Acceptance under Indian Contract Act 1872

Acceptance is the final and unqualified expression of assent to the terms of a proposal. Under Section 2(b) of the Indian Contract Act, 1872, when the person to whom a proposal is made signifies assent to it, the proposal is said to be accepted. Once accepted, the proposal becomes a promise.

An acceptance is valid when it is given by the person to whom the proposal is made, in the prescribed manner, within the prescribed or reasonable time, and is absolute and unqualified. Acceptance may also be express or implied depending upon the manner in which assent is communicated.

Acceptance Must Be Communicated

Communication of acceptance is an important requirement of contract formation. The acceptance of a proposal must generally be communicated to the proposer for a binding contract to arise.

Communication may take place through writing, orally, or through conduct, depending upon the circumstances and the mode prescribed for acceptance. The acceptance should also be communicated within the relevant time and should be clear and unconditional.

Felthouse v Bindley

Felthouse v Bindley is an important case concerning communication of acceptance and the principle that silence does not ordinarily amount to acceptance.

In the case, an uncle attempted to purchase a horse from his nephew and stated that he would consider the horse to be his if he received no contrary response. The nephew did not communicate acceptance to his uncle, and the horse was subsequently sold at auction.

The court held that there was no binding contract because acceptance had not been communicated. The case established that silence or inaction cannot ordinarily be imposed as acceptance of an offer.

Powell v Lee

Powell v Lee also illustrates the requirement that acceptance must be communicated to the offeror.

The case concerned an appointment to a position where the claimant believed that his acceptance had resulted in a contract. However, the acceptance had not been properly communicated to the person who had made the offer.

The court held that communication of acceptance was necessary for the formation of a binding contract. The case therefore reinforces the principle that an offeree’s private reliance on an offer is insufficient where acceptance has not been communicated.

Acceptance by Conduct

Acceptance may take place through the conduct of the offeree. This is commonly described as acceptance by conduct, acceptance by performance, or acceptance by behaviour.

In such cases, the offeree does not necessarily communicate acceptance through separate words or writing. Instead, their conduct clearly indicates that they have accepted the terms of the offer.

For example, where an offer is made subject to certain conditions and the offeree performs those conditions, the conduct may amount to acceptance. Carlill v Carbolic Smoke Ball Company is a well-known example of acceptance through performance of the conditions of a general offer.

When Communication of Acceptance Is Complete

Section 4 of the Indian Contract Act, 1872 provides rules for determining when communication of acceptance becomes complete.

As Against the Proposer

Communication is complete against the proposer when the acceptance is put into a course of transmission so that it is beyond the power of the acceptor.

This principle is particularly relevant where acceptance is communicated through post or another authorised mode of communication.

As Against the Acceptor

Communication is complete against the acceptor when the acceptance comes to the knowledge of the proposer.

Therefore, Section 4 creates different points at which communication becomes complete as against the proposer and as against the acceptor.

Acceptance by Post

Acceptance by post is governed by the principle commonly known as the postal rule. Under Section 4, where post is an appropriate means of communication, acceptance may become effective when the letter of acceptance is properly posted rather than when it is actually received by the offeror.

Household Fire and Carriage Accident Insurance Company v Grant

In Household Fire and Carriage Accident Insurance Company v Grant, the court considered whether acceptance sent by post could be effective even though it was not received by the offeror.

The court applied the postal rule and held that acceptance was effective when it was posted. The case established that, where the postal rule applies, delay or loss of the letter after proper posting does not necessarily prevent the formation of a contract.

Adams v Lindsell

In Adams v Lindsell, an offer to sell wool was sent by post but was delayed because of an error in addressing the letter. The offeree posted an acceptance after receiving the offer, but the acceptance reached the offeror only after the offeror had sold the goods elsewhere.

The court held that the contract was formed when the acceptance was posted. The case is regarded as the foundation of the postal rule, under which acceptance by post may become effective upon posting when post is a reasonable means of communication.

Place of Acceptance

The place of acceptance can become important in determining the jurisdiction connected with a contract.

The place may depend upon the mode through which acceptance is communicated. In the case of postal communication, the rules governing completion of communication may produce a different result from instantaneous methods of communication.

Acceptance by Telephone or Telex

The postal rule does not generally apply to instantaneous communication such as telephone or telex.

In such cases, communication of acceptance is generally complete when the acceptance reaches the offeror. Consequently, the place of contract may be connected with the location where the offeror receives the acceptance.

Bhagwan Das v Girdhari Lal

In Bhagwan Das v Girdhari Lal, acceptance was communicated by telephone. The court recognised telephone communication as a valid mode of acceptance and emphasised that the important requirement was that the acceptance should be clearly and effectively communicated to the offeror.

The case illustrates the distinction between postal communication, where the postal rule may apply, and instantaneous communication, where acceptance generally becomes effective upon receipt.

Acceptance Must Be Absolute and Unqualified

Acceptance must correspond with the terms of the original offer. The offeree cannot introduce new conditions or modify the terms of the offer and still describe the response as an acceptance.

If the offeree attempts to change the terms of the offer, the response generally becomes a counter-offer rather than an acceptance.

The principle is illustrated by Hyde v Wrench, where the plaintiff attempted to accept the original offer after having made a counter-offer on different terms. The court held that there was no binding contract because the acceptance was not absolute and unqualified.

Acceptance Must Be in the Manner Prescribed by the Proposer

Where the proposer specifies a particular manner in which acceptance must be communicated, the offeree should follow that prescribed method.

For example, if an offer requires acceptance by email, fax, or another specified method, the offeree should ordinarily communicate acceptance accordingly. The purpose of this requirement is to ensure that the parties have a clear understanding of how acceptance is to be communicated.