Essentials of Valid Acceptance

According to Section 2(b) of the Indian Contract Act 1872, acceptance is the act of signifying assent to a proposal made by another person. When the person to whom the proposal is made expresses their agreement without any conditions, the proposal is accepted. Once accepted, the proposal becomes a promise, and this promise is binding and cannot be revoked.

It is important to note that an offer alone does not create any legal obligation. However, when the offer is accepted, it establishes a legal obligation for both parties involved. Once the acceptance is communicated, the offeror can no longer withdraw or revoke the offer.

For example, let’s consider a situation where X offers to buy Y’s horse for 1 lakh rupees. If Y agrees to the offer and gives their consent to sell the horse to X for the specified amount, their acceptance transforms the offer into a promise. At this point, both parties are bound by their respective obligations.

Valid acceptance: Sections 7 and 8 of the Indian Contract Act, 1872

For an acceptance to be considered valid under the Indian Contract Act of 1872, certain essential elements are specified in Sections 7 and 8 of the Act.

Section 7: Absolute Acceptance

Section 7 emphasises that an acceptance must be absolute and unqualified. It should be expressed either explicitly or implicitly unless the proposal specifies a particular acceptance manner. If the proposal states how the acceptance should be communicated, the offeree must comply with that specified method to indicate their consent.

Section 8: Acceptance by Performance

Section 8 deals with situations where an offer can be accepted without explicit communication of acceptance. According to this section, if the offeree performs the conditions mentioned in the offer or accepts the consideration for a reciprocal promise, it is considered an acceptance of the offer. In such cases, the offer is deemed accepted even if there is no explicit communication of acceptance.

These provisions in the Indian Contract Act outline the requirements for a valid acceptance. It is important to ensure that the acceptance is absolute and unqualified and to be aware of circumstances where acceptance can be implied through performance rather than explicit communication.

Essentials of a Valid Acceptance

The following are the essential elements of a valid acceptance:

Acceptance without Conditions

Section 7 emphasises that acceptance should be absolute and without any conditions. When someone accepts an offer, they must not add any conditions or change the offer. Doing so would create a new offer called a counteroffer.

For example, if Mr. X offers to sell his house to Mr. Y for 10 lakh rupees, and Mr. Y accepts but suggests paying in instalments instead, the original offer by Mr. X no longer exists. This is because Mr. Y changed the offer, creating a counter-offer.

Case: Trollope & Colls Ltd. v. Atomic Power Constructions Ltd., 1963

In this case, during Atomic Power Construction, the parties agreed to form a contract based on the points they had agreed upon. However, they continued to negotiate on the points they disagreed. The question arose whether such a contract is valid. The Court ruled that since the parties had not mutually agreed on all the contract clauses, it could create future problems. Therefore, it was not considered a valid contract.

Intention to Fulfill the Promise

To have a valid acceptance, the person receiving the offer must have the intention and willingness to fulfil the promise. Acceptance is invalid if there is no genuine intention to fulfil the promise.

For instance, if Mr. X agrees to sell his horse to Mr. Y for 2 lakh rupees, but it later turns out that Mr. X does not actually own a horse, the acceptance becomes invalid. This is because Mr X had no intention to fulfil the promise.

Communication of Acceptance

For an acceptance to be valid, the person accepting the offer must communicate their acceptance to the person making the offer. Simply thinking or agreeing mentally is not sufficient. The communication can be either expressed or implied. However, if the offer requires the offeree to take some action, performing that action is considered acceptance.

Case: Brogden v. Metropolitan Rly. Co., 1877

In this case, Brogden and Metropolitan Rly Co. had been doing business informally without a formal contract. Later, the defendant (Metropolitan Rly Co.) created a formal contract. They drafted a contract and sent it to Brogden (complainant). Brogden changed the contract and returned it but did not explicitly communicate acceptance. Nevertheless, both parties continued their business as usual. When a dispute arose, the validity of the contract was questioned.

The Court ruled that there was a valid contract between the parties. Even though the acceptance was not communicated, the defendant’s conduct indicated acceptance. The coal was delivered, and payment was made according to the draft. Thus, the contract was considered valid.

Acceptance in the Prescribed Mode

When accepting an offer, the mode of communication should follow the method specified in the offer. This is one of the essentials of a valid acceptance.

If the offer does not mention a specific mode, acceptance can be communicated normally and reasonably. However, if the mode of acceptance is stated in the offer and the offeree uses a different mode, the proposer can reject or inform the offeree. If there is no communication from the offeree, it is considered accepted.

For example, if Mr Y offers to sell his car to Mr X and specifies that acceptance must be through WhatsApp, but Mr X sends it via email, it is not considered acceptable. Mr. Y is not obligated to inform Mr. X that the acceptance was not communicated through the specified mode.

Silence is Not Acceptance

Mere silence cannot be considered as valid acceptance. The offeror cannot state that silence will be deemed as acceptance.

For instance, if Mr. Y offers to rent his apartment to Mr. X and mentions that if Mr. X does not respond within one week, it will be assumed as acceptance. If Mr. X does not reply within the specified timeframe, it is not considered as acceptance because silence is not a valid mode of communication for acceptance.

Case: Felthouse v. Bindley, 1862

In Felthouse v Bindley, Felthouse, the complainant, discussed the sale of a horse with his nephew, Mr. Bindley. Later, Felthouse sent a letter to Mr Bindley stating that if he did not respond, it would be presumed that he had accepted the offer, and the horse would belong to Felthouse. Mr Bindley did not reply to the letter because he was occupied. Subsequently, Mr. Bindley sold the horse to someone else, which upset Felthouse. As a result, Felthouse filed a lawsuit for the tort of conversion against Mr. Bindley.

The Court ruled that there was no contract between Felthouse and Mr Bindley because silence cannot be considered acceptable. The Court emphasised that the acceptance of an offer must be clearly communicated. In this case, Mr. Bindley’s failure to respond to the letter did not imply acceptance through silence. Thus, there was no valid contract between Felthouse and Mr. Bindley.

Communication within the Prescribed Time

The offeree is required to respond to an offer within the time period specified in the offer. If no specific time limit is mentioned, the offeree must respond within a reasonable time or before the offer expires or is withdrawn by the offeror.

For example, if Mr. X offers to buy Mr. Y’s house in July, and Mr. X accepts the offer in December, Mr. X’s acceptance is considered beyond a reasonable time. Therefore, Mr. X’s refusal to buy the house based on the delayed acceptance would be justified.

No Acceptance Prior to the Offer

Acceptance cannot occur before the offer is presented. An offer must be made before acceptance can take place. A person unaware of the offer cannot accept it solely based on their actions aligning with the offer.

Case Example: Laksham Shukla v. Gauri Dutt, 1913

In this case, the respondent’s nephew was missing, and he asked his servant (complainant) to search for the boy. While the complainant was searching for the boy, the respondent announced that a reward of Rs. 500 would be given to anyone who safely brings the boy back home. The complainant found the boy and brought him home. Upon learning about the announcement, the complainant requested the reward from the respondent. However, the respondent refused to provide the money, leading the complainant to file a case against him.

The Court ruled that since the complainant was unaware of the offer when he performed the act, there was no contract between them. For a contract to exist, the offeree must know about the offer.

Acceptance by the Offeree or Authorised Agent

The offeree or their authorised agent must communicate the acceptance of an offer. No contract is formed if anyone other than the offeree or their authorised agent communicates acceptance.

Case Example: Powell v. Lee, 1908

In this case, Powell applied for the position of headmaster at a school, and the School Board accepted his application. The acceptance was conveyed to Powell by one of the members of the School Board. However, the School Board later rescinded their acceptance. Powell filed a lawsuit for breach of contract.

The Court determined that since someone authorised by the School Board did not communicate acceptance, there was no valid acceptance and, consequently, no valid contract. The person communicating acceptance must have the proper authority to do so on behalf of the offeree.

No Acceptance “Subject to Contract”

Acceptance of an offer implies acceptance of all the terms stated. If the offeree accepts the offer with phrases such as “subject to contract,” “subject to formal contract,” or “subject to contract to be approved by solicitors,” it indicates that the agreement is still in the negotiation phase. The offer does not bind the parties until both parties have created and signed a formal agreement.

In other words, if the acceptance includes these conditions, the parties are not legally obligated to fulfil the obligations outlined in the offer unless a formal agreement has been established and agreed upon.

Acceptance via an Agent

If a proposal is made through an agent, it is considered sufficient if the acceptance is communicated to the agent. For example, a valid contract is formed if X sends an offer to buy Y’s house through their agent, Z, and Y accepts the offer by communicating the acceptance to Z. Z doesn’t need to communicate the acceptance to X for the contract to be valid. The acceptance made to the agent is binding and establishes a contractual relationship between X and Y.

Conclusion

Understanding the essentials of a valid acceptance is crucial when entering contractual agreements. The Indian Contract Act specifies certain requirements that must be met for an acceptance to be considered valid. The essentials of a valid acceptance include an absolute and unqualified acceptance without conditions, and communication of acceptance either explicitly or through performance, creating a binding promise that cannot be revoked.

Firstly, the acceptance must be absolute and unqualified, as Section 7 of the Act outlines. This means that the offeree’s consent must be explicit or implied unless the proposal specifies a particular manner of acceptance. Compliance with the specified method is necessary to validate the acceptance.

Furthermore, Section 8 highlights that acceptance can also be demonstrated through performance. If the offeree fulfils the conditions mentioned in the offer or accepts the consideration for a reciprocal promise, it constitutes a valid acceptance. In such cases, explicit communication of acceptance may not be required.