ACCEPTANCE

MEANING, DEFINITION, ESSENTIALS, REVOCATION

 Meaning & Definition of Acceptance
⚫ A contract emerges from the acceptance of an offer. Acceptance is the act of assenting by

the offeree to an offer.

⚫ Section 2(b) defines acceptance as follows –

“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.”

⚫ The person making the proposal does not become bound thereby until its acceptance. As

soon as his proposal is accepted that is known as promise, whereby both the parties become

bound.

⚫ The offeree is not bound to accept the offer. He is free to reject it or make it to lapse by no

acceptance.
⚫ Case – Gajendra Singh vs. Nagarpalika Gwalior (1966)

The M.P. High Court held that, if an authority calling tenders decided not to go
ahead and accept a tender, the tenderers, or even the highest tenderer, could not
force the authority to accept the tender and enter into a contract with him.

⚫ Case – Food Corporation of India vs. Kamdhenu Cattle Food Industries

(1993)

A person inviting tenders may reserve a power to reject all the tenders. The

person submitting the highest tender cannot have a right to have accepted.
 Essentials of a valid acceptance
1. Acceptance should be communicated by the offeree to the offeror.

2. Acceptance should be absolute and unqualified.

3. Acceptance should be made in some usual and reasonable manner, unless the
proposal prescribes the manner of acceptance.
4. Acceptance should be made while the offer is still subsisting.
 Communication of Acceptance

i) Acceptance by external manifestation or overt act –

⚫ The definition clearly requires that the assent should be signified. It may
be signified or expressed by an act or omission by which the party
accepting intends to communicate his assent or which has the effect of
communicating it.
⚫ The principle is that there should be some external manifestation (overt
act) of acceptance. A mere mental determination to accept unaccompanied
by any external indication will not be sufficient.
⚫ Such manifestation may be in the form of express words, written or
spoken or may be signified through conduct.
⚫ Case – Brogden vs. Metropolitan Railway Co. (1877)

B has been supplying coal to a railway company without any formal agreement. B suggested that a

formal agreement should be drawn up. The agents of both the parties met and drew up a draft

agreement. It had some blanks when it was sent to B for his approval. He filled up the blanks including

the name of an arbitrator and then returned it to the company. The agent of the company put the draft

in his drawer and it remained there without final approval having been signified. B kept up his supply

of coals on the new terms and also received payment on the new terms. A dispute have arisen B

refused to be bound by the agreement.

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 he had not expressed his mental determination and retention

of the agreement was not a sufficient acceptance. But the subsequent conduct of the parties in

supplying and accepting coal on the basis of proposed agreement was a conduct that evidenced or

manifested their intention. The Court held that the final acceptance was clearly given when the

company commenced a course of dealing which is referable only to the contract and when that course

of dealing was accepted and acted upon by B in the supply of coals.

Acceptance by conduct –

⚫ It is well-settled that an offer may be accepted by conduct. But conduct would only amount to

acceptance if it is clear that the offeree did the act with the intention of accepting the offer.

⚫ The Courts must examine the evidence to find out whether in the facts and circumstances of the

case the conduct of the offeree was such as that it amounted to an unequivocal acceptance of the
offer made.

⚫ An offeree cannot be permitted to change his mind after the unequivocal acceptance of the offer.

ii) Communication to offeror himself –

⚫ For a valid contract the acceptance must be communicated to the offeror only.

⚫ When the parties are face to face, communication could be oral. When they are at a distant place,

communication could be made by post, by telegram, by a message on phone, through a

messenger, or in any other reasonable manner. Sometimes, the conduct of a person might

indicate his assent. Eg., when a passenger boards a bus and travels thereby, he impliedly assents

to pay the necessary fare.

⚫ Case - Felthouse v. Bindley (1863)

Brief facts - Felthouse wrote a letter to his nephew offering to buy his horse for £30. In the

letter containing the offer it was also mentioned “If I hear no more about the horse, I consider the

horse mine at £30. The nephew did not reply this letter. He, however, told his auctioneer,

Bindley, that he wanted to reserve this horse for his uncle and, therefore, desired that the horse

be not sold by the auctioneer. The auctioneer disposed of the horse by mistake. Felthouse sued

Bindley for the tort of conversion on the plea that Felthouse had become the owner of the horse

which Bindley had disposed of.

Judgment – It was held that since the nephew had not communicated the acceptance to

Felthouse, no contract had arisen in this case, and therefore, Felthouse had not become the

owner of the horse and such his action for conversion failed.

⚫ An offeror cannot impose upon the offeree the burden of refusal. The offeror cannot say

that if no answer is received within a certain time, the same shall be deemed to have been

accepted. Mere silence cannot be regarded as acceptance of the offer.

⚫ Case – Cotton Corporation of India Ltd. vs. Bombay Dyeing & Mfg. Co. Ltd. (2006)

The Court held that “It is not open to an offeror to stipulate against an unwilling offeree that the
latter’s silence will be regarded as equivalent to acceptance. He cannot force him to take a positive
course of action under penalty of being contractually bound if he does not.”

iii) Communication by acceptor himself –

⚫ In order that the acceptance can be treated as valid, it is necessary that the same must be
communicated to the offeror either by the offeree, or by some duly authorized person on his behalf.
If the communication is made by an unauthorized person, it does not result in a contract.

⚫ Case - Powell v. Lee (1908)

Brief facts - Powell was one of the candidates for the post of headmaster of a school. The Board
of Managers passed a resolution selecting him for the post. No communication about this decision
was made to Powell by the Board. One of the member of the board who had not been authorized to
communicate this decision, acting in his individual capacity, informed Powell about his selection
for the post. The board of managers met again and decided to cancel the appointment of Powell
and appoint another candidate. Powell sued for the breach of contract.
 Judgment – The court rejected Powell’s action and stated that there must be notice of
acceptance from the contracting party in some way. Information by an unauthorized
person is insufficient to give rise to a contract.

iv) Communication to the wrong person –

⚫ If the letter of acceptance is posted at a wrong address or to a wrong person, that will not

bind the offeror.

⚫ Case – Karan Singh vs. The Collector, Chhatarpur (1980)

In an auction of the quarry lease, the petitioner’s bid of Rs.1800 was the highest. In
accordance with the auction conditions the petitioner deposited the security and earnest
money of Rs.540. The bid was not accepted at the auction. The bid was subsequently
accepted by the Collector, but instead of sending the communication of acceptance to the
petitioner, the same was wrongly sent to somebody else. The officer concerned realized
the mistake after the expiry of the period of lease. Then the demand notice was sent to the
petitioner asking him to pay the lease money. The petitioner, on the other hand, demanded
the refund of the security of Rs.540.
 Judgment – It was held that the petitioner’s bid, which was an offer, although
accepted on file, did not result in a contract as no intimation was sent to the
petitioner and received by him. The demand notice for recovering the lease
money was quashed and respondents were directed to refund the security deposit.

v) When communication not necessary –

⚫ In certain cases communication of acceptance is not necessary. The offeror may

prescribe a particular mode of acceptance, then all that the acceptor has to do is to
follow that mode. Then, there may be an offer which impliedly indicates that
acting on its terms will be sufficient acceptance. Announcement to pay reward for
discovering a lost thing is an offer of this kind.

⚫ Offeror may have acquiesced in a certain conduct on the part of the acceptor as

equivalent to acceptance. In such case also no formal communication is

necessary.
vi) Mode of Communication –

⚫ Acceptance has to be made in the manner prescribed or indicated by the offeror. An acceptance given
in any other manner may not be effective, particularly where the offeror clearly insists that the
acceptance shall be made in the prescribed manner.

⚫ Case – Yates Building Co. Ltd. Vs. R.J. Pedleyn & Sons (York) Ltd. (1975)

Where the notice to exercise an option to purchase a building land was required to be sent by
registered or recorded delivery post but it was sent by ordinary post and received within time, the
court was of the opinion that the letter amounted to binding contract even though it was sent by
ordinary post.

⚫ This Anglo-American rule has, however, not been strictly followed in the Indian Contract Act.

⚫ As per Section 7(2), in order to convert a proposal into a promise, the acceptance must 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.
⚫ The section no doubt requires that acceptance should be made in the manner prescribed in

the proposal. But a departure from that manner does not of itself invalidate the acceptance.

⚫ Case – Surendra Nath Roy vs. Kedar Nath Bose (1936)

The Calcutta High Court held that where an offeror requires that the acceptance be sent to

a particular person, it “has to be read in a reasonable and in a sensible manner” and there

was no violation of Sec.7 when the offeree, instead of writing to the particular person, met

him personally to communicate his acceptance. The defendant was bound by the

acceptance.

vii) Communication when complete – Sec.4 provides as follows:

“The communication of an acceptance is complete, as against the proposer, when it is put in

a course of transmission to him, so as to be out of the power of the acceptor; as against the

acceptor, when it comes to the knowledge of the proposer.”

⚫ The offeror becomes bound when a properly addressed and adequately stamped letter of

acceptance is posted.
⚫ Case – Ram Das Chakarbarti vs. Cotton Ginning Co.Ltd. (1887)

A letter of allotment of shares was claimed to have been posted by a company, but the applicant denied to
have received it. The Allahabad HC stated that the notice of allotment, which is the acceptance of the offer
to purchase shares, is communicated to the allottee when it is despatched, and from that moment there is a
complete contract for him. Whether or not he receives the letter is absolutely immaterial. However, the
company failed to furnish any evidence of the posting of the notice of allotment.

⚫ Case – J.K. Enterprises vs. State of M.P. (1997)

The petitioner submitted tender to purchase tendu leaves on 11-1-93. The respondents sent
communication of acceptance by registered cover dated 12-2-93 on the address given by the petitioner. The
said letter of acceptance was however, returned to the respondents as it address given by the petitioners was
not the full address. It was held that that the dispatch of the letter of acceptance had amounted to acceptance
and completion of the contract.

⚫ The only difference that the section makes in the position of the acceptor. In England when a letter of
acceptance is posted, both the offeror and the acceptor become irrevocably bound. But in India, the acceptor
does not become bound by merely posting his acceptance. He becomes bound only when his acceptance
“comes to the knowledge of the proposer”.
⚫ The rule that communication of an acceptance is complete as against the proposer, when the letter is posted, is

probably intended to apply only when the parties are at a distance and they communicate by post. Where,

however, the parties are in each other’s presence or, though separated in space they are in direct

communication.

⚫ Acceptance by Telephone and Fax – Sec.4 and 5 which make provisions about the communication of offer

and acceptance and the revocation thereof, do not make a mention whether these provisions relate to the

communication made with the help of telephone and telex.

⚫ Case – Bhagwandas vs. Girdhari Lal & Co. (1966)

The plaintiffs made an offer on phone from Ahmedabad for the purchase of cotton seed cake from the

defendants. The defendants accepted this offer on phone at Khamgaon. The defendants having failed to

supply the cake were sued by the plaintiffs to pay compensation amounting to Rs.31,150 for the breach of

contract. The suit was filed at Ahmedabad. The defendants contended that the Ahmedabad Court had no

jurisdiction because the contract was completed by the acceptance of offer on telephone at Khamgaon. On the

other hand, the plaintiffs pleaded that the contract was struck when the acceptance was communicated to him

at Ahmedabad and therefore, the suit was within the jurisdiction of the Ahmedabad Court.
 The SC held that in the case of telephonic conversation, the position is the same as in the
case where the parties were in the presence of each other, and the rule of a contract through
post did not apply to such contracts. In case of acceptance sent by post, the contract is
concluded when the letter of acceptance is posted, whereas, in the case of acceptance by
phone, the contract is deemed to be complete when the offeror hears the acceptance at his
end rather than when the acceptor speaks the words of acceptance.

⚫ Case – Quadricon P Ltd. vs. Bajrang Alloys Ltd. (2008)

Communication by fax is also instantaneous communication. Fax communication like

telephonic communication, becomes complete when the acceptance is received by the
offeror.

⚫ Case – Trimex International FZE Ltd. Vs. Vedanta Aluminium Ltd. (2010)

The SC held that the mere absence of a signed formal contract does not affect the
unconditional acceptance of a proposal or implementation of the contract resulting from it.
The unconditional acceptance of a contract through email of an offer made through email
specifying the terms and conditions satisfied requirements of Sec.4 and 7.
 ⚫ Points to remember –

i) Where the negotiations are concluded by instantaneous

communications between the parties being in the presence of
each other, the contract completes only when the acceptance
is received by the offeror.
ii) The contract would be completed only when the acceptance is
received by the offeror and at the place where it is received.
iii) In case of non-electronic mode (post or telegram), the contract
is deemed to have entered into/formed in the place from
which it was communicated.
 Absolute and Unqualified
⚫ According to Sec.7(1) - In order to convert a proposal into a promise, the acceptance

must be absolute and unqualified.

⚫ When a letter of acceptance contemplates future negotiations for finalization of the

terms of contract, there arises no contract. Conditional or qualified acceptance is not

the proper acceptance for the creation of a valid contract.
Eg., If A offers to sell his radio to B for Rs.500 and B conveys that he is willing to
pay only Rs.400 for the same, there is no contract in this case. B’s willingness to pay
Rs.400 is not acceptance to A’s offer, it is a counter offer by B. A contract can arise if
A unconditionally accepts the counter offer. By conditional acceptance or the counter
offer, the original offer is deemed to be rejected. Once the original offer is destroyed
by a counter offer, it is a dead offer and cannot be accepted unless renewed.
⚫ Case - Hyde vs. Wrench (1840)

There was an offer made by A and B for the sale of a Farm for 1000 pounds. B rejected this offer
and said that he will pay only 950 pounds to which A did not agree. Thereupon B said that he was
willing to pay 1,000 pounds to which also A did not agree. B sued A and contended that there was a
contract by which by which A was bound. It was held that B had once rejected A’s offer by his
counter offer to pay 950 pounds and this made the original offer to lapse, and therefore, no contract
had resulted in this case.

⚫ Case – D.S. Construction Ltd. vs. Rites Ltd. (2006)

The defendant issued a letter inviting tender to the plaintiff for construction of Thermal Power
Station. In case, the defendant wanted to have the validity of the tender extended beyond the original
period of six months, it was up to him to request the tenderer therefore. The request made by the
defendant for extension, was met by a counter offer by the plaintiff. The defendant rejected the
counter offer made by the plaintiff as a condition precedent, but contended the concluded contract
had been stuck. Rejecting his contention the Delhi HC held that the offer or proposal had to be
accepted in its entirety with the condition or not at all. If the offer was not accepted in its entirety, it
would be a deemed refusal on the part of the plaintiff and therefore the defendant was held not
entitled to forfeit the earnest money.
⚫ Case – U.P. Rajkiya Nirman Nigam Ltd. vs. Indure Pvt. Ltd. (1996)

There was an offer in the form of tender from A (offer) to B (offeree or acceptor). B
accepted the offer with material alterations in the offer (counter offer). There was no further
communication thereafter from A to B. The question arose as to whether silence by A
amounted to acceptance of the counter offer by conduct.

It was held by the SC that when there was a counter offer it meant that there was no
consensus ad idem as to the material terms of the contract. No concluded contract had
therefore come into existence between A and B.

⚫ Case – Stevenson, Jaques & Co. vs. Mclean (1880)

The offeror made an offer to sell iron for a certain amount. After receiving the offer, the
offeree sent a telegram to the offeror to know about the terms of delivery and payment.

It was held that this enquiry did not mean the rejection of the original offer or a counter
offer, and therefore the offeree could still accept the offer. “Mere enquiry of the terms of
the offer does not necessarily mean a counter offer.”
 Acceptance in usual or prescribed manner
⚫ According to Sec.7(2), the acceptance must be “expressed in some usual and
reasonable manner, unless the proposal prescribes the manner in which it is to be
accepted”. It means that if the manner of acceptance has been prescribed by the
proposal, the acceptance has to be in that prescribed manner, otherwise the same may
be made in some usual or reasonable manner.
i) Usual and Reasonable manner –
⚫ Usual and reasonable manner of acceptance means the manner which is usually
adopted in a particular kind of transaction according to the usage or custom of
trade.
⚫ Acceptance by post, telegram, telephone or through personal messenger may be
considered to be a usual manner.
ii) Prescribed manner –

⚫ If the proposal prescribes any particular manner of acceptance, the acceptance must be made in that

manner. The manner of acceptance may include the requirement of fulfillment of certain conditions,

such as the payment of an advance. If such conditions are not fulfilled, there does not arise a valid

contract.

⚫ Case – Chairman –cum-M.D. T.N. Tea Plantation Corp. Ltd. vs. M/s Srinivasa Timbers (1999)

The respondents had made the highest bid for the grant of a forest contract by the appellant to them.

The bid was accepted subject to the condition that the respondent would deposit the prescribed amount

and execute the agreement. The respondents failed to fulfill this condition and the appellant cancelled

the agreement and returned the earnest money deposited by the respondent-tenderer. The tenderer

accepted the refund without any protest. The respondent the challenged the decision of the appellant to

cancel he agreement.

The Court held that the agreement was subject to conditions which were not fulfilled and therefore,

the cancellation was valid.

⚫ According to Indian law, therefore, acceptance of the proposal in a manner different from
the prescribed one does not automatically invalidate. The proposer may require the
acceptor to accept again, in the prescribed manner. If the proposer fails to raise any
objection to the acceptance, he is deemed to have accepted the same and that results in a
contract. It means that in case acceptance is not made in the prescribed manner, the burden
lies on the offeror to raise the objection within a reasonable time. If he fails to object to
such acceptance, that become binding on him.

⚫ Case – Babu Ram Jain vs. L.I.C. (1990)

The deceased took an L.I.C. policy for Rs.10,000. In view of the loss of teeth by the
deceased the premium was increased by Rs.10 from Rs.329 to Rs.339. The deceased paid
premium of Rs.329 only and the L.I.C. unconditionally accepted the same.

It was held that there was concluded contract between the parties and the deficit of Rs.10
did not vitiate the contract and therefore, the L.I.C. was bound by the obligations under the
policy.
 Acceptance when offer is subsisting

⚫ After the offer has been withdrawn or has lapsed, there is nothing
which can be accepted. It is therefore, necessary that the acceptance
should be made while the offer is still alive and subsisting.
⚫ Acceptance after the lapse of the offer cannot give rise to a contract.
Similarly, the offer is deemed to have ended by rejection of the
original offer or a counter offer. In such a case also, once the offer
has lapsed, an attempt to accept the same would not give rise to any
legal obligation.
 Revocation of Acceptance
◼ According to English Law and acceptance once made is irrevocable. This rule is
confined in its operation only to postal acceptance. In other cases ‘an acceptance
can be revoked at any time before acceptance is complete, provided, of course,
that the revocation itself is communicated before the acceptance itself.
◼ In India, acceptance is revocable. An acceptor may cancel his acceptance by a
speedier mode of communication which will reach earlier than the acceptance
itself .
◼ Sec.5 stated that “An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the acceptor, but not
after wards.
Thus the communication of revocation should reach earlier than the acceptance itself. What
happens if they reach together. The section does not make this point clear. But the
illustration appended to the sections seems to show that in such a case also the acceptance
will be deemed to have been revoked. The illustrations is a s follows –

“A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a
letter sent by post. A may revoke his proposal at any time before or at the moment when B
posts his letter of acceptance, but not afterwards. B may revoke his acceptance at any time
before or at the moment when the letter communicating it reaches A, but not afterwards.”

Case – Countess of Dunmore vs. Alexander

A proposal of service made by a letter was sent through an agent. The agent received the
acceptance and forwarded it to the principal, but the principal was away that day. The next
day the agent received the revocation and forwarded t to the principal, who received the two
letters together. The revocation was held to be effective, the court saying that “the admission
of the two letters were received together outs an end to the case”.
Q&A