145 In Homeguard Products v Kiwi Packaging [1981] 2 NZLR 322 a cheque was sent in "full settlement of our account" which was disputed. The offeree made no reply to that communication but instead banked the cheque some days later. The offeree later wrote asserting a right to payment of the higher amount. The Court held that the inevitable inference was that the banking of the cheque was done "in conformity with the condition by which it was accompanied", that is, in full settlement of the account. The Court held that the offeree had only two choices: either to accept the payment (giving rise to an accord and satisfaction) or to return the cheque. The offeree was precluded from disclaiming the condition on which the cheque was tendered and treating the cheque as payment towards the original amount, "for it could only adopt that course by committing against the appellant the tort of conversion".
146 However, in McMahon's (Transport) Pty Ltd v Ebbage [1995] 1 Qd R 185 at 195 Pincus JA said:
The principal argument put forward on behalf of the receivers, challenging the primary judge's view that there was no accord, was that stated in the New Zealand case of Homeguard Products v. Kiwi Packaging [1981] 2 N.Z.L.R. 322 at 331, where it was said in effect that in this sort of situation the creditor's retaining and banking the cheque -
"… is conclusive evidence of his assent to the conditions upon which the cheque was sent. So what really matters, irrespective of his intent, is the conduct of the creditor."
Counsel referred to the "objective theory of contract", by which was meant that the intention of a party negotiating a contract is in law that which would be reasonably deduced by the other party, not the subjective intention.
But objectivity does not assist the receivers much here; no-one reading the landlord's responses to the receipt of the cheque could have read them as accepting the condition on which the cheque was proffered. The question, so far as contract is concerned, is whether an offeree who chooses to retain or to dispose of property which has been obtained by him on stipulated terms, while purporting to reject those terms, is bound by them. Here, the problem arises in relation to payment of a cheque, but the same principle is involved if one postulates that some other sort of property - say, cash - is sent on the basis that if the person to whom it is sent keeps it or spends it, he is to be taken to be bound by certain stipulations, as a matter of contract.
The basis on which it is said that one party may effectively force an agreement on another, by telling that other that a certain sort of action (other than assent to the proposal) will be taken to be assent to the terms of the proposed agreement, is unclear. One can understand why, in this area, a distinction is drawn between the case in which the contract when made imposes no obligations on the offeree, as in Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, and that in which it is sought to impose an obligation on the offeree, the obligation coming into existence because the offeree has performed an act stipulated by the offeror - such as, to take Corbin's example (Vol. 1 p. 310), hanging out a flag on Washington's birthday.
The question is obviously not merely one of fact, but involves matters of legal principle, such as those just alluded to. The cases on conditional tender of payment, although numerous, give no clear guidance. I, like the primary judge, prefer to follow those in which the Court has rejected the offeror's assertion that there has been an accord; I do so on the basis that the question is whether there is a contract and that the answer to that question is that there is none, because in general the law does not allow the imposition of an obligation in contract to be achieved by a stipulation that it shall be deemed to be imposed if the prospective obligor performs a stipulated act (other than one by way of express assent to the terms proposed), or does nothing as in Felthouse v. Bindley (1862) 11 C.B.(N.S.) 869;142 E.R. 1037. Since writing the above, I have noticed the decision of this Court in Citibank Ltd v. Amos (App. 243/1994; 10 May 1996, unreported); the views there expressed are consistent with my conclusion: see pp. 5, 7 of the principal judgment.
I should add that there may be another question, namely whether the property in the cheque passed, as it was proffered on a condition which the profferee would not accept; but that issue has not been raised, the lawfulness of the banking of the cheque being unchallenged.