Meaning of acceptance under Indian Contract Act
Q.3 Discuss the law relating to the valid acceptance of an offer.
Or
"Acceptance is to offer what a lighted
match is to a train of gunpowder. It produces something which cannot be
recalled or undone. But the powder may have lain till it has become damp or the
man who has lain the train may remove it before the match is applied.".
Explain with illustrations the principles sought to be expressed in the above
passage.
Ans. Section 2(a) of the Indian Contract Act defines 'proposal' as
"When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal": Further section 2(b) defines 'Acceptance' as "When the person to whom the proposal is made signifies his assent thereto; the proposal is said to be accepted."
Section 7 of the Contract Act provides that "In order to convert a proposal into a promise the acceptance must:
(1) be absolute and unqualified;
(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes the manner in which it is to be accepted, and the acceptance made in such manner, the proposes may within a reasonable time after the acceptance is not communicated to him, insist that his proposal shall be accepted in the prescribed manner and not otherwise, but if he fails to do so, he accepts the acceptance".
Section 8 further provides that "Performance of the conditions of a proposal or the acceptance of any considerations for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal."
In the words of Sir William Anson "An acceptance is to a proposal what a lighted match is to a train of gunpowder. It produces something which cannot be recalled or undone. But the powder may have lain till it became damp, or the man who laid the train may remove it before the match is applied. So an offer ay lapse for want of acceptance or be revoked before acceptance. Acceptance converts the offer into a promise and then it is too late to remove."
Thus, an offer once accepted explodes into a contract. The offeree when he signifies acceptance is called 'Acceptor".
A valid acceptance comprises the following essential features:
(a) Acceptance must be communicated in some
usual or reasonable manner.
Communication of Acceptance
(1) Acceptance express or implied - The offeree must signify his assent, or communicate the acceptance. There should be some external manifestation (overt act) of acceptance. Acceptance may be in the form of express words, written or spoken or may be signified through conduct Fall of hammer in an auction sale amounts to acceptance.
In Brogden v Metropolitan Railway Co. (1877) 2 AC 666, the conduct of the company's agent in keeping the agreement in his drawer was an evidence of the fact that he had mentally accepted it. But the subsequent conduct of the parties in supplying and accepting goods on the basis of proposed agreement was a conduct that evidenced or manifested their intention.
(2) When communication not necessary -ln all cases of general offers (unilateral contracts), the acceptance is usually by conduct, as envisaged by Sec. 8 ('performance of the conditions of a proposal is an acceptance of the proposal'). In Hindustan Co-operative Insurance Society v Shyam Sunder (AIR 1952 Cal 91) , cashing of a cheque by the Insurance Company was held to be acceptance of the proposal without there being any formal acceptance. In Carlill v Carbolic Smoke Ball Co. case, held that in cases of general offers, the other party has only to perform act and not to give a promise in return, the requirement of notification or communication of acceptance is not necessary.
(3) communication to offeror himself - Acceptance must be communicated to the offeror himself. A communication to any other person is no communication in the eyes of law. In Felthouse v Bindley (1863) 7LT 835, the plaintiff offered by means of a letter to purchase his nephew's horse. The letter said: "If I hear no more about the horse, consider the horse mine at £ 33.15s” To this letter no reply was sent by nephew but he 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 sold it. The plaintiff sued the auctioneer on the ground that under the contract the horse had become his property.
The court said that the nephew intended the uncle to have the horse, but he had not communicated his intention to the uncle. The court laid down the following two propositions:
i) Acceptance of an offer should be communicated to the offeror himself or his authorised agent. A communication to a stranger, like the auctioneer in this case, will not do.
(ii) An offeror can't impose upon the offeree the 'burden of refusal or 'duty to reply'. The offeror cannot say that if no answer is received within a certain time, the same shall be deemed to have been accepted. An offeror cannot say that failure to reply will be deemed to be the acceptance of offer. The offeree has a right to make the offer lapse by not being accepted within the prescribed time or the reasonable time. Mere silence cannot be regarded as acceptance of the offer.
(4) Communication by acceptor himself- The communication of acceptance should be from a person who has the authority to accept. Information received from an unauthorised person is ineffective. In
Powell v Lee (1908 ) 24 TLR 606, the plaintiff was an applicant for the of a school. The managers passed a resolution appointing him, but the decision was not communicated to him. One of the members, however, in his individual capacity informed him. The managers cancelled their resolution and the plaintiff sued for breach of contract. The court held that no contract had come into existence as information from an unauthorised person is as insufficient as over-hearing from behind the door.
Acceptance must be made only by the person to whom the offer is made and if someone else tries accept the offer there is no contract with such person.
In Boulton v. Janes, (1857) 2 H & N 564, (565), A sold his business to his manager without disclosing the fact to his customers. On the afternoon of the day on which the sale was carried through, a customer (Jones), who had a running account, sent an order for some goods addressed to the vendor of the business by name. The new owner of the business executed the order without disclosing that the business had changed hands. It was held that he could not recover the price as there was no subsisting contract.
(5) Mode of communication-Acceptance has to be made in the manner prescribed or indicated by the offeror. But a departure from that manner does not of itself invalidate the acceptance. A duty is cast on the offerar to reject such acceptance within reasonable time and if he fails to do so, the contract is concluded. Where no mode of acceptance is prescribed, acceptance must be expressed in some usual and reasonable manner
(Sec. 7), By giving his acceptance in the prescribed mode, the acceptor has done all that the offeror required him to do and he is entitled to the contract, even if the acceptance does not reach the offeror.
(6) When contract concluded-When the parties are in the presence of each other, the contract is concluded when acceptance is communicated to the proposer. When the parties are at distance and are contracting through post or by messengers or by telephone the question arises when is the contract concluded?
(b) Acceptance should be made before the
offer is revoked or rejected.
(c) Acceptance should be absolute and
unqualified and correspond with the terms of the offer.
Section 7 provides that in order to convert a proposal into a promise, the acceptance should be absolute and unqualified and correspond to the term of the offer and may be expressed by means of an external act indicating the mental assent. While communication of accepter need not conform to any particular term or type (unless prescribed for in the offer), silence can never construed as acceptance.
In Oriental Insurance Co. Ltd. v. Gowaranna, AIR 1994 Kant 29, the appellants did not clear the doubt whether Siddappa had insurable interest in the vehicle proposed to be insured before accepting the policy and the appellants were prevented from taking stand which is contrary to proposal and acceptance or the policy had been accepted. The provisions of Contract Act were against the insurer.
An acceptance with a variation is no acceptance, it is simply a counter proposal which must be accept by the original promise before, a contract is made, Haji Mohd Haji Jiva v. E Spinner, (1900) 24 Bom 5)
An acceptance is thus an expression of
(a) Agreement to the terms of the offer by the offeree.
(b) It may be made in usual or reasonable manner unless the offer itself prescribes the manner in which the acceptance is to be indicated. If the offer says "Please wire reply" and a reply is sent by post there is no compliance with the offer unless the offerer accepts it as such. Again where an acceptance is to be indicated within a specified date, late acceptance will have no effect.
(c) No particular form of words or mode of expression is required for an acceptance.
(d) An acceptance may be signified in the case of a unilateral contract by performance of the act called for.
(e) Where an acceptance had been communicated to the offerer, but not in the manner prescribed, the proposer may, after a reasonable time, insist that the proposal be accepted in the prescribed manner and not otherwise. If the proposer fails to do so, he is deemed to accept the acceptance.
Silence is no acceptance
Silence
is no indicator in a positive legal system such as ours. Normally the person to
whom the proposal made need not reply. This silence cannot be regarded as an
acceptance of the proposal. The proposer cannot prescribe mode of rejection
Suppose, A proposes to B and suggests 'if you remain silent I will take it as acceptance. It means now has to say no if she does not intend to marry A and as such cannot ignore A's proposal. This is unreasonable and an infringement on the right of a person.
In the following instances silence may be indicative of assent to the proposal
(1) Where the offeree having reasonable opportunity to reject the goods or services derives any benefit from them, it will amount to an acceptance.
Example:
A landlord served a notice to the tenant demanding enhanced rent. The tenant did not protest and continued to occupy the premises. This conduct on the part of the tenant tacitly amounted to acceptance of the offer to pay the rent at a higher rate.
Acceptance by Telephone
When the communication of acceptance is made by Telephone, the acceptance is not complete, until the offerer comes to have knowledge of the fact of acceptance.
-Entores Ltd. v. Mills Far East Corporation, (1955) 22 QB 327.-Ar offer was made by the plaintiff for the purchase of certain goods by the plaintiff from London by telex, and it was accepted by a communication received on the telex machine of the plaintiff situated in the same place. It was observed by Denning L. J. that the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offerer, and the contract is made at the place where the acceptance is received.
Bhagwandas v. M/s. Girdharilal and Co., AIR 1966 SC 43.-1n this case the rule laid down in the Entores Ltd. was affirmed by the Supreme Court.
In this case, the plaintiffs made an offer (on phone) from Ahmedabad to the defendants at Khamgaon to purchase certain goods and the defendants accepted the offer. The question was whether the conversation resulted in a contract at Khamgaon or at Ahmedabad. The question was relevant to decide the jurisdiction of the Ahmedabad Court. it was held that the contract was made at Ahmedabad where the acceptance was communicated. The contract, in case of acceptance by phone, is deemed to be complete when the offeror hears the acceptance at his end rather than when the acceptor speaks the words of acceptance. This is unlike acceptance by letter where the contract is concluded when the letter of acceptance is posted.
Thus, in the case of acceptance by telex or telephone, the rule regarding acceptance by post does not apply and acceptance is not complete until it is received by the offerer.
References
Avtar Singh – Law of Contract and Specific relief .
Mulla --- Law of Contract and Specific relief.
Dr. H.K. Saharay- Law of Contract.
Dr R.K. Bangia—Law of Contract.
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