Acceptance

 

 

MEANING OF ACCEPTANCE:

Section 2 (b) of the Indian Contract Act 1872 defines acceptance

When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted, becomes a promise.

“Acceptance” is the assent given to a proposal, and it has the effect of converting the proposal into promise. It is a final and unqualified expression of assent to the terms of an offer.

EFFECT OF ACCEPTANCE:

A contract is created only after an offer is accepted, before the acceptance neither party is bound thereby. At that stage the offeror is free to revoke or withdraw his offer, and the offeree is free not to accept the offer or to reject the same. After acceptance each party becomes legally bound by the promise made by him through the medium of offer and acceptance of it.

The effect of acceptance of an offer has been explained by Anson:

“Acceptance is to an offer what a lighted match is to train of gun powder. It produces something which cannot be realized or undone. But the powder may have laid until it has become damp, or the man who laid the train may remove it before the match is applied. So an offer may lapse for want of acceptance or be revoked before acceptance. Also the offeree may decide to reject the offer. Until an offer is accepted, it creates no legal rights, and it may be terminated at any time.”

Just as when the lighted match comes in contact with the gunpowder, there would be an explosion and then it will not be possible to bring the things back to the original position, similarly, after the offer is accepted it creates a contract whereby both the parties become bound and none of them can go back. What happens after explosion or after acceptance cannot be undone.

However, in India, an acceptance of an offer may be revoked by the acceptor before the communication of acceptance is complete as against him.

ESSENTIALS OF A VALID ACCEPTANCE:

In order that acceptance of an offer can result in a contract the acceptance must satisfy the following requirements as per section 7 of ICA:

  • It should be communicated by the offeree to the offeror.
  • It should be absolute and unqualified.
  • It should be made in some usual and reasonable manner, unless the proposal prescribes the manner of acceptance
  • It should be made while the offer is still subsisting.

COMMUNICATION OF ACCEPTANCE (SECTION 3& 4)

Overt act or external manifestation: The assent should be signified. It may be signified or expressed by any act or omission. According to Sec 3 it may be signified or expressed by any act or omission, by which party accepting intends to communicate his assent or which has the effect of communicating. There should be some external manifestation (overt act) of acceptance. A mere mental determination to accept, unaccompanied by any external indication will not be sufficient. Justice Shah in Bhagwandas Goverdhandas kedia vs. Girdharilal Parshottamdas & Co AIR 1966 SC 543, “An agreement does not result from a mere state of mind: intent to accept an offer or even a mental resolve to accept an offer does not give rise to a contract. There must be some external manifestation of that intent of speech, writing or other act. Such manifestation may be in the form of express words, written or spoken or may be signified through conduct”.

Acceptance by conduct: Section8 provides that “performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal”. Such proposal demand acceptance by performance.

Acceptance to be signified to offeror: Acceptance must be communicated to the offeror himself. A communication to any other person is as ineffectual as if no communication has been made. In Felthouse vs. Bindley (1863) 7LT 835. The plaintiff offered by means of letter to purchase his nephew’s horse. The letter said,” if I hear no more about the horse, I consider the horse mine at $ 33.15s “To this letter no reply was sent. But the nephew told the defendant, his auctioneer, not to sell the horse as it was already sold to his uncle. The auctioneer by mistake put up the horse for auction and the court said. “It is clear that the nephew in his own mind intended the uncle to have the horse, but he had not communicated his intention to the uncle.” The case s also an authority for the proposition that an offeror cannot impose upon the offeree the burden of refusal. The offeror cannot say that if no answer is received within a certain time, the offer shall be deemed to have been accepted.

Acceptance to be signified by acceptor: The communication of acceptance should be from a person who has the authority to accept. Information received from an authorized person is ineffective. Thus in Powell vs. Lee (1908) 24 TLR 606 the court observed: “There must be notice of acceptance from the contracting party in some way. Information by an unauthorized person is as insufficient as overhearing from behind the door.”

An acceptance by whom a proposal is not addressed is no acceptance.

When communication is not necessary:In certain cases, however, communication of acceptance is not necessary. The offeror may prescribe a particular mode of acceptance. All that the acceptor has to do is to follow that mode. There may be an offer which impliedly indicates that acting on its terms will sufficient acceptance. Where the other party has to promise or undertake to do something, the requirement of notification of his acceptance should not be allowed to be dispensed with.

Mode of Communication: Acceptance should be in prescribed manner (Sec 7). Acceptance has to be made in the manner prescribed or indicated by the offeror. An acceptance given in other manner may not be effective, particularly where the offeror clearly insists that the acceptance shall be made in the prescribed manner. The section no doubt requires that acceptance should be made in the manner prescribed in the proposal but if the acceptance is not made in such form it does not invalidate the acceptance. A duty is cast on the offeror to reject such acceptance within reasonable time and if he fails to do so, the contract is clinched on him and he becomes bound by the acceptance.

COMMUNICATION WHEN POSTED: When the parties are at a distance and are contracting through post or by messengers, the question arises when is the contract concluded? The question first arose in Adams vs. Lindsell (1818) 106 ER 250 KB. The court held that a complete contract arises on the date when the letter of acceptance is posted in due course. This rule was affirmed by the Court of Appeal in Household Fire & Accident INS Co vs. Grant LR 4 Ex Div. 26 CA.

Acceptance by post etc. in the Indian Contract Act:

Section 4 of the Act mentions the following rules when the communication of acceptance is made by post etc.

  1. The communication of acceptance is complete as against proposer, when it is put in the course of transmission to him, so as to be out of the power of the acceptor.
  2. The communication of acceptance is complete as against acceptor, when it comes to the knowledge of the proposer.

Difference between English law and Indian law: the only difference that the section males is the position of acceptor. In England when a letter of acceptance is posted, both the offeror and the acceptor becomes irrevocably bound. But in India the acceptor does not become bound by merely posting the acceptance. He becomes bound only when his acceptance comes into the knowledge of the proposer”.

ABSOLUTE AND UNCONDITIONAL ACCEPTANCE

Section 7 provides: Acceptance must be absolute- In order to convert a proposal into a promise the acceptance must be

  • Absolute and Unqualified

Counter Proposals: Any departure from the terms of the offer or any qualification vitiates the acceptance unless it is agreed to by the person from whom the offer comes. In other words, an acceptance with a variation is no acceptance; it is simply a counter proposal, which must be accepted by the original promisor before a contract is made.

Partial acceptance: Acceptance should be of the whole of the offer. The offeree cannot accept a part of its terms which are favourable to him and reject the rest, such an acceptance is another kind of counter- proposal and does not bind the offeror unless he agrees to the qualified acceptance expressly or by subsequent conduct.

Inquiry into terms of proposal: A mere inquiry into terms of a proposal is not a counter proposal. On acceptance of the proposal, the contract will be created on the basis of the terms and conditions of the original proposal.

Acceptance of Counter-proposal: When a counter proposal is accepted, a contract arises in the terms of the counter- proposal, and not in terms of the original proposal.

Provisional Acceptance: An acceptance is sometimes made subject to final approval. A provisional acceptance of this kind does not ordinarily bind either party until final approval is given. Meanwhile the offeror is at liberty to cancel this offer.

Trimex International FZE Ltd vs. Vedanta Aluminium Ltd. (2010) 1 SCC

The unconditional acceptance of a contract through e-mail of an offer made through e-mail specifying the terms and conditions satisfied requirements of sections 4 and 7.

 

 

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