co.
[1966] AIR SC 543, the plaintiff offered to get certain goods supplied at Ahmedabad to
defendants who accepted the offer at Khamgaon. The issue is whether the contract was
formed in Ahmedabad or Khamgaon. Shah J from Supreme Court of India held that when the
offer was made by the plaintiff by telephone conversation from Ahmedabad and the same was
accepted by the defendant by telephone conversation from Khamgaon, the contract is made at
Ahmedabad where the acceptance was received. This shows that the contract was only
complete when the acceptance was received by the offeror in Ahmedabad.
Based on the judicial decisions in three cases above, the communication through telex is
instantaneous. The rule about instantaneous communication between parties is different from

the rule about the post, whereby the postal acceptance rule stipulates that acceptance is
complete when the letter or telegram containing the acceptance is posted or handed in. Under
the rule of instantaneous communications, the contract is only complete when the acceptance
is received by the offeror and the contract is made at the place where the acceptance is
received. Thus, section 4(2)(a) of the Contracts Act 1950 (hereinafter referred to as CA
1950) which states that the communication of an acceptance is complete as against the
proposer when it is put in a course of transmission to him, so as to be out of the power of
acceptor, is inapplicable in this case. Hence, by applying the rule of instantaneous
communication into our case, Muthus communication of acceptance is incomplete because
Tans telex machine is out of order at the time when Muthu sends the telex, and the office is
already closed by the time Muthu reaches Tans office. This shows tha Tan has not received
the acceptance.
In short, Muthus communication of acceptance is incomplete, and no contract is formed
between Muthu and Tan.