D. Communication of Acceptance

AuthorJohn D. McCamus
ProfessionProfessor of Law. Osgoode Hall Law School, York University

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The consensus ad idem theory implies that an acceptance, to be effective, must be communicated by the offeree to the offeror. The minds of the parties must meet. Indeed, this is the general principle established by the cases. In Larkin v. Gardiner,121for example, Larkin had placed property in the hands of her agent for sale. The agent received an offer in the form of a draft agreement to purchase executed by Gardiner for transmittal by the agent to Larkin. By the next day, the agent presented the draft agreement to Larkin that she thereupon signed and returned to him. Later that same day, and before receiving any communication from the agent, Gardiner notified the agent that he was withdrawing the offer. It was held that Larkin had not accepted Gardiner’s offer by that time. The mere execution of the agreement, which simply remained in the possession of Larkin’s agent, did not fulfil the requirement that notice of the acceptance be communicated to the offeror.

In this part, we consider whether silence or inactivity on the part of the offeree can ever constitute acceptance of an offer. We then turn to consider a variety of issues relating to the point in time at which various means of acceptance are effective. Where, for example, a notice of acceptance and a revocation of the original offer have crossed in the mails, it will be necessary to determine the point in time at which the notice of acceptance is effective. Under the traditional "postal acceptance rule," in a case where mailing an acceptance is an appropriate manner of communicating the acceptance, the acceptance will be effective upon mailing. In this hypothetical situation, then, the acceptance would occur prior to the receipt of notification of the acceptance. After considering the operation of this rule, we will turn to assess the significance, with respect to this issue, of using various other forms

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of communication. As well, we will consider the relevance to the application of offer and acceptance analysis of the e-commerce legislation enacted by the Canadian provinces.

1) Silence as Acceptance

Against the background of a general requirement that an acceptance, in order to effective, must be communicated to the offeror, it may be considered whether there are ever circumstances in which silence or inaction may constitute acceptance of an offer. There are essentially two different kinds of fact situations in which silence may have this effect. First, situations may arise in which the silence of the offeree is reasonably understood by the offeror to indicate an acceptance of the offer by the offeree. In such circumstances, it might be said that the conduct of the offeree has the effect of signalling the offeree’s assent to the offeror. The second group of cases are situations in which the offeror has waived the normal requirement of communication of acceptance. As we shall see, such waiver is more likely to be found to occur in the context of unilateral rather than bilateral agreements.

A leading illustration of the first category of cases - silence of the offeree communicating assent - is the decision of the Supreme Court of Canada in Saint John Tug Boat Co. v. Irving Refinery Ltd.122The defendant in this case operated an oil refinery in the harbour at Saint John. The refinery was supplied with crude oil brought by large tankers, which in turn were guided through the harbour by tugboats. The defendant did not have a sufficient supply of tugboats to meet completely the need for these services and rented tugs from the plaintiff for this purpose.

Pursuant to the agreement at issue in this case, the defendant had rented one of the plaintiff’s tugs to provide stand-by services at a particular rental rate. The contract was renewed twice, but after the expiry of the second renewal the plaintiff continued to provide stand-by services and invoiced the defendant at the contract rate for those services. Several months later, the defendant adopted the position that the contract had expired on the renewal expiry date and that the defendant was therefore not liable to pay for the stand-by services that had been accepted by the defendant in the subsequent months. For the Supreme Court, the issue in this case was whether an acceptance by the defendant of the plaintiff’s continuing offer to supply services at the contract rate could be inferred from the defendant’s conduct in simply acquiescing in the receipt of services. The test of whether conduct,

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unaccompanied by any explicit undertaking may constitute an acceptance, in the Court’s view, was an objective one. The question is whether the offeror, acting reasonably, would understand that the offeree was assenting to the terms proposed. On the present facts, this test was met and the defendant was obliged to pay for the services rendered subsequent to the expiry of the renewal period at the contract rate.123

The general principle is well established and perhaps more obviously applies in circumstances where some positive action on the part of the offeree - such as a seller sending goods in response to an order124or a

buyer accepting delivery of goods125- where the conduct in question plainly signals agreement to the terms of the offeror. As we have seen, acceptance by conduct of this kind often applies in the context of cases involving the "battle of the forms."126The evident purpose served by the principle is protection of the reasonable expectations of the offeror in circumstances of this kind.

In the second category of cases - waiver of the requirement of notice by the offeror - the evident purpose of the doctrine is to protect the interest of the offeree who may reasonably have assumed that notice of acceptance is not necessary. A waiver of notice by the offeror may often arise in the context of an offer of a unilateral agreement. The leading illustration of the phenomenon is Carlill v. Carbolic Smoke Ball Co.127In this case, it will be recalled, the smoke ball company published a notice of a reward to be paid to any person who suffered influenza after acquiring the smoke ball product and using it in accord with the instructions. Among the various arguments made by the defendant smoke ball manufacturer to defend against the plaintiff Carlill’s claim to enforce the reward was an assertion that Mrs. Carlill had not accepted the offer of reward simply by acquiring the smoke ball, using it in the prescribed manner and then catching influenza. An agreement can only be formed between the parties, it was urged, if Mrs. Carlill had notified her acceptance of the offer to the defendant. In the absence of notification, the defendant argued "the two minds may be apart, and there is not that consensus which is necessary according to the English

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law." The defence was rejected. As Bowen L.J. explained: "... as notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so ... and if the person making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification ... ."128On these facts, then, it was not necessary for Mrs. Carlill to do anything other than fulfil the stipulated condition in order to accept the defendant’s offer. This proposition appears to be applicable generally to notices of reward. As Bowen L.J. further explained, if a notice of reward for the finding of a lost dog is posted, it is not necessary for everyone who enters upon a search for the dog to send a note to the offeror indicating an acceptance of the offer. As soon as someone finds the dog, he or she has accepted the offer.

Although the most obvious application of the waiver principle is in the context of notices of reward and other offers of unilateral agreements, there is no reason in principle why the doctrine could not apply to an offer of a bilateral contract.129As "master of the offer," the offeror is entitled to stipulate whatever manner of acceptance is deemed appropriate, including conduct by the offeree that does not involve notification of the offeror. The decision in Dominion Building Corp. Ltd. v. The King,130provides an illustration. In this case an offer to purchase land from the Crown stipulated that the offer would constitute a binding contract of purchase and sale once an Order in Council authorizing the transaction was passed by the offeree and a certified copy sent to the offeror. The Privy Council held that the certified copy was unnecessary. The offer would be accepted, pursuant to its terms, when the appropriate Order in Council had been made.

It is quite another matter, however, whether an offeror can impose silence as acceptance on an offeree with the result that an offeree who makes no reply may be surprised to discover that a binding contract has been created. The leading and controversial authority is Felthouse v. Bindley131in which a nephew had been negotiating the sale of a horse to his uncle. The uncle had offered to pay a price of £30 in response to which the nephew suggested the slightly higher price of 30 guin-

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eas. In reply, the uncle wrote a letter suggesting a compromise price of £30, 15 shillings, indicating that he would consider the deal done if he did not hear back from the nephew. The nephew did not reply until sometime later after an auctioneer, with whom the nephew was dealing, accidentally sold the horse that had been reserved for his uncle. The nephew had instructed the auctioneer that the particular horse had been previously sold. On this basis, the uncle brought a claim for damages for conversion relying on the auctioneer’s improper dealings...

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