ACCEPTANCE

Meaning and Definition

When offer is accepted unconditionally by the offeree to whom the offer is made,
it will amount to acceptance.

Definition: Section 2(b):

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.
 Essential Elements of a valid Acceptance

2. Communication of
3. Mode of
1. Acceptance must be acceptance must be
Communication must
absolute & unqualified made
be appropriate

4. Acceptance should 5. Communication of

be made while the offer acceptance must be
is still subsisting complete
 1. Acceptance must be absolute & unqualified
{Sec.7(1)}

For a valid acceptance it is essential that it should be absolute and

unqualified. The offer should be accepted as a whole.

In other words, the acceptance should not be conditional; partial or

provisional acceptance.
For absolute and unqualified acceptance, the following things are required;
(a) It should not be conditional;
(b) It should not be partial and
(c) It should not be provisional.

e.g. A offers to sell his house to B for Rs. two lakhs. B accepts the offer and promises
to pay the price in four installments. This is not valid acceptance as the
acceptance is not absolute and unqualified in the terms of the offer.
 Consequences of conditional acceptance

Acceptance of offer with conditions or variations is not an

acceptance rather it amounts to counter-offer which must be
accepted by the original promisor before a contract is made.

(A counter-offer puts an end to the original offer, and it can’t be revived by

subsequent acceptance by the acceptor).
Case law: Hyde v. Wrench (1840)
e.g. ‘A’ proposes to sell his car to ‘B’ for 2 lacs. If B says that he will pay only 1 lac,
then it is not a valid acceptance of A’s proposal rather it is a conditional acceptance
(counter-offer) by B. By this counter-offer by B, the original offer comes to an end.

The counter proposal made by B (to buy car for 1 lac) is now offer to A to sell his car
at that price to B and now A have to accept the counter-offer of B. If he accepts the
offer of B then it results into contract.
 Consequences of Partial Acceptance

Partial acceptance of the offer is also amounts to counter-offer

which results into the rejection of original offer.

Thus, offer has to be accepted as a whole. Acceptance of few

terms of offer which are beneficial to the acceptor and rejecting
the rest which are not favourable is not permitted by law.
e.g., ‘A’ makes an offer to ‘B’ for sale of 100 bags of wheat for
Rs. 500 per bag but B says he is willing to buy 50 bags of
wheat for Rs. 500 per bag. This is not a valid acceptance of
A’s proposal. This is the partial acceptance, and it results into
rejection of original offer.
 Consequences of Provisional Acceptance

Provisional acceptance is the type of acceptance by the offeree which is made

subject to the final approval by the competent authority. A provisional
acceptance does not bind either party to the contract until the final approval is
given by the competent authority.

In other words, the contract in this case comes into existence only after the final
approval of acceptance of the offer by the competent authority. Before the final
acceptance or approval, the party making the offer has the liberty to cancel the
offer.
 U.O.I. v. S. Narain Singh (1953)P.H.

Held: The P&H held that where the condition attached to the auction
sale of liquor shop expressly provides that the acceptance of the bid
shall be subject to the confirmation of the Chief Commissioner, the
contract will come into existence only after the acceptance of bid is
confirmed by the Chief Commissioner.
 2. Communication of acceptance must be made

It is also necessary for a valid acceptance that, it must be communicated

to the offeror after the acceptance.

Thus, mere mental acceptance or intention to accept the offer is no

acceptance.
Similarly, if the acceptor just accepts the offer and keeps it in a drawer
and does not communicate the same to the offeror, is also not a valid
acceptance.
e.g. ‘A’ makes an offer to ‘B’ to sell his house for 5 lac. B
makes his mind to buy the house at the stated price but didn’t
communicate this fact to A. This is not acceptance.
 Felthouse v. Bindley (1863)

The nephew had the intention to accept the offer of his uncle, but
he didn’t reply to his uncle, so this is not a valid acceptance.
 Principles governing communication of Acceptance

(i) Communication of (ii) No communication

of acceptance in case (iii) Acceptance by
acceptance may be
of general offer silence
express or implied

(vi) Communication of
(v) Communication of
(iv) Acceptance can acceptance by the
acceptance to offeror or
only be given to whom acceptor or his
his authorized agent
the offer was made authorized agent
 (i) Communication of acceptance may be express or implied (section 9)
Under the Indian Contract Act, acceptance can be in following two ways:-

(a) Express Acceptance:- (b) Implied Acceptance:-

Acceptance which is When acceptance is not through the words
made by means of words, oral or (oral/written) but through the conduct of the person to
written is known as express whom the offer is made, is called implied acceptance.
acceptance.

e.g. ‘A’ makes an offer to sell his watch e.g. The striking of hammer thrice by auctioneer is also
to ‘B’ through email. B accepts the an implied acceptance of the offer made by the bidder
offer by replying the email. This is at an auction.
an express acceptance.
 (ii) No communication of acceptance (in case of general offer)

As s. 8 provides that performance of the conditions of a proposal is an acceptance

of proposal. Thus, in all cases of general offers, the acceptance is usually by
conduct.

Carlill v. Carbolic Smoke Ball Com. (1892)

 (iii) Acceptance by Silence

Silence of offeree does not amount to acceptance of offer.

e.g. ‘A’ offers to ‘B’ to buy his house for Rs.5 lakhs and
General Rule:
writes “If I hear no more about it within a week, I shall
presume the house is mine for Rs.5 lakhs. “B’ does not
respond. Here, no contract is concluded between ‘A’ and
‘B’.
 Silence coupled with offeree’s conduct
Exception:
amount to acceptance.
Bharat Petroleum Cor. Ltd. V. Great Eastern Shipping Co. Ltd. (2007)SC

Facts: There was an agreement b/w appellant and respondent under which the
appellant has to give on hire vessels for a period of 2 years. The appellant requested
the respondent to extend the period and respondent sent a letter by quoting higher
rate for hiring vessels for further period and the existing terms and conditions were
asked to be continued. The appellant didn’t reply the letter. The appellant continued to
use the vessel on hire. Later disputed arose regarding the price for hiring the vessel.

Held:- The court held that the appellant’s silence on the respondent's letter coupled with
the fact that they continued to use the vessel show that they accepted the offer of the
respondent.
 (iv) Acceptance can only be given to whom the offer
was made

A proposal or offer may only be accepted by the person to whom it

was made. The offer cannot be accepted by any third party without
the consent of the offeree.

Case law: Boulton v. Jones (1857)

 (v) Communication of acceptance to offeror or his
authorized agent

The acceptance must be communicated to the proposer or

offeror or his authorized agent.
Thus, communication to any other person is no
communication in the eyes of law.
 Felthouse v. Bindley (1863)

Facts:- Felthouse wrote a letter to his nephew offering to buy his horse. He also wrote in the
letter that – ‘if I hear no more about the horse, I shall consider the same to be mine’. The
nephew didn’t reply this letter. He however, told his auctioneer, Bindley, that he wanted to
reserve that horse for his uncle and thus the horse should no be sold in the auction.
However, the Bindley sold the horse by mistake. Felthouse filed a case against Bindley.

Held:- The court held that communication of acceptance to the stranger (like in this case to
auctioneer) is not a valid acceptance. Thus, though the nephew had the intention to accept
the offer of his uncle, but had not communicated the acceptance to his uncle, so there is no
acceptance.
(v) Communication of acceptance must be made by the
acceptor/proposee or his authorized agent

For a valid acceptance, it is also necessary that the

communication of same must be made by the proposee himself
or his authorized agent.

If the communication is made by an unauthorized person, then it

does not result in a contract.
 Powell v. Lee (1908)

Facts: The plaintiff (Powell) was selected for the post of headmaster in a school.
However, no official communication about this selection was made to him. One
employee of the school (not authorized agent) informed the plaintiff about the selection
for the post. Subsequently, his selection was cancelled, and another person was
appointed. The plaintiff filed a case against the school for breach of contract.

Held: Since the decision of his selection was not communicated to him by the school or
any authorized person of the school so it could not result into a contract. For valid
contract, it is necessary that the communication of acceptance should be made by the
proposee or his authorized agent.
 3. Mode of Communication {sec.7(2)}

S. 7 provides that acceptance has to be

made/communicated in the manner prescribed by the
proposer.
General Rule: Thus, if the proposer has prescribed in the offer that if the

(Mode prescribed proposee accepts the offer then he has to communicate the
by proposer) acceptance through the telegram or speed post, then it will
be a valid acceptance only if proposee communicate by
prescribed mode.
 Where acceptance is given otherwise than
prescribed mode

Proposer must insist acceptor for opting prescribed

mode
Where the proposer has prescribed the mode for acceptance and
proposee fails to do so and he sends acceptance by different mode then
the proposer has a duty to insist that his proposal shall be
accepted in the prescribed mode.
 If proposer fails to do so,

then he becomes bound by the acceptance.

e.g. A offers B and indicates that the acceptance be given by

telegram. B sends his acceptance by ordinary post. A does not
insist (give notice) to B that he should sent acceptance by
telegram. It is a valid acceptance
 Where even after insist, the proposee does not
follow the prescribed mode

Where even after insist, the proposee does not follow

the prescribed mode, then the offeror will not be
bound by the acceptance.
 Where proposee has not prescribed
any mode for acceptance

If he has not prescribed any mode for acceptance, then the

acceptance is to be made in some usual or reasonable manner.

Usual and reasonable manner means manner which is generally

followed in a particular type of business according to the custom or
usage.
 4. Acceptance should be made while the offer is
still subsisting

Acceptance should be made while the proposal is still subsisting.

Once the proposal becomes dead, then it can’t be accepted.

Any acceptance given after the proposal becomes dead, is not a

valid acceptance.
 Grounds when a proposal becomes dead
(non-subsisting)

1. Time limit for acceptance is over:-

If the proposal specifies any time for acceptance, then

acceptance must be given within that specified period.
If the proposal does not specify any time limit for acceptance,
then it must be accepted within reasonable time.
 RAMSGATE VICTORIA HOTEL COMPANY LIMITED VS. MONTEFIORE
(1866)

Facts: On June 8, Montefiore applied for shares in RV Hotel

Company Limited. The corporation did not write to him until
November 3rd, allotting the shares. When he was notified that he
had been awarded shares, he refused to take them, resulting in a
disagreement.

Issue: If there was a contract between both the parties after the
acceptance was made six months after the original offer was
made.
Held: The court held that the offer had lapsed after
a fair period of time had passed. The court said
that the length of time it takes for an offer to expire
is determined by the subject matter. Hence,
acceptance must be made in a reasonable time
period.
2. Withdrawal of offer before acceptance

If the proposal is withdrawn by the proposer before

acceptance is made by the offeree, then it will also not be a
valid acceptance of that proposal
 5. Communication of acceptance must be complete

(i). Where both parties are at the same place (in

presence of each other):-

There may
be three In this case, the contract is concluded as soon as
situations:-
the offer is made by one party and the acceptance is
made by another party. Thus, the contract comes into
existence immediately.
(ii) When parties are at different places and communication is
by letter:-

s. 4. when the parties are at a distance and are contracting through post then the
acceptance will be complete :

As against the proposer: when the letter of acceptance is put in the course of
transmission (posted) to him.

As against the proposee (acceptor): when letter of acceptance comes to the

knowledge of the proposer.
e.g. ‘A’ sends proposal by post on 1 Jan. 2020 which is received by ‘B’ on 4 Jan. 2020. ‘B’
accepts the proposal (by posting letter) on 5 Jan. 2020 and ‘A’ received the letter on 8 Jan.
2020.

Thus, the time of completion of communication of acceptance will be:

As against the proposer: when it is posted (5 Jan. 2020)

As against the acceptor: when it comes to the knowledge of A. (on 8 Jan. 2020)
 Delayed delivery or no delivery of letter or letter lost in transit

Where the letter of acceptance is posted by the acceptor, but it never

reaches the offeror, or it is delayed in transit, it will not affect the validity of
acceptance.

The offeror is bound by the acceptance.

(iii) When acceptance is by instant mode of communication

When the acceptance is by telephone or any other instant mode of

communication, the contract is complete only when the acceptance is received
(clearly heard and understood) by the offeror.
 Time and Place of formation of Contract

2. When acceptance is by
letter/post
1. When both parties 3. When acceptance is by
are at the same place instant mode of
communication
1. When both parties are at the same place:-

Place of formation of contract will be the place where

the parties are at the time being.

Time of formation of contract will be when the

acceptor has given its assent to the offer.
 2. When acceptance is by letter/post:-

Place of formation of contract: In case of acceptance by the

post, the place where the letter of acceptance is posted is the
place of contract. In other words, the place on which the
proposal is accepted (at place at which proposal is sent).

Time of formation of contract will be the time of posting the

letter of acceptance to the time of contract.
e.g. A (Delhi) makes a proposal on 1 Jan. 2020 to B (Chandigarh) by letter. B
accepts the proposal of A by letter on 5 Jan. 2020 which is received by A on 8 Jan.
2020.

Here place of contract will be………….?

Time of contract:……………..?
 3. When acceptance is by instant mode of
communication

Place of formation of contract: Where the acceptance is

given by instantaneous means of communication
(telephone, fax, tele-printer, telex etc.), the contract is made
at the place where the acceptance is received.

Time of formation of contract: In case of acceptance by

instantaneous means of communication, the time of
contract is the time when offeror gets the communication of
acceptance.
e.g. A makes a proposal from Delhi by phone on 1 Jan. 2020 to B at Chandigarh who
accepts the offer by phone on same date.

Place of contract: ……………?

Time of Contract: ……………?