Introduction
Contracts govern a large aspect of day to day life; they are one of the fundamental ways that society is ordered.
Section 2(h) of the Indian Contract Act 1872, defines a contract as an agreement enforceable by law.
There are several requirements for a valid contract.[1]
i) Offer[2]
ii) Acceptance[3]
iii) Intention to create legal relationship
iv) Lawful consideration
v) Competent parties[4]
vi) Free consent
vii) Lawful object
viii) Not expressly declared void
Importance of Acceptance
In a contract acceptance is a really important essential element. Once valid acceptance takes place, the contract became binding.
As per section 2(b) of Indian Contract Act, valid acceptance take place when the person to whom an offer is made to do or abstain from doing an act to obtain the assent of such a person, if gives his assent thereto is said to have accepted the offer.
Deep Chandra v Sajjad Ali Khan[5]
In this case Justice Seth said that “…the theory of ‘offer and acceptance’ has received statutory recognition in this country, so that, every contract must originate in a proposal and every transaction to be recognized as contract must in its ultimate analysis resolve itself into a proposal and its acceptance”.
Rules of Valid Acceptance
1. Acceptance can only be given to whom the offer was made & also no third person without the knowledge of the offeree can accept the offer.
2. Section7 (1) says that Acceptance must be absolute & unqualified. The reasoning behind this is when acceptance is not absolute & unqualified it results in a counteroffer which leads to rejection of the original offer.
3. Acceptance must be communicated. The communication must be made in prescribed mode or any such mode in the normal course of business if no specific form has been prescribed.
Lalman Shukla v Gauri Dutt[6]
Held that “mere knowledge of an offer does not imply acceptance by offeree”.
Pawell v Lee[7]
Held that to make acceptance valid, the communication to offer either by the offree by some duly authorized person on behalf of him is necessary. If made by unauthorized person it does not result in the contract”.
4. Mere silence is not acceptance; however there are conditions in which silent amount to acceptance.
i) If the offeror communicates the same to the offree accepts that premise silence will amount to acceptance.
ii) If the offeree starts acting in the manner to suggest that the offer been accepted.
Felthouse v Bindley[8]
The court held that “an offer cannot prescribe silence mode of acceptance”.
Who an Accept?
In the case of a general offer, it can be accepted by anybody who first comes to know about this & can contract and accept it with all terms and conditions.
Carlil v Carbolic Smoke Ball Co.[9]
It was observed that in the case of a general offer, communication of acceptance is not necessary and it can be claimed by anyone who comes and performs the said condition.
But in case of a specific offer it can only be accepted by a specific counterparty to whom the offer is made.
Types of Acceptance
1. Implied Acceptance
Acceptance is made by the conduct of the party to whom the offer is made.
2. Express Acceptance
Acceptance using words, either oral or written.
3. Partial Acceptance
Partial acceptance is the acceptance in which offeree accepts certain terms that favoring him while rejecting the rest condition. This kind of acceptance does not bind the offerer as there is no binding contract.
4. Acceptance with subsequent condition
Condition means operative term after acceptance and before acceptance. Condition can be of 3 types-
Express condition-condition that are expressly agreed upon parties.
Implied condition- agreed by the conduct of parties
Constructive condition- when the court believes that parties to contract must have intended to operate conditions because the court believes that justice requires the presence of the condition.
5. Provisional Acceptance
Provisional acceptance is subject to final approval. It is not binding on either party until final approval.
Acceptance and Tenders
A tender is a legal offer or proposal with respect to money or specific articles; to do or abstain from doing an act on it binds the party to performance. When the tender is accepted it becomes a standing offer and a standing offer is not a contract, it is the offer that remains open for acceptance over a period of time.
Vijay Kumar Ajay Kumar v. Steel Authority of India[10]
The court observed in this case that in certain circumstances the invitation to tender can give rise to a binding obligation on part of the person who invited the tender.
Auctions
Auction is a public sale in which goods or property are sold to the highest bidder.
Where an auction is “without reserve” (i.e there is no minimum priced bid required to win the auction) each bid is an offer, and when the auctioneer ends the bidding, this is the acceptance. Therefore, each bidder may revoke their offer at any time before the end of the bidding.
Where an auction is “with reserve”, (i.e the owner of the goods has set a minimum price) the auctioneer is only obliged to accept any bids which are above the minimum price.
Revocation of Acceptance
Section 5 provides that acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterward. He should adopt a speedier mode of communication that will reach earlier than the acceptance of the offer. However, if they reach at the same time, the acceptance will be deemed to have been revoked.
Conclusion
Acceptance being an essential part of contracts is important from the contractual point of view. Once the offer is accepted, the offeror’s right to revoke ends. Acceptance also ensures the consent of the parties to contract. All the rights and obligations of the parties to the contract depend upon the acceptance of the offer.
References:
[1] Sec.10 Indian Contract Act,1872
[2] Sec.2(a) Indian Contract Act, 1872
[3] Sec.2(b) Indian Contract Act,1872
[4] Sec.11 Indian Contract Act,1872
[5] AIR 1951 All 93 at 97
[6] (1913) 11 ALJ 489
[7] (1908) 99 LT 284
[8] (1862) EWHC CP J 35
[9] (1893) 1 QB 256
[10] AIR 1994 All 182
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