Concept of Acceptance | Law of Contracts - CLAT PG PDF Download

Definition of 'Acceptance' 

 Acceptance  refers to the act of agreeing to the terms of an offer, indicating a willingness to enter into a contract.

• When the person to whom the proposal is made signifies his assent thereto, the offer is said to be accepted. Thus the proposal when accepted becomes a promise.
• An offer can be revoked before it is accepted. As specified in the definition, if the offer is accepted unconditionally by the offeree to whom the request is made, it will amount to acceptance.
•  Acceptance  may be express or implied:
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  •  Express Acceptance  : When acceptance is communicated through spoken or written words.
  •  Implied Acceptance  : When acceptance is conveyed through actions or conduct without explicit words.
• What is necessary is that there should be some external manifestation of acceptance.

Who Can Accept? 

•  General Offer  : An offer made to the public at large, which can be accepted by anyone who fulfills the conditions of the offer. For example, a reward notice for finding a lost pet.
•  Specific Offer  : An offer directed to a specific individual or group, which can only be accepted by the designated party. For instance, a job offer made to a particular candidate.

Effect of Acceptance 

• A contract comes into existence only when an offer is accepted. Until acceptance occurs, neither party is bound by the agreement. At this stage, the offeror can withdraw the offer, and the offeree is free to reject or ignore it.
• Once the offer is accepted, it transforms into a promise, which legally binds both parties if the other conditions of a valid contract are met. After acceptance, each party is obligated to fulfill the promise made through the offer and acceptance process.

Essentials of Valid Acceptance 

• Acceptance must be communicated by the offeree to the offeror.
• Acceptance should be absolute and without any qualifications.
• Acceptance should be made in a usual and reasonable manner unless the proposal specifies a particular way of acceptance.
•  Acceptance must occur while the offer is still open and valid.

Acceptance Communication in Contract Law 

• Acceptance must be communicated by the offeree, either explicitly or implicitly.
• For instance, when a passenger boards a bus, they implicitly agree to pay the fare.
• To form a contract, acceptance and its communication must be evident.
• In the case of  Felthouse v. Bindley  , a letter offering to buy a horse was deemed invalid because the nephew did not communicate acceptance directly to his uncle.
•  Key Principles: 
  • Acceptance must be communicated to the offeror directly.
  • Communication to a third party does not constitute acceptance.
  • The offeror cannot shift the burden of refusal onto the offeree.
• An example is  Powell v. Lee  , where a candidate was not validly informed of his selection by the board.
•  Valid communication of acceptance is crucial in contract law.

Mode of Communication 

 S. 7.  Acceptance must be absolute. In order to convert a proposal into a promise, the acceptance must-

• be absolute and unqualified;
• be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.

Completion of Communication

 Communication when complete. 

• The communication of an acceptance is considered complete  As against the proposer  , when it is put in a course of transmission to him, making it out of the power of the acceptor.
•  As against the acceptor  , when it comes to the knowledge of the proposer.

 Example:  When B accepts A's proposal sent by post, acceptance is complete:

•  As against A  , when the letter is posted.
•  As against B  , when the letter is received by A (there is a presumption that the letter reaches).

Absolute and Unqualified Acceptance

• Acceptance must be unconditional and absolute. There cannot be conditional acceptance that would amount to a counteroffer which nullifies the original offer. For example, if A offers to sell his cycle to B for a certain price, and B says he accepts only if A will sell it for a different price, this does not constitute a valid acceptance; it would be considered a counteroffer.
• Acceptance should also be expressed in a prescribed manner. If no specific manner is described, it should be expressed in a normal and reasonable manner, as would be customary in the course of business.
• Implied acceptance can be indicated through conduct or actions, but silence cannot be considered a form of acceptance. The offeror cannot assume acceptance simply because no response is received.
• In the case of  Hyde v. Wrench  , A made an offer to sell a farm to B for 1000 pounds. B rejected the offer and countered with a lower price of 950 pounds. When A did not accept this counteroffer, B later offered to pay 1000 pounds again. However, since B had initially rejected A's offer with his counteroffer, the original offer lapsed, and no contract was formed.

Acceptance Should Be Expressed in a Usual or Prescribed Manner 

•  According to Section 7 (2)  of the Indian Contract Act, acceptance must be expressed in a usual or reasonable manner unless the proposal specifies a particular method of acceptance.
• If the proposal prescribes a specific manner of acceptance, it must be followed. If not, acceptance can be made in a usual or reasonable manner.

 Usual or Reasonable Manner 

•  Usual or Reasonable Manner of Acceptance  refers to the method commonly used in a specific type of transaction, based on trade customs or practices.
• Methods such as acceptance by post, telegram, telephone, or through a personal messenger are considered usual.

 Prescribed Manner 

• If a proposal specifies a particular manner of acceptance, it must be followed exactly.
• The prescribed manner may include conditions like advance payment. If these conditions are not met, a valid contract does not arise.

Timeliness of Acceptance 

• Acceptance must occur while the offer is still valid.
• The offeror can withdraw the offer, or it can lapse under various circumstances mentioned in Section 6.
• Once the offer is withdrawn or has lapsed, there is nothing to accept.
• Acceptance after the offer has lapsed does not create a contract.
•  An offer is also considered ended if the original offer is rejected or a counter-offer is made.

Revocation of Offer and Acceptance

 Revocation of Offer 

• A contract is formed only when an offer is accepted, binding both parties to their promises. Until then, the offer can be revoked. Once accepted, it becomes a contract and cannot be revoked.

 Modes of Revocation of Offer 

Various modes of revocation of offer are outlined in Section 6.

• Notice of Revocation
• Lapse of Time
• Failure to Accept Condition Precedent
• Death or Insanity of Offeror

 Revocation by Notice 

• An offer can be revoked at any time before acceptance through a notice of revocation communicated by the proposer or their agent.
• In India, only the proposer can communicate the notice of revocation.
• In England, the offer is revoked even if the offeree learns of the revocation from a source other than the proposer.

By lapse of time

• A proposal is revoked by the lapse of the time prescribed for acceptance or, if no time is prescribed, by the lapse of a reasonable time.
• The offeror can revoke the offer before the specified time, even if they have set a deadline for acceptance. For example, if A offers to sell property to B until a specific time, A can revoke the offer before that time.
•  Rejecting an offer before the specified or reasonable time also causes the offer to lapse.

 By failure to fulfill a condition precedent 

• When an offer includes certain conditions that must be met before acceptance, these conditions must be fulfilled by the acceptor. If the acceptor fails to meet the conditions, the offer is revoked.
• For instance, if an offer stipulates the need for a deposit or the signing of a document, these requirements must be satisfied.
• In the case of  State of M.P. v. Goberdhan Nath  , tenders for the sale of goods were invited with the condition that 25% of the amount be paid upon acceptance of the tender. Despite A's tender being the highest and accepted, the contract did not materialize because he failed to meet this condition.
• Consequently, A could not be held liable for breach of contract if he did not take the goods and pay for them.

 By death or insanity Of the offeror 

• An offer can be revoked by the death or insanity of the offeror if the acceptor becomes aware of this fact before accepting the offer.
• In India, the offer does not automatically lapse upon the death or insanity of the offeror. It is revoked only if the acceptor is informed of the death or insanity before acceptance.
• If the acceptor is unaware of the offeror's death or insanity at the time of acceptance, the acceptance is valid and creates a contractual obligation.
• Under English Law, the death of the offeror revokes the offer regardless of whether the acceptance occurs without knowledge of the offeror's death.

Revocation of Acceptance 

•  According to Section 5 of the Indian Contract Act, acceptance can be revoked at any time before the communication of acceptance is complete against the acceptor. Once the communication is complete, the acceptor is bound by the acceptance. 
•  In the case of acceptance through post, as per Section 4, the proposer becomes bound when the letter of acceptance is posted, while the acceptor becomes bound when the letter of acceptance reaches the proposer. 
•  Since the acceptor is not bound immediately upon posting the letter of acceptance, they have the option to revoke the acceptance by using a faster mode of communication. This allows the revocation of acceptance to reach the proposer before the letter of acceptance does.