Acceptance to an Offer must be Unconditional

Introduction:

Whenever there is an offer, given by one particular party to another, what do you think should be the next step? What does the party acting as the offeree do with the offer? One might intuitively say that the party will either accept it or reject it; rather in reality mostly when a party is given an offer it will usually try to convince the offeror party & amend the offer in such a way that it has more of a profit or advantage on their end. This results in arguments between the parties. These arguments are generally of certain natures and are mostly consecutive offers made by both parties in order to come to a mutually decided agreement. It would also not be very wrong to compare this scenario with a layman bargaining in a marketplace if we are to understand this concept through an example. Coming back to the ‘consecutive offers’, as and when they take place during the argument, they take the form of ‘counter offers’ and ‘cross offers’. Counteroffers are offers in which the original offer given by the offeror gets destroyed. It is then modified by the offeree and is presented as a completely new offer thereafter. This also means that now the offeree cannot accept the conditions of the original offer. Counteroffers are very common Cross offers. A cross offer takes place when two parties extend the same proposal to each other along with being unaware of each other’s offers at the same time. Cross offers never lead to a valid contract. Counteroffers, however, can lead to valid contracts provided the original offeror accepts the modified conditions and agrees to enter into a contract on these conditions.

Concept Of Unconditional Acceptance

The reason for understanding these offers and mainly ‘counter offer’ is to bring attention to an important concept called ‘Unconditional Acceptance’. What would happen if the original offeror does not accept the modified conditions of his offer and denies entering into a contract on the conditions of the other party? Is he wrong to deny this counteroffer? The answer is ‘No’. It will simply result in no contract at all. The Original offeror is not at all bound to accept the modified conditions of his offer and has the right to deny it based on the concept of unconditional acceptance. Acceptance must be absolute, unambiguous, unequivocal and unconditional. The offeree cannot just reject a part of an offer and accept another at the same time. There are no “alright, but…”, “I agree, provided…”, “okay, what if…” and so on when giving an acceptance. If the acceptance is not unconditional it will be treated as a counteroffer and the original offeror becomes free to accept or reject this counteroffer.

Laws Related to Unconditional Acceptance

According to Section 2 (b) of the Indian Contract Act 1872[1], the definition of acceptance is as follows – “When the person to whom the proposal has been made signifies his assent thereto, the offer is said to be accepted. Thus the proposal when accepted becomes a promise.” Moreover, according to Section 7 (1) of Indian Contract Act 1872[2], “In order to convert a proposal into a promise the acceptance must- (1) be absolute and unqualified.”

For example, Rahul offers to sell his skateboard to Vishal at a price of Rs 4000. But Vishal wants the board very eagerly and also thinks that Rahul is charging too much for it. He starts to persuade Rahul into lowering the price to Rs.3200. Rahul denies Vishal’s offer of letting him buy the skateboard at Rs 3200. Here, even if Vishal changes his decision and makes up his mind at some later point in time that he is ready to buy the skateboard at Rs. 4000, Rahul won’t be obligated to sell him the skateboard. This is because Vishal’s counteroffer earlier had already ended Rahul’s original offer and now the only way Vishal can get the skateboard is by entering into a whole new contract with Rahul.

Case Laws

In Badri Prasad v. State of Madhya Pradesh & Anr.[3], the appellant Shri Badri Prasad Moolchand entered into a contract concerning particular forests where he became sanctioned to cut the teak trees with certain delineation.[4] He got this deal in the amount of Rs. 17006 (was rounded off to seventeen thousand rupees) and paid the price in a lump sum. The contract was to be for a period of 3 years i.e. from December 1950- December 1953. However, on 26^th January, the Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act[5] came into force. The plaintiff later started working under his contract in March 1951. Hence under the aforementioned act, he was prohibited from cutting teak trees as the estate now vested in the State. On February 1^st 1955 the state (the Divisional Forest Officer) sent the plaintiff a notification letter specifying that his claim to cut the teak trees will be given allowance only if he gives up his claim to an amount of Rs.17000 which he paid earlier already under the contract and whether was ready to pay an additional amount of Rs. 17000 to the State. On February 5^th 1955 Badri Prasad sent a letter expressing that he is ready to pay the additional amount of Rs. 17000 to the state but wishes to reserve his right to claim a refund on the original amount. The state rejected his prerogative to cut the teak trees after which Badri Prasad went on to file a suit claiming specific performance of his contract.  There were three points of heated disagreement:

• Under the 1951 act, the trees and forest did not vest under the state.
• Even if they vested, under the act the standing timber/teak which was already sold to the plaintiff would not vest under the state.
• A new contract was completed on the 5^th of February 1955 and the plaintiff was accredited to specific performance of the contract.

Result of case and Analysis with respect to the concept of Unconditional Acceptance

The Trial court favoured the plaintiff but the MP High Court, however, dismissed his suit and favoured the appeal of the state. Even the Hon’ble Supreme Court of India favoured the states’ appeal. It was held that under the act the trees and forest did vest in the state. Badri Prasad, under the contract, did not become an owner of the trees as ‘goods’ and so the trees would belong to him only when they are felled.

 We, however, know that the above scenario did not take place and the trees vested in the state before they were felled. According to the contract, since there was no sale of the ‘whole’ of the trees (see footnote 4), it had to be determined which trees were the ones that fit the needed criteria to cut the trees and until and unless this was done they could not be called ‘ascertained goods’ according to section 19 of Sale of Goods Act (1930)[6].

The final and the most important verdict for which this case was analysed to this extent was that even if the letter from 1^st of February be treated as an offer, the acceptance which was given was a conditional and qualified one whereas it was needed to be an unconditional and absolute one. Since the plaintiff had reserved his right to claim the refund over the original amount which he conveyed in his letter dated 5^th of February, the acceptance was not at all unconditional and absolute. As a result, there was no contract and his appeal was dismissed with costs.

In the case of Hyde v Wrench[7] the defendant, Mr Wrench, had offered to sell his property (his farm) to the plaintiff, Mr. Hyde, at a price of 1200 pounds. Mr Hyde denied the offer. The defendant decided to approach the plaintiff with another fresh offer by offering him the property at the price of 1000 pounds along with a statement that this would be his last offer regarding the property. The plaintiff replied with an offer to sell him his property at the price of 950 pounds. The defendant refused this offer and also confirmed it with the plaintiff. After a while, having a change of thoughts the plaintiff agreed to buy the property at the rate of the previous contract i.e. at the rate of 1000 pounds, but the defendant refused to sell his property. The court held that no contract existed between them as the plaintiff did not convey an unconditional acceptance and merely gave a counter offer. Since there was no unconditional acceptance there was no contract.

In the case of Robarts v Antoni NO and Others[8], two neighbours got in a quarrel on an issue regarding how high one of them should renovate/build his house so that he doesn’t block the view of the other neighbour. The neighbour who was blocking the view decided to make a settlement offer. This offer however was criticized by the other neighbor who said that the offer did not match what they had agreed orally and hence ended up with a counteroffer. This was not paid attention to by the first neighbour and he proceeded to build the house. The court held that there was no unconditional acceptance to the first offer and hence there was no settlement either.

In the case of Pacific Minerals Ltd. v. Singhbhum Mining Syndicate[9] , On May 22^nd Mr Bennet offered to sell a particular ore at the price of Rs. 8140 per ton. The plaintiff accepted this offer on May 25^th but decided to modify the offer and added his condition saying that sampling must be paid for equally. Notice that this was not an unconditional acceptance from the plaintiff and hence after this the defendant is free to accept or reject this counter offer. However, what the defendant did was rather different compared to what we have seen in cases discussed till now. The defendant in his reply to the counter offer refused the plaintiff’s condition but also repeated the offer which he had made on May 22^nd i.e. the very first offer he had made to the plaintiff. This resulted in the creation of a new contract after the previous one was destroyed due to a lack of unconditional acceptance from the plaintiff. On May 29^th the plaintiff accepted this new offer which had the same old conditions and hence there was a valid contract.

Conclusion

After studying all the above cases we can see the importance of the concept of Unconditional Acceptance. It is a very basic notion but if not paid attention to, can even turn the most trivial of arguments into full-fledged court cases. We in our daily lives make offers and accept them every second. It is our duty to correct ourselves and others who do not know the basic concepts of contract making. We can easily fall into trouble if we are to commit such small mistakes in our professional life. To every clear offer made, there must be an absolute and unconditional acceptance. If not, there is no contract.

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References:

[1] Section 2(b) in The Indian Contract Act, 1872, Central Government Act, https://indiankanoon.org/doc/1845680/

[2] Section 7 in the Indian Contract Act, 1872, Central Government Act, https://indiankanoon.org/doc/74115/

[3] Badri Prasad vs State of Madhya Pradesh & Anr., 3 SCC 23 (1971)

See judgement at – Badri Prasad vs State Of Madhya Pradesh & Anr on 11 October, 1968, https://indiankanoon.org//doc/19635357/ 

[4] Teak trees with girth more than 12 inches and to be cut in a slanting position; also after cutting the trees the stumps were to be left atleast 3 inches high.

[5] M.P. Abolition of Proprietary Rights (Estates, Mahals, Alienated lands) Act, 1950, http://www.bareactslive.com/MAH/mh621.htm

[6] India Code: Sale of Goods Act,1930, https://www.indiacode.nic.in/handle/123456789/2390?view_type=browse&sam_handle=123456789/1362

[7] Hyde v Wrench, 3 BEAV 344-49 ER 132 (1840)

[8] Robarts v Antoni NO and Others, 64 ZASCA (327/2013) [2014]

[9] Pacific Minerals Ltd. Singhum Mining Syndicate, AIR Cal 343 (1938)