Proposal and Acceptance - Felthouse v Bindley

  • May I know what is meant by this: "Where communication of acceptance is waived by the offeree"? I know this is an exception to the rule that there is no valid contract without proper acceptance by the offeree. WHY can't this exception apply to the case of Felthouse v Bindley [1862]?

    Under the general rule on acceptance, it must be communicated to the offeror/proposer. That means if the offeree (e.g. Justin) wants accept the offer, he must inform the offeror (Zac). Either he calls, sends SMS or write letter. Different rules will apply, but u dun wori abt this first.

    Sometimes the offeror will "waive" the need to inform him. That means he does not require offeree to tell him that the offeree is accepting his offer. So if Justin (offeree) wants to accept the offer, he needs not tell Zac (offeror). Now, this situation only makes sense in a "lost item" or "competition climb Mount Sg Panjang" scenario. Because in those situation, it is not enough for the offeree to tell the offeror he is going to find the lost item/climb mountain....he MUST actually FINISH doing that, then only he is considered to have accepted the offer.

    Why the exception cannot apply to Felthouse v Bindley? Because here, although the offeror does not require offeree to tell him that the offeree is accepting offer, the offeror CANNOT go one step further in expecting that the offeree will accept the offer. It is still the choice of the offeree whether to accept or dun accept. If offeree does not want to accept, he only need to just remain silent or do nothing.

    The problem in Felthouse v Bindley was the offeror ASSUMED that the offeree's silence means acceptance. This is wrong in law, because silence means rejection.

    That is why the legal principle that u learn from that case was that "the offeror cannot impose the burden of rejection on the offeree". Meaning, the offeror cannot make it a requirement that if the offeree rejects, the offeree must inform the offeror. In law, the offeree has no obligation to do anything if he rejects the offer.

    So in summary:

    1. Sometimes the offeror will waive the requirement for the offeror to inform that he is accepting the offer. In this situation, the offeree just go ahead to perform the conditions of the offer (e.g. find lost item, participate in competition) without the need to inform the offeror that he is participating.

    2. BUT the offereor must not assume that if there is no news from the offeree, it means the offeree agrees. Offeror cannot make it a requirement that if offeree wants to reject, offeree must inform him. In law, the offeree needs not do anything if he rejects the offer.

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  • Isn't the 2nd paragraph is under the unilateral offer?


    Yes, usually where the offeree has waived the need to communicate acceptance, it is in a situation of unilateral contract.

    i) Isn't because of that sentence the uncle (offeror) stated in the letter as an offer, so the offer is void?


    The uncle’s offer is not void.

    ii) IF the uncle (offeror) didn't state that sentence in the letter and also didn't assume anything (i.e. silence means accepted), CAN the exception applied?

    No. In Felthouse v Bindley, the uncle stated “if I don’t hear from you, I consider the horse mine”. He did not state “If you are accepting my offer, you need not inform me”. So the uncle (offeror) had not clearly waived the requirement for communicating acceptance. That means, the nephew (offeree) must still inform the uncle if the nephew wants to sell the horse to the uncle.

    iii) The meaning of that exception (where the offeror dispenses with the need for communicating acceptance) - isn't a situation where the two particular parties have already made an agreement in the past, that “silence would amount acceptance, and acceptance needs not be communicated to the other party" this what the sentence mean? Any example?


    Yes, both parties must have clearly made an arrangement that if the offeree wants to accept the offer, needs not inform the offeror, rather, he should PERFORM whatever acts that is required to be done. E.g. Zac offers to sell his IPAD3 to Justin. Zac says “If you are accepting my offer, no need bother telling me. Just bank in RM2300 to my bank account, and we will meet tomorrow to hand over the IPAD3”.

    So if Justin is accepting the offer, he needs not call Zac, he only needs to bank into his account. But that is assuming Justin is ACCEPTING. No problem tomorrow when Zac meets up with Justin, Justin has already bank in the money. (Note: If Justin has not banked in the money tomorrow, Zac at that time can still REVOKE his offer, since there is no acceptance by Justin).

    Do you think a seller like Zac should do this? Not recommended, right?

    Also, what happens if Justin does NOT want to accept the offer? When Zac meets up with Justin, can Zac insist “since I did not hear from you, I assume you are buying my IPAD3”....this is exactly what the uncle in Felthouse v Bindley did.....

    iv) In that case, can the nephew sue the auctioneer?

    Technically yes, under the law of agency, since the auctioneer had exceeded his authority as an agent. BUT from the proposal acceptance aspect, there was no loss or harm to the nephew. He was not liable to his uncle for breach of contract because he did not accept his uncle’s offer.

    So the situation depends on what the nephew was trying to achieve – if he sues just because the auctioneer exceeded his authority, it is also hard to succeed because the nephew did not suffer any loss.

    v) Is there anything that the nephew can do to get back the horse once the auctioneer has sold it, owing to the auctioneer's mistake?


    This is under the law of agency. By right, if an agent (auctioneer) exceeded his authority, the Principal (nephew) is not bound by any contract of sale of the horse. But the auctioneer had clearly acted under his actual and ostensible authority as an agent, so it is unlikely the nephew can get back the horse (this procedure is called “rescind the contract”).

    If the buyer of the horse was aware that the auctioneer has no authority to sell the horse, then, under agency law, yes, the nephew can take back the horse since he can rescind the contract of sale.

  • What I read from my textbook (page 53, paragraph b) is that "where communication of acceptance is WAIVED BY THE OFFEREE" , it states the offeree has a right to waive the requirement for communication of acceptance, BUT NOT OFFEROR. are these two different?


    That paragraph (b) is a situation where BOTH parties agree that silence would amount to acceptance. Zac offers to sell to Justin. Justin says, "If I don't call u, u can assume that I am buying". Zac must have agreed to this arrangement.

    Similarly, Zac can also do the same thing, "If you are accepting my offer, u need not call me".

    Yet, what happens if Justin is NOT ACCEPTING? It is obvious that Zac cannot force Justin to accept by saying he ASSUMES Justin is accepting. Zac cannot sue Justin to make him accept.

    What about Justin, he himself has set the condition that it is assumed he is accepting if he does not in this situation, he cannot escape.

    In other words, it is open to both OFFEROR and OFFEREE to set condition for communication of acceptance, they can set condition that parties need not communicate acceptance. If NO ONE sets the condition, then silence does not amount to anything.

  • So, both parties must have set an agreement that silence would amount acceptance and acceptance needs not communicated to the other? THEN this will come under the exception to the rule that there is no valid contract without proper acceptance by the offeree. Is this the correct position? At first, I thought that as long as the offeree think that he has the intention to accept the offer, the exception is effective. It means the silence would amount acceptance only after both parties had made an agreement. DOESN'T REALLY MEAN the one party KEEP SILENT!!!

    Generally what you say is correct. If the parties have already agreed that acceptance is done by being silent, then silence will amount to acceptance. In fact, there is now an obligation on the offeree to actually communicate his REJECTION to the offeror.

    In Felthouse, the uncle did not obtain the consent of the nephew that silence was to amount to acceptance. The uncle wrote a letter, stating that, but the nephew did not reply, although he had decided to sell to the uncle after all. But after the auctioneer made the mistake, the nephew escaped from being sued by the uncle. If silence had really amounted to acceptance, the nephew would be in breach of contract.