2.9.3 Bilateral contracts

In relation to bilateral contracts, the position is different. The leading authority is Felthouse v Bindley. An uncle was negotiating to buy a horse from his nephew. The uncle wrote to his nephew offering a particular sum and saying ‘If I hear no more about him, I consider the horse mine’. The nephew did not respond, but told an auctioneer to remove this horse from a forthcoming auction. The auctioneer omitted to do so, and the horse was sold to a third party. The uncle sued the auctioneer, and the question arose as to whether the uncle had made a binding contract for the purchase of the horse. It was held that he had not done so, because the nephew had never communicated his intention to accept his uncle’s offer. It is true that he had taken an action (removing the horse from the auction) which objectively could be taken to have indicated his intention to accept, but because his uncle knew nothing of this at the time, it was not effective to complete the contract.

This case has long been taken to be authority for the proposition that silence cannot amount to acceptance, at least in bilateral contracts. It is by no means clear that the court intended to go this far. It is uncertain, for example, what the court’s attitude would have been had it been the nephew, rather than the uncle, who was trying to enforce the contract. Nevertheless, later courts have taken the principle to be well established. In The Leonidas D, for example, the judge Robert Goff J commented:

We have all been brought up to believe it to be axiomatic that acceptance of an offer cannot be inferred from silence, save in the most exceptional circumstances.

No court has challenged the correctness of the general principle said to be established by Felthouse v Bindley, though commentators have doubted it. In considering the analogous situation of acceptance of a repudiatory breach of contract, the House of Lords has suggested in Vitol SA v Norelf Ltd that silence and inaction can be effective provided that they can be regarded as ‘clear and unequivocal’ and the other party has notice. If the same approach can be applied to acceptance of an offer, this will presumably fall within the ‘exceptional circumstances’ referred to by Robert Goff J. In most cases, however, silence by itself will inevitably be equivocal, in that it will be impossible to tell objectively whether the offeree has decided to accept or reject the offer.

The policy which may be said to lie behind the principle is that one potential contracting party should not be able to impose a contract on another by requiring the other to take some action in order not to be bound. It was felt that someone in the position of the nephew in Felthouse v Bindley should not be obliged to tell his uncle if he did not want to accept the offer. He should be entitled to do nothing, and not incur contractual obligations simply by inaction.

2.9.4 Inertia selling

During the 1960s, a related problem arose out of the growing practice of what came to be known as ‘inertia selling’. The seller in these transactions would send a person who was thought to be a potential buyer a copy of a book, for example, with a covering letter stating that, unless the book was returned within a certain time limit, the recipient would be assumed to want to keep it and would be obliged to pay the purchase price. As we have seen, on the basis of Felthouse v Bindley, no binding contract could arise in this way. But, of course, many people were ignorant of their rights under contract law, and were led in this way to pay for items which they did not really want. In order to remedy this, the Unsolicited Goods and Services Act 1971 was passed, which allowed the recipient of unsolicited goods, in circumstances such as those outlined above, to treat them after a specified period of time as an unconditional gift, with all rights of the sender being extinguished. The provisions of this Act, insofar as they deal with goods sent to consumers, have now been replaced by reg 24 of the Consumer Protection (Distance Selling) Regulations 2000. These enable the consumer to treat the goods as an unconditional gift as soon as they are received. Moreover, reg 24(4) makes it an offence to seek payment for unsolicited goods or services.