Introduction:
In order to constitute a valid acceptance, acceptance should be communicated. Section 2(b) of the Indian Contract Act, 1872[1] defines acceptance as when the person to whom an offer is made gives his assent thereto, the proposal is deemed to be accepted provided that acceptance is absolute and unqualified. Para 1 of Section 4[2] of the Indian Contract Act, 1872 lays down that the communication of offer is completed when it comes to knowledge of the person to whom it is made while Para 2 states the conditions for the communication of acceptance. It is one of the crucial details of a binding agreement when the communication of acceptance is complete, the agreement makes the parties legally binding to their part of obligations. On a similar note, the acceptance by the offeree (to whom the offer is made) needs to be communicated to the offeror (who makes the offer). In accordance with the general rule, the acceptance should be communicated towards the offeror for the benefit of the offeror and the offeror might waive this requirement. In such matters, acceptance might be effective even before it comes to notice of the offeror but the acceptance cannot be inferred from the silence.
Scope
The acceptance could be communicated in two ways: by words or by conduct. Either words or conduct constitutes acceptance of an offer. Communication of acceptance by words means the consent is initiate via words whether oral or written like letters, e-mails, telegraphs, phone calls, etc. communication. The verbal acceptance of contracts is a valid form unless there are such circumstances that let both the parties deal that the contract is to be accepted in writing. Communication of acceptance by conduct is made through actions or by the conduct. Suppose when we are in a restaurant and we order something from a menu, the menu symbolizes an offer and signaling the waiter to get you the items mentioned in the menu imitates the communication of acceptance to pay for the food. When it is the discretion of the court to decide on a problematic contract, the court may consider how a reasonable person would foresee the situation rather than the intention of the parties. Common sense is the basis as it is expected that neither party would want to be held liable for damages by breaching their side of the agreement. For an acceptance to be treated as a valid one, acceptance must be communicated to the offeror either by the offeree or by means of some duly authorized individual on his behalf. If the communication is made by means of an unauthorized individual, it does not become a binding instrument or contract.
The conduct of a person could also amount to acceptance if it is clear that the offeree did the act with the intention of accepting the offer. The evidence must be examined by the court to find out whether in facts and circumstances of the case the conduct of the “offeree” was such as amounted to an unequivocal acceptance of the offer made. If the circumstances discern that there was no reservation in signifying acceptance by conduct, it must follow that the offer has been accepted by conduct. While on the other hand, if the evidence suggests that the offeree had a reservation in accepting the offer, his conduct may not amount to acceptance of the offer, his conduct may not amount to acceptance of the offer in terms of provisions of the Indian Contract Act, 1872.
Case Laws
Felthouse v. Bindley[3] [(1862) EWHC CP J 35]
Felthouse had written a letter to his nephew offering to buy his horse for a specified amount stating that if he heard no more about the horse, it would be considered his for the same amount. There was no reply from the nephew however he told his auctioneer, Bindley, that he wanted to reserve this horse for his uncle and, therefore desired that the horse be not sold by the auctioneer. Bindley disposed of the horse by mistake thereby Felthouse sued Bindley for the tort of conversion of plea that Felthouse had become the owner of the horse which Bindley had disposed of. It was held that since the nephew had not communicated the acceptance to Felthouse, no contract had arisen in this case, and therefore, Felthouse had not become the owner of the horse and as such his action for conversion failed. This case makes it clear that the intention of the nephew to accept the offer of his uncle, or the communication of his intention to the auctioneer, was not enough to create the contract. It reiterates the principle mere silence could not be regarded as acceptance of the offer.
Powell v. Lee[4] [(1908) 99 LT 284]
Powell was one of the candidates for the post of headmaster of a school. The Board of Managers passed a resolution selecting him for the post. No communication about this decision was made to Powell by the Board. One of the members of the Board who had not been authorized to communicate this decision, acting in his capacity, informed Powell about his selection for the post. Subsequently, the Board of Managers met again and decided to cancel the appointment of Powell and appoint another candidate Parker, in Powell’s place. Powell sued Lee, the chairman of the Board of Members, for the breach of contract. It was held that since the resolution passed by the board was not communicated to Powell by Board or any authorized person on its behalf, it could not give rise to a contract. Powell’s action failed as there was no valid communication of acceptance.
If the communication of acceptance is made to the wrong person, the offeror could not be held liable for the breach of contract.
Karan Singh v. The Collector Chhatarpur [AIR 1980 Madh Pra 89: 1980 MP LJ 231]
In an action of quarry release, the petitioner’s bid of Rs. 1800 was the highest. In accordance with the auction conditions, the petitioner deposited the security and earnest money. The bid was not accepted at the auction. The bid was subsequently accepted by the Collector, but instead of sending the communication of acceptance to the petitioner, the same was wrongly sent to somebody else. The officer concerned realized the mistake after the expiry of the period of the lease. Then a demand of notice was sent to the petitioner asking him to pay the lease money. The petitioner, on the other hand, demanded a refund of the security. It was held that the petitioner’s bid, which was an offer, although accepted on file, did not result in a contract as no intimation was sent to the petitioner and received by him. The demand notice for recovering the lease money was quashed and the respondents were directed to refund the security deposit.
The acceptance of an offer or promise could be in implied terms and the conduct would amount to acceptance only if it is clear that the offeree did the act with the intention, actual or apparent, of accepting the offer.
Bhagwati Prasad Pawan Kumar v. Union of India [AIR 2006 SC 2331]
Two consignments of iodized salt booked in favor of the appellant were not delivered by the railways. Against the two claims made by the appellant and admitted by the railways, the respondent enclosed with the letter, two cheques implying the condition that if the offer is not acceptable to you, the cheque should be returned forthwith to the office failing to do it would be deemed as the acceptance of the offer. The Apex Court had held that if the appellant had accepted the cheques and encashed them without anything more, the appellant must be held to have accepted the offer by conduct. In case of a cheque, it is the duty of the offeree to prove that by conduct, he has not accepted the condition attached to the cheque and it should be done before encashment of the cheque, even where the cheque is encashed by the offeree during the pendency of the proceedings.
Rakesh Kumar Dinesh Kumar v. U.G. Hotels & Resorts Ltd.[5] [AIR 2006 H.P. 135]
There was a contract for the supply of goods by plaintiffs to the defendant. Default was made by the defendant in making payment. The defendant had made an offer in writing to pay a certain amount in full and final settlement of dues. It was demonstrated by the conduct of the parties that the plaintiff had impliedly accepted the offer and received part of the amount.
Sapna Ganglani v. R.S. enterprises[6] [AIR 2008 Kar. 178]
The Karnataka High Court has observed that whether a contract in respect of immovable property, entered into through e-mail, was enforceable, was a mixed question of facts and law. The Court held that the question should be addressed by the Trial court after a full-fledged trial.
Bhagwandas v. Girdharilal[7] [AIR 1966 S.C. 543]
The Supreme Court held that in case of communication by telex, the normal rule would apply, and the contract would be completed only when the acceptance was received by the offeror.
Quadricon Pvt. Ltd. V. Bajarang Alloys Ltd.[8] [AIR 2008 Bom. 88]
In case of communication by fax, the Bombay High Court ruled that the contract would be completed only when the acceptance was received by the offeror.
Conclusion
As soon as the communication of acceptance is complete, a contract comes into being, whereby both the parties become bound. In case the parties to the contract are present at the same place, one making the offer and the other communicating the acceptance, both the parties become bound immediately. The problem arises when the parties are at different places and the communication of offer and acceptance is made by post or telephone or other ways. Section 4 of the Indian contract Act, 1872, explains the following rules when the communication is made by post or telegram stating that the communication of acceptance is complete as against the proposer when it is put in the course of transmission to him to be out of the power of acceptor. The communication of acceptance is complete as against the acceptor when it comes to the knowledge of the proposer. The rule about instantaneous communication between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offeror and the contract is made at a place where the acceptance is received.
References:
[1] When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise;
[2] Communication when complete.—The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. —The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.” The communication of an acceptance is complete,— as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer. The communication of a revocation is complete,— as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge.
[3] Teacher, Law. (November 2013). Felthouse v Bindley – (1862). Retrieved from https://www.lawteacher.net/cases/felthouse-v-bindley.php?vref=1
[4] Associate Kantika Mukherjee, Sep 04,2019, lawyered.in/legal-disrupt/articles/communication-acceptance-contract-law-powell-vs-lee-case/
[5] https://indiankanoon.org/doc/433935/
[6] https://www.casemine.com/judgement/in/56093dd1e4b014971123053b
[7] Indian Case Law, June 16, 2016, https://caselaw.in/today/communication-acceptance-and-revocation-of-proposals/2471/
[8] https://www.lawyerservices.in/Quadricon-Pvt-Ltd-Versus-Shri-Bajrang-Alloys-Ltd-2009-03-17
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