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:
- Orally
- In Writing
- Performance of Conditions
- 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 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.
- 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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