Acceptance in Contracts law can be understood as when a lit match is placed in a train of gunpowder, it explodes, causing something to happen. Similarly, once an offer has been accepted, it cannot be retracted. A genuine offer must be followed by the acceptance of the offer for a contract to be successful. The Indian Contract Act of 1872 defines acceptance in Section 2(b). As stated in the definition, acceptance occurs when the offeree to whom the proposition is presented unconditionally accepts the offer. When such an offer is accepted, it turns into a promise. When a proposal is approved, it becomes a proposal that cannot be changed. An offer does not generate any legal duties, but it does constitute a promise if it is accepted. And because it generates legal duties between parties, a promise is irrevocable. Before an offer is accepted, it might be retracted. However, once acceptance has been made it cannot be retracted or cancelled.

To grasp the notion of acceptance, we must first learn about the numerous legal laws that govern valid acceptance as well as the elements of valid acceptance in contracts. In this research paper, the author has discussed some essential elements of valid acceptance in a contract with the help of a few case laws using data from different reliable resources that will help us understand the concept of acceptance from a broader perspective.

Keywords – Contracts, offer, promise, communication, acceptance.

INTRODUCTION

From insurance plans to work contracts, contracts play a significant part in our daily lives. Indeed, we engage in contracts without even thinking about it, such as when purchasing a movie ticket or installing an app. Contracts are agreements between two or more parties that are either oral or written. Individuals, businesses, non-profits, and government entities might all be parties to a contract. The process of getting into a contract begins when one party makes an offer and the other party accepts it.

A genuine offer must be followed by the acceptance of the offer for a contract to be successful. An offer and acceptance are required to form a contract. Acceptance is the second stage in contract creation.” The person who is making the proposal is called the “promisor”, and the one who is supposed to accept it is called the “promisee”.

Acceptance happens when the offeree to whom the proposal is made unconditionally accepts the offer, as indicated in the definition. When a proposal or an offer is been accepted by the parties it becomes a promise. When a proposal is adopted, it becomes final and unchangeable. If accepted, an offer does not create any legal obligations but creates a promise. A promise cannot be reversed since it creates legal obligations between parties but it can be revoked before being accepted. Acceptance, on the other hand, cannot be reversed or revoked once it has been stated. As a result, if an offer is accepted, it becomes a promise that generates a legal obligation between the parties, and it cannot be reversed. For example, A makes an offer to buy a bike for Rs 50,000 to B. B accepts the offer and now the promise cannot be revoked.

ACCEPTANCE

Section 2(b)[1] in The Indian Contract Act,1872 has been defined as, When the person to whom the proposal has been made signifies his assent to it, the provider is claimed to be accepted. Thus, the proposal once accepted becomes a promise.

Furthermore, the author will be discussing the essentials of a valid acceptance of the contract.

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. When the proposal, on the other hand, is a broad offer, anybody with awareness of the offer can accept it. It can further be explained through the following case:

CASE LAWS –

 BOULTON VS. JONES (1857) 2H AND N564 [2]

Plaintiff: Boulton

Defendant: Jones

Facts: Mr. Jones was unaware that Boulton had acquired the firm from Brocklehurst. Jones placed an order with Brocklehurst, who owed the money. Since the Boulton acquired the firm, it got the letter of offer and gave the items to Jones despite the fact that the letter was not addressed to him. Jones declined to pay Boulton because he wished to offset his debt against Brocklehurst.

Issue: Whether Boulton has the power to accept the offer made to him by Jones.

Judgment: The court ruled that the defendant, Mr. Jones, was not obligated to pay Boulton. It is critical when a contract is established with a specific individual. As a result, no contract existed between the parties.

Acceptance must be communicated to the offeror by the offeree

When the promisor receives the notification of the proposal's acceptance, the proposal becomes a contract. If no specific form has been established, the acceptance will be communicated in the prescribed form or any other form used in the usual course of business. Before transmitting his acceptance, the offeree must also be informed about the offer. It suggests that the offeree cannot express acceptance unless he or she is aware of the offer.

An acceptance can be communicated in the following modes:

  1. Orally
  2. In Writing
  3. Performance of Conditions
  4. Acceptance of Contribution

CASE LAWS –

POWELL V. LEE (1908) 99 LT 284 [3]

Plaintiff: Mr. Powell

Defendant: Mr. Lee

Facts: Mr. Powell submitted an application for the job of headmaster at the institution, the application was accepted by the School Board, and he was appointed. However, before the authorized authority told him of the board's decision, one of the board members acting in his individual capacity informed the plaintiff of the board's decision. The board afterward changed its mind for whatever reason and chose to rescind its decision by choosing someone else. The plaintiff filed a lawsuit against the school for breach of contract.

Issue: Whether the school was liable for breach of contracts as the acceptance wasn’t communicated.

Judgment: The court held that since there was no communication of the acceptance by the authorized authority, the school board then no valid contract exists between them. This case demonstrated that for a contract to be valid it is essential for it to be communicated by an authorized party or any other person who has been authorized to act on their behalf.

BROGDEN VS. METROPOLITAN RAILWAY COMPANY (1877) LR AC 666 (HL)[4]

Plaintiff: Brogden

Defendant: Metropolitan Railway Co.

Facts: Brogden, the complainants, were coal suppliers to the defendant, Metropolitan Railway. They had informal commercial relations with the coal on a regular basis.  The plaintiff and the defendant did not have a formal contract. However, the parties determined that for their future commercial interactions, a formal contract should be created. Brogden was been given a draft contract by the Metropolitan Railway to evaluate. Brogden made a few small changes to the document, including filling in certain spaces, and later returned the corrected document to the defendant. The defendant filed the document but never informed the plaintiff of their approval of the modified contract. Therefore, the acceptance of the amended contract was never communicated to the complainant. 

Issue: If Brogden and the Metropolitan Railway had a contract and if the agreement was valid.

Judgment: The House of Lords ruled that a valid contract existed between the suppliers, Brogden, and the Metropolitan Railway. The updated contract represented a counter-offer, which was accepted by the parties' actions. The agreed-upon rates in the proposed agreement were paid, and coal was supplied. Even if there had been no indication of approval, just carrying out the contract without any complaints was sufficient.

Mere silence would not amount to acceptance –

If the offeree remains silent and does nothing to indicate that he has accepted the offer, no contract is established. His silence does not imply that he accepts the proposal. Even if the proposal indicates that silence would be interpreted as acceptance, a proposal made to another cannot mature into an agreement just because the offeree does not respond. As a result, mental acceptance is not the same as acceptance.

It can be explained through the following case:

CASE LAW:

 FELT HOUSE V. BINDLEY (1863) 7 LT 835[5]

Plaintiff: Paul Felthouse

Defendant: Bindley

Facts: Paul Felthouse, the complaint, discussed purchasing his horse with his nephew, John Felthouse. Following their conversation, the uncle wrote a letter indicating that if he didn't hear from his nephew about the horse, he would consider the transaction completed and he would own the horse. His nephew did not respond to this letter since he was preoccupied with auctions. Mr. Bindley, the defendant, was the auctioneer, and his nephew encouraged him not to sell the horse. He did, however, sell the horse to someone else by accident.

Issues: Mr. Bindley contended that because the nephew had not expressed the acceptance of the complainant's offer, there was no legitimate contract for the horse. Here, whether silence or omission to reject an offer constituted acceptance.

Judgment: The plaintiff and his nephew did not have a contract for the horse, according to the court. There had been no acceptance of the offer as silence did not imply acceptance. Obligations cannot be imposed on one another. Any acceptance of an offer must be expressed in a clear and concise manner. As a result, the nephew's inability to react did not imply that he had accepted the plaintiff's offer.

Acceptance must be absolute and unconditional-

This is the first and foremost valid essential of acceptance that has been mentioned in Section 7(1) of the Contract Act[6]. Acceptance must be complete and unconditional. There cannot be conditional acceptance because it would be a counter-offer, nullifying the first offer. Acceptance is void if there is even a small or significant change in the terms of the offer. If an offer is accepted unconditionally, it can be turned into a promise. To constitute a valid contract, the acceptance should be given without making any other conditions.

It can further be explained through the following cases:

CASE LAWS-

 JORDAN V. NORTON (1838) 150 E.R. 1382 [7]

Plaintiff: Jordan

Defendant: Norton

Facts: The Norton offered to buy Jordan’s horse if he guaranteed that the mare was ‘quite in harness.’ The Jordan wrote to the Norton that the horse was ‘quite in double harness.’

Norton informed the principal that his Agent would only pick up the horse from Norton if Norton presented a guarantee saying that the horse was in good condition (sound and quiet). The agent was unable to retrieve the horse because he was not in a good condition i.e., not of sound mind.  Jordan sued Norton because he refused to pay.

Judgment: It was held that the offer has not been accepted. Hence, the acceptance was not absolute and unqualified as the original offer was not accepted.

HYDE V. WRENCH (1840) 49 ER 132[8]

Plaintiff: Hyde

Defendant: Wrench

Facts: Mr. Wrench promised to sell the land he owned to Mr. Hyde. Although, he refused the offer of £1,200 for the home. The defendant decided to contact the complaint again, this time offering to sell him the farm for £1,000. He stated unequivocally that this was his final bid for the property. In return, Mr. Hyde wrote a letter and offered £950 for the land. Mr. Wrench disputed this, and he verified it with the complainant. Hyde then agreed to buy the farm for £1,000 that had been proposed earlier. Wrench refused to sell his farm.

Issue: Breach of contract by refusing to sell the property. The question, in this case, was whether the parties had entered into a legitimate contract and if a counteroffer was made during negotiations, whether the initial offer would still be available.

Judgment: The court dismissed the allegations, ruling that Mr. Hyde and Mr. Wrench did not have an enforceable contract for the land as w When a counter-offer is made, it is said that it trumps and destroys the original offer. This first deal is no longer valid. When Mr. Hyde offered £950, he immediately cancelled the £1,000 offer and was unable to accept.

Acceptance must be made in a prescribed mode and must be expressed in some usual and reasonable manner

Acceptance must be given in the manner stipulated or indicated by the offeror. An acceptance delivered in any other manner may be ineffective, especially if the offeror expressly states that the acceptance must be done in the required method.

Section 7(2) of the Contract Act[9] says that if the offeror does not indicate the manner in which it should be expressed, it must be expressed in a regular and reasonable manner, that is, as it would be in the ordinary course of business.

CASE LAWS –

ELIASON V. HENSHAW (1819) 4 Wheaton 225 [10]

Plaintiff: Eliason

Defendant: Henshaw

Facts: On February 10, 1813, Eliason wrote to Henshaw promising to buy flour in Georgetown and asked him to "please write by return of wagons if you accept our offer." On the 14th, Henshaw received the letter, but the wagoner informed them that he would not be returning to Harper's Ferry. Henshaw submitted his acceptance letter on the 15th, and the letter was delivered to Georgetown by the normal mail carriage on the 19th, the next available wagons. On the 25th, Eliason acknowledged receipt of the letter but stated that the answer was too late because the wagon had not returned it. Henshaw filed a lawsuit for not performing.

Issue: whether the offer is accepted at the appropriate time and manner.

Judgment: According to Washington, there was no acceptance, and hence no contract was established. the contract was not accepted at the proper location; the acceptance should have been returned to Harper's Ferry rather than Georgetown, and the contract was not acknowledged on time - it was not returned by wagon. The contract was not accepted in the proper manner - it should have been conveyed by wagon but was instead sent by mail.

LALMAN SHUKLA V GAURI DUTTA (1913) 40 ALJ 489

Plaintiff: Lalman Shukla

Defendant: Gauri Dutta

Facts: The plaintiff worked as a Munim for the defendant. The plaintiff set out to find the defendant's nephew when he ran away. The defendant distributed handbills in the absence of the plaintiff and promised a prize of Rs 501 to anyone who could find his nephew. The plaintiff was able to track him down. When the plaintiff discovered the boy, he was unaware of the reward.

Issue: Whether the plaintiff, Lalman Shukla is entitled to the reward.

Judgment: The plaintiff's lawsuit was dismissed by the Allahabad High Court. The plaintiff's acceptance of the offer was incomplete since he had no knowledge of the reward as it is necessary to be aware of an offer in order to accept it. The honorable Court concluded that the offer and agreement were not genuine since the plaintiff did not perform any new conduct in order to receive the judgment The plaintiff's behaviour was a duty in the course of his work, not a component of the compensation agreement. The defendant couldn't claim the reward as there was no consideration from the side of the plaintiff.

Acceptance should be made in the prescribed time –

According to Section 7(b) of the Indian Contracts Act of 1872 that acceptance must be made in the prescribed time and mode. Acceptance must be made within the prescribed time limit to be legally effective, or within a reasonable time if no time limit is indicated since an offer cannot be extended forever.

CASE LAWS –

RAMSGATE VICTORIA HOTEL COMPANY LIMITED VS. MONTEFIORE (1866) LR 1 Ex 109 [11]

Plaintiff: Ramsgate Victoria Hotel Co. Ltd.

Defendant: Montefiore

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.

Judgment: 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. In this situation, the acceptable period before the automatic expiration of the offer for shares was determined to be six months. Hence, acceptance must be made in a reasonable time period.

SHREE JAYAMAHAL COOPERATIVE HOUSING SOCIETY V. ZENITH CHEMICAL WORKS PVT LTD (1991) Bom 211[12]

Plaintiff: Shree Jayamahal society

Defendant: Zenith chemical works Pvt Ltd.

Judgment: In this case, it was held that when no time has been prescribed by the offeror for acceptance, then the offer must be accepted within a reasonable time which should not be infinity.

CONCLUSION

In the Indian Contract At of 1872 offer and acceptance analysis is a common method for determining whether two parties have reached an agreement. An offer is a statement made by one party to another that they are willing to enter into a contract on particular conditions without further discussion. If there is an express or inferred agreement, a contract is created. When the offeree communicates his or her acceptance of an offer to the offeror, a contract is said to exist. The communication of an offer is complete when the person to whom the offer is made is known of it, and the communication of an acceptance is complete when the acceptance is placed in a transmission path to the offeror.

As a result, acceptance is a crucial aspect of a contract, and it should be made of one's own free will and with the desire to enter into a legally binding agreement in either event.

 BIBLIOGRAPHY

  • Boulton v. Jones (1857) 2H AND N564.
  • Powell v. Lee (1908) 99 LT 284.
  • Felt House v. Bindley (1863) 7 LT 835.
  • Brogden v. Metropolitan Railway Company (1877) LR AC 666 (HL).
  • Jordan v. Norton (1838) 150 E.R. 1382.
  • Hyde v. Wrench (1840) 49 ER 132.
  • Eliason v. Henshaw (1819) 4 Wheaton 225.
  • Lalman Shukla v. Gauri Dutta (1913) 40 ALJ 489.
  • Ramsgate Victoria Hotel Company Ltd v. Montefiore (1866) LR 1 Ex 109
  • Shree Jayamahal Cooperative Housing Society v. Zenith Chemical Works Pvt Ltd (1991) BOM 211.
  • The Indian Contract Act, 1872 3,4,5 (Professional, 2021).
  • Avtar Singh, Contract and specific relief 24-37 (Eastern Book Company, Lalbagh, Lucknow, 2020).
  • C. C. Turpin, Acceptance of Offer: Instantaneous Communication, 73 S. African L.J. 77 (1956).

[1] The Indian Contract Act, 1872, s. 2(b).

[2] (1857) 2H AND N564

[3] (1908) 99 LT 284

[4] (1877) LR AC 666 (HL)

[5] (1863) 7 LT 835.

[6]  The Indian Contract Act, 1872, s. 7(1).

[7] 150 E.R. 1382.

[8] (1840) 49 ER 132.

[9]  The Indian Contract Act, 1872, s. 7(2).

[10] (1819) 4 Wheaton 225.

[11] (1866) LR 1 Ex 109.

[12] AIR 1991 BOM 211.

About the Author: This Law Notes is prepared by Ms. Siddhi Jaiswal, law student at NMIMS, Mumbai. She can be reached at siddhijaiswal08@gmail.com

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