Contract Formation: Acceptance
- teachlawhub
- Nov 21, 2025
- 5 min read
Updated: Nov 28, 2025
Contract Formation: Acceptance
Once a valid offer has been made, the next essential step in forming a contract is acceptance. Acceptance is the moment an agreement becomes legally binding, so it is important to understand how, when, and by whom it can be made.
What is Acceptance?
Acceptance is an unqualified agreement to all the terms of the offer. The offeree must accept exactly what has been offered, without altering or adding anything. If the response changes any term, it is not acceptance but a counter-offer, which ends the original offer.
Acceptance in Bilateral and Unilateral Contracts
Bilateral Contracts - In bilateral contracts, acceptance must be communicated to the offeror. These involve an exchange of promises where both parties undertake obligations. For example: A says, "I’ll pay you £40 to mow my lawn.", B must communicate a “yes” verbally, in writing, or by another clear method for acceptance to be valid.
Unilateral Contracts - In unilateral contracts, acceptance is made by performance rather than communication. The offeree accepts the offer simply by carrying out the required act.
Carlill v Carbolic Smoke Ball Co (1893) The company advertised that it would pay £100 to anyone who used the smoke ball correctly and still caught influenza, stating they had deposited £1,000 to show sincerity. Mrs Carlill used the product as instructed, became ill, and claimed the reward. The company argued she had not communicated acceptance. The court held the advertisement was a unilateral offer to the world, accepted by performance, so no prior communication was necessary.
Key Requirements for Valid Acceptance
1. Acceptance Must Match the Offer - Acceptance must be absolute and unconditional. Any attempt to change the terms becomes a counter-offer and ends the original offer.
2. Acceptance Must Be Communicated - Acceptance must be communicated to the offeror to be effective, unless dealing with a unilateral contract. Silence generally does not amount to acceptance.
3. The Method of Acceptance - Acceptance may be given by any reasonable method unless the offer specifies otherwise.
Yates v Pulleyn (1975)
The offer asked for acceptance by registered or recorded delivery, but the offeree used ordinary post. The court held that acceptance was still valid because the specified method was not essential but simply a means to ensure secure delivery. Ordinary post still effectively communicated acceptance, and the offeror was not disadvantaged. The decision confirms that a different method is acceptable unless the offer imposes strict compliance.
4. Awareness of the Offer - A person cannot accept an offer they do not know exists.
Fitch v Snedaker (1868)
A reward was offered for information leading to the conviction of a murderer. The claimant had already provided the information before learning about the reward. The court held he could not claim payment because acceptance requires knowledge of the offer. Without awareness, there can be no agreement.
Battle of the Forms
When two businesses exchange documents such as purchase orders or invoices, each containing different standard terms, the courts decide whose terms apply.
Last Shot Rule - This is the usual approach. The last set of terms sent before performance takes place is treated as the final counter-offer. If the other party proceeds, they are taken to have accepted those terms.
Butler Machine Tool v Ex-Cell-O (1979)
Both parties exchanged documents with conflicting terms, including a price variation clause in Butler’s terms. Ex-Cell-O replied with their own terms and included an acknowledgement slip, which Butler signed and returned. The court held that Ex-Cell-O’s terms applied, as they were the last terms communicated before performance. By signing the slip, Butler accepted the counter-offer.
Exception: First Shot Rule - This applies where the first party’s terms expressly reject any later attempts to vary them. Here, the initial terms prevail.
TRW v Panasonic (2021)
Panasonic sent its standard terms first, including a clause preventing any future terms from taking effect unless expressly agreed in writing. TRW later sent its own terms, but Panasonic began performance without accepting them. The court held that Panasonic’s original terms applied because their no-variation clause blocked the later documents. This created an exception where the initial terms take priority.
The Postal Rule
Normally, acceptance must be received to be effective. The postal rule is an exception: where it applies, acceptance is complete when posted, even if it is delayed or lost.
Adams v Lindsell (1818)
The defendants mis-addressed a letter offering to sell wool, causing delay. The claimant posted acceptance immediately upon receiving it, but the defendants assumed rejection and sold the wool elsewhere. The court held that acceptance was valid once posted, creating a binding contract. This developed the postal rule to prevent unfairness caused by postal delays.
Household Fire Insurance v Grant (1879)
Grant applied for shares, and the letter of acceptance was posted but never arrived. He argued there was no contract. The court held that the contract was complete when the letter was posted. The decision emphasises certainty in postal communications even when letters are lost.
Limits to the Postal Rule
The postal rule may not apply where:
• The offeror excludes it.
• The method is unreasonable.
• The offer requires actual notice.
Holwell Securities v Hughes (1974)
The offer required “notice in writing” to exercise an option. The claimant posted acceptance, but it never arrived. The court held the postal rule did not apply because the offer required actual receipt. The wording showed the parties intended a stricter requirement.
Instant Forms of Communication
Instant forms of communication, such as telephone, fax, telex, and email, generally do not fall under the postal rule. The postal rule states that acceptance is effective when posted, but this applies only to non-instant forms of communication, like letters.
Rule: For instant communications, acceptance is effective when it is received by the offeror, not when it is sent.
Entores Ltd v Miles Far East Corporation (1955)
The claimant sent acceptance by telex from London to Amsterdam. The court held that acceptance takes effect when it is received by the offeror, not when sent. The case confirmed that the postal rule does not apply to instantaneous forms of communication, and the contract is formed at the place of receipt.
Brinkibon v Stahag Stahl (1983)
The claimant sent an acceptance by telex to Austria. The court held that acceptance takes effect when received, not when sent. The judges also noted that no single rule applies universally and decisions depend on commercial practice and context. Instant communication is generally effective on receipt.
How Acceptance Cannot Be Made
• Acceptance cannot occur without knowledge of the offer (Fitch v Snedaker).
• Acceptance cannot be inferred from silence. An offeror cannot say “If I don’t hear from you, I’ll assume you agree.”
In Summary
Acceptance must be:
• Clear
• Unconditional
• Communicated (except in unilateral contracts)
• Made with knowledge of the offer
• In the correct form where specified
• Consistent with postal and communication rules
Click below to download the FREE TeachLaw student activity pack.
For further support and revision materials for Contract Law, please see our range of
available resources below.