- A contract comes into being from the acceptance of an offer.
- Section 2(b) of the Act defines acceptance as follows: “When the person to whom the offer is made signifies his assent thereto, the proposal is said to be accepted .”
- The acceptance of the offer must be absolute and unqualified i.e. it cannot be conditional.
Criteria of Valid Acceptance Section 7:
- Section 7 lays down two essentials of a valid acceptance
- Acceptance must be absolute.—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 a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is 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.|
Essentials of Valid Acceptance:
Acceptance must be absolute and unqualified:
- Section 7 of the Contract Act requires that the acceptance must be absolute and unqualified.
- It must correspond with all the terms of the offer.
- Conditional acceptance is no acceptance.
- If there is a variation in the terms of the acceptance, it is not an acceptance, then it constitutes a counter-offer, which the original proposer may or may not accept. A counter-offer destroys the original offer. Thereafter the offeree cannot rever to the original offer and purport to accept it.
- Example: A offers to sell his car to B for Rs. two lakhs. B accepts the offer and promises to pay the price in five equal installments. In this case, there is a variation in the terms of the offer. Thus original offer is rejected and cease to exist. Actually, it is counter-offer by B.
- In Trollope & Colls Ltd. v Atomic Power Constructions Ltd.  1 WLR 333, 3 All ER 1035 case during atomic power station construction, parties negotiated for some time and agreed nearly everything, in order to get things moving, decided contract would start on the site and continued negotiating. They never reached agreement on outstanding points. The question for the Court was whether it is a contract. Court held that their agreement consisted of everything they had agreed on, what they had not agreed on, was blank and did not exist. Hence it is not a contract. This can cause problems if relied on, particularly if the ultimate agreement is not reached.
- In Sewak Ram And Ors. vs Municipal Board AIR 1937 All 328 case A and B agreed upon the terms of a contract of sale, and the writing concluded with the words “contract in due course”. The Court held that it is not concluded the contract.
Acceptor must in indicate an intention to fulfill the promise.
- Acceptance, in order to be valid, must be made under circumstances which would show that the acceptor is able and willing to fulfill the promise. If no such intention is present, the acceptance is not valid.
Acceptance must be communicated:
- Mere mental acceptance is no acceptance. The acceptance must be communicated to the offeror with a proper mode of communication. There is no requirement of communication of acceptance of the general offer. Similarly, for the offer to be acted upon, no communication to the offer is necessary.
- In Brogden V. Metropolitan Rly. Co. (1877) 2 App Cas 666 case The complainants, Brogden, were suppliers of coal to the defendant, Metropolitan Railway. They completed business dealings regarding the coal frequently for a number of years, on an informal basis. There was no written contract between the complainant and the defendant. However, the parties decided that it would be best for a formal contract to be written for their future business dealings. The Metropolitan Railway made a draft contract and sent this to Brogden to review. The complainant made some changes to this draft and filled in some blanks that were left. Brogden sent this amended document back to the defendant. Metropolitan Railway filed this document, but they never communicated their acceptance of this amended contract to the complainants. During this time, business deals continued and Brogden continued to supply coal to the Metropolitan Railway. When a dispute arose, the issue, in this case, was whether there was a contract between Brogden and the Metropolitan Railway and if the written agreement they had was valid. The Court held that there was a valid contract between suppliers, Brogden, and the Metropolitan Railway. The draft contract that was amended constituted a counter-offer, which was accepted by the conduct of the parties. The prices agreed in the draft contract were paid and coal was delivered. Although there had been no communication of acceptance, performing the contract without any objections was enough. It was the acceptance by the conduct
Acceptance must be in the mode prescribed:
- The general rule says that the proposal must be accepted as per the manner prescribed by the offeror (according to its terms). If no mode is prescribed in which it can be accepted, then it must be in some usual and reasonable manner.
- If the proposal lays down a mode of acceptance, then the acceptance must be according to the mode prescribed. If the acceptance is not given in the made prescribed, the proposer may reject the acceptance and intimate the offeree within a reasonable time. But if he does not inform the offeree, he is deemed to have accepted the acceptance.
- Example: If an offer is made to supply goods at certain consideration indicating that the acceptance is to be communicated by telegram. If the acceptance is sent by ordinary post then it is not an acceptance according to the mode prescribed and the offer will be deemed to be not accepted. The offeror need not inform the offeree that the acceptance is not according to the mode prescribed.
Silence cannot be prescribed as a mode of acceptance:
- Mere silence is not acceptance of the offer. The offeror can prescribe the mode of acceptance but not the mode of rejection. The offeror cannot frame his offer in such a way as to make the silence or inaction of the offeree to operate as acceptance.
- Example: A offers to B to buy his house for Rs.5 lakhs and 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 because there is no communication of acceptance.
- In Felthouse V. Bindley  EWHC CP J35 case, the complainant, Felthouse, had a conversation with his nephew, about buying his horse. After their discussion, Felthouse replied to nephew by letter stating that if he didn’t hear any more from his nephew concerning the horse, he would consider acceptance of the offer done and he would own the horse. His nephew did not reply to this letter and was busy at auctions. The defendant, Mr. Bindley, ran the auctions and the nephew advised him not to sell the horse. However, by accident, he ended up selling the horse to someone else. Felthouse sued Mr. Bindley in the tort of conversion. The Court held that there was no contract for the horse between the complainant and his nephew. There had not been an acceptance of the offer; silence did not amount to acceptance and an obligation cannot be imposed by another. Any acceptance of an offer must be communicated clearly. Although the nephew had intended to sell the horse to the complainant and showed this interest, there was no contract of sale. Thus, the nephew’s failure to respond to the complainant did not amount to an acceptance of his offer.
Acceptance must be given within the time stipulated or within a reasonable time if time is not mentioned.
- If the offer prescribes the time limit, it must be accepted within the specified time. If the offer does not prescribe the time limit, it must be accepted within a reasonable time. Further, acceptance must be given before the offer lapses or before it is withdrawn.
- Example: A applied (offered) for shares in a company in early June. The allotment (Acceptance) was made in late November. A refused to take the shares. The Court held that A is entitled to do so as the reasonable time for acceptance had elapsed.
There can be no acceptance before the communication of the offer.
- Acceptance cannot precede an offer. A person who has no knowledge of an offer cannot be said to have accepted it merely because he happened to act just by chance in the manner prescribed by the offer.
- In Lalman Shukla v. Gauri Datt (1913) All LJ 489 case A’s nephew has absconded from his home. He sent his servant to trace his missing
nephew. When the servant had left, A then announced that anybody who has discovered the missing boy would be given the reward of Rs.500. The servant discovered the missing boy without knowing the reward. When the servant came to know about the reward, he asked for the same from A. A refused to give the reward. The servant brought an action against A in the court of law to recover the same. But the court held that when the servant discovered the boy, he was not aware of the reward. Thus the offer was not communicated to him. Hence he is not liable to get the reward from A.
Acceptance and communication of acceptance must be made by the offeree or his authorized agent.
- Acceptance and communication of acceptance must be made by the offeree or his authorized agent. If not done so it will not be a contract.
- In Powell v. Lee (1908 24 TLR 606) case the plaintiff Powell applied for the post of a headmaster and his application was accepted by the School Board. Before the formal appointment, one of the Board members had informed Powell of the decision which was later rescinded by the Board. Powell sued the School for breach of contract. The court held that the acceptance was not communicated by someone authorized by the School Board and thus there was no valid contract.
Acceptance subject to the contract is no acceptance.
- Acceptance of the proposal will mean acceptance of all the terms of the offer.
- When an offer is accepted by an offeree by “subject to contract” or subject to formal contract” or “subject to contract to be approved by solicitors,” the matter is known to be at the negotiation stage and it means the parties do not intend to be bound until a formal contract is made and signed by them.
- In such cases, acceptance will not create a binding contract until a formal contract is prepared and signed by all the parties
If the proposal is made through an agent, it is sufficient if the acceptance is communicated to him.
- If A sends the offer to B by an agent C, and B give his acceptance to C, the acceptance is complete resulting in a valid contract. It is immaterial whether C communications the acceptance of B to his principal A or not.
Who can give an acceptance?
- When an offer is made to a particular person or to a group of persons, it can be accepted only by that person or member of the group. If it is accepted by any other persons, there is no valid acceptance.
- Example: B sold his business to P without disclosing the fact to his customers. J, who had a running account with B, placed an order with B for the supply of certain goods. The new owner without disclosing the fact of himself having purchased the business executed the order. J refused to pay P for the goods because he, by entering into a contract with B intended to set off his debt against B. Held, the new owner of could not recover the price. “The rule of law is that if you promise to make a contract with A, then B cannot substitute himself for A without your consent and to your disadvantage, securing to himself all the benefits of the contract”.
- When an offer is made generally to the public at large, any person or persons who have the notice of the offer, may come forward and accept the offer. By doing what is required to be done under the offer, the offer is said to be as accepted and there will be a valid contract, (Carlill V. Carbolic Smoke Ball Co. 1893).
- Agreement to agree in future. If the parties have failed to agree upon the terms of the contract but have made an agreement to agree in future, there is no contract,
- Example: An actress was engaged by a theatrical company for a certain period. One of the terms of the agreement was that if the party was, shown in London, she would be engaged at a salary to be mutually agreed upon. Held, there was no contract. (Luftus V. Roberts, (1902) 18 T.L.R. 532).