âLaw Masterâs Publicationâ
âCompetency to Contractâ
Prof. Santosh D. Bhosale
18
(..3...)
COMPETENCY (CAPACITY) TO CONTRACT(B) ACCEPTANCE
SYNOPSIS
2)
Acceptance may be express or implied.
I.
Introduction:-
A proposal, when accepted, results in an agreement. Therefore, acceptance is the
second step in the formation of a valid contract. Acceptance is the consent of the party
to whom the offer is made. A binding contract is created between the parties as soon as
the proposal is accepted. According to Anson, âAcceptance is to an offer what a lighted
Definition:-
S. 2 (b) of the Act defines Acceptance as âwhen the person to whom the proposal is
made signifies his assent thereto, the proposal is said to be accepted.â.
II.
Essentials of a valid acceptance:-
For a valid acceptance, the following conditions are necessary: -
Acceptance must be Communicated:-
Acceptance must be communicated to the offeror.
1)
15
(Refer Adikanda Biswal v. Bhubaneswar Development Authority AIR 2006 Ori 36.)
18
(1863) 7 LT 835.
âLaw Masterâs Publicationâ
âCompetency to Contractâ
Prof. Santosh D. Bhosale
19
Facts:- By a letter, the plaintiff offered to purchase his nephew's horse for ÂŁ 33.15.
He also informed him that he would presume that the horse had been sold to him for that
amount in case of no reply. The nephew told his auctioneer not to put the horse on the
auction sale, as he had sold it to his uncle. The nephew did not communicate his intention
to the uncle, who had decided to accept his offer. The auctioneer, by mistake, sold the
horse. Uncle (Felthouse) sued the auctioneer for the sale of his house.
The court held that the nephew had not communicated his acceptance to his uncle;
therefore, a binding contract was not created between them. Therefore, the acceptance must
be communicated not only to the offeror but also to a person having authority for it.
Therefore, the horse had not become Uncle's property since the nephew had not
communicated acceptance to him.
2)
Acceptance may be express or implied:-
When acceptance is given either by words spoken or written, it is called express
acceptance. But when an act or conduct gives acceptance, it is called implied acceptance.
Facts:- It is the leading case on this issue. The Carbolic Smoke Ball Company made
an advertisement that anyone who takes the ball (medicine) according to the printed
directions will not be affected by influenza. The company declared an award of ÂŁ 100 to a
person who would be affected by influenza even after using the ball according to the
directions. It was also added that ÂŁ 100 was deposited with the Alliance Bank, showing
their sincerity in the matter. One Mrs Carlill used the ball but was affected by influenza.
She claimed ÂŁ 100. The company argued that it was mere an advertisement and not made
an offer to any particular person (i.e. Carlill); there was no acceptance conveyed on her
behalf to the company.
The Court Held:- that it was an offer, a general offer. Mrs Carlill had accepted it by acting
according to the terms of the offer (implied acceptance). Therefore, she was entitled to the
reward.
Moreover, in Amit Mondal v. Pannalal Das (AIR 2017 (NOC) 854 (Cal))
Facts- The purchaser signed the agreement. However, the seller accepted earnest money.
from the purchaser. The seller subsequently denied the agreement.
The court held that a valid contract was created, and the seller, by accepting earnest money,
impliedly accepted the contract.
3)
Acceptance should be Absolute, Unqualified:-
An acceptance must also be absolute and unqualified and correspond to the terms
of the offer. If it is not, the offer lapses by rejection or counteroffer.
20
[1 Q.B. 256, 1893]
âLaw Masterâs Publicationâ
âCompetency to Contractâ
Prof. Santosh D. Bhosale
20
Fact:- In this case, an offer to sell a farm for ÂŁ1,000 was rejected by the plaintiff, who
offered ÂŁ 950 for it. This was denied by the offeror, and then again, the plaintiff agreed to
pay ÂŁ 1,000.
The Court held- Holding that the defendant was not bound by any such acceptance, the
court observed that: âThe defendant offered to sell it for ÂŁ 1,000, and if that had been at
once unconditionally accepted, there would undoubtedly have been a perfect binding
contract, instead of that, the plaintiff made an offer of his own, to purchase the property for
ÂŁ 950 and thereby rejected the offer previously made by the defendant. Therefore, there
exists no obligation of any sort between the parties.â
4)
Acceptance should be in the prescribed mode:-
The proposal should be accepted in the manner provided by the proposer.
Acceptance, which is not in prescribed mode, is liable to be rejected by the promisor. But
if the proposer has not prescribed any mode of acceptance, it should be accepted in a usual
and reasonable manner. Thus, if the proposal is made through the post and no other mode
of communication is prescribed, acceptance usually must be through the post. If acceptance
is required through telegraph, it must be through telegraph.
5)
Acceptance should be given in a prescribed or reasonable time:-
Acceptance must be conveyed within the prescribed period mentioned by the
offeror. S. 6 provides that the proposal is revoked by the lapse of the time prescribed in
such proposal for its acceptance or after a lapse of reasonable time.
III. Communication, Acceptance and Revocation of the Proposal-
When the contracting parties meet face to face to make the contract, no question of
communication of offer, acceptance, or revocation arises. But when contracting parties are
residing at distant places and contracts through post or telegraph, the question of
communication of offer, acceptance or its revocation becomes important to decide their
liabilities. It is, therefore, necessary to determine the exact time when the offer or
acceptance is made or completed. Ss. 4, 5 and 6 are applicable in such circumstances to
determine the exact time of making an offer or acceptance.
S. 3 provides, in general terms, two modes of communication, viz, (i) by any act, or
(ii) by omission, - intending thereby to communicate to the other (or which has the effect
of communicating it (offer or acceptance) to the other). Thus, an offer's acceptance and
revocation may be communicated, expressed or implied.
23
1840.
âLaw Masterâs Publicationâ
A) Communication of Offer:-
The communication of an offer is complete when it comes to the knowledge of the
âCompetency to Contractâ
Prof. Santosh D. Bhosale
21
person to whom it is made (S. 4). An offer may be communicated either by words spoken
or written, or it may be inferred from the conduct of the parties (i.e. implied).
When a proposal is made by post, its communication is completed when the letter
containing the proposal reaches the person to whom it is made. For example, A proposes
B sell his house for rupees twenty lakh. The letter was posted on 10 March. The letter
reached B on 12 March. The offer is said to have been communicated on 12 March, when
B received the letter.
B)
Communication of Acceptance:-
S. 4 provides that communication of an acceptance is complete-
(i)
as against the proposer- when the acceptance is put in the course of
transmission to him so as to be out of the power of the acceptor to withdraw
the same;
(ii)
as against the acceptor- when the acceptance comes to the knowledge of the
proposer.
When a proposal is accepted through a letter sent by post, the communication of
acceptance is complete against the proposer when the letter of acceptance is posted and
against the acceptor when the letter reaches the proposer.
In the example given above, if B accepts Aâs proposal and sends his acceptance by
post on the 14th. The communication of acceptance as against A is complete on the 14th
(i.e. when the letter is posted), and as against B, it completes when the letter reaches A.
Suppose this letter of acceptance was duly posted but was delayed in the post or lost in
transit, even then Bâs acceptance will bind a. The rule is that the proposer becomes bound
by the contract from the moment the acceptor posts the letter of acceptance. But the
acceptor will be bound by his acceptance only when the letter of acceptance reaches the
proposer. Thus, the loss of letters by post, late delivery, etc., will not affect the contract's
validity. But the letter of acceptance must be correctly addressed, sufficiently stamped and
posted.
C)
Revocation of Offer:-
Revocation of the proposal may be made in any of the following ways.
1)
By communication of notice of revocation by the proposer to the other party.-
Under S. 4, the communication of revocation is complete-
(i)
as against the person who makes it, when the proposal 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;
(ii)
as against the person to whom it is made when it comes to his knowledge.
âLaw Masterâs Publicationâ
âCompetency to Contractâ
Prof. Santosh D. Bhosale
22
In the above example, if you (proposer) revoke your proposal by telegraph, the
revocation will be complete so far as you (proposer) yourself are concerned when you have
dispatched the telegraph. But so far as I (the acceptor) am concerned, it will be complete
when I actually receive the telegraph. As regards the revocation of acceptance, I revoke
my acceptance by telegraph. My revocation of acceptance is complete against myself as
soon as I (acceptor) have dispatched the telegraph and as against you (proposer) when it
reaches you.
Under S. 5, a proposal may be revoked by the proposer at any time before the
communication of its acceptance is complete. The acceptor may revoke an acceptance at
any time before the communication of acceptance is complete as against the acceptor.
2)
By Lapse of Specified or Reasonable Time:-
A proposal is revoked by the lapse of a specific time or, if no time is specified, by
the lapse of reasonable time. What is a reasonable time? It is the question of fact that is to
be decided by the court from time to time.
Facts:- The plaintiff received an offer from the defendant to purchase a certain
property within 14 days. The plaintiff responded to the offer with an acceptance, which
was posted the next day. The defendant withdrew the offer before receiving the acceptance
but after the plaintiff posted the acceptance.
Held- that the contract was concluded, as revocation was not effective.
3)
By failure to accept condition precedent.-
A proposal is also revoked if the acceptor fails to fulfil the condition precedent for
the acceptance. For example, A proposes to B, âI can sell my house to you for Rs.
20,00,000/âlakh provided you lease out your land to me.â If B refuses to lease out the
land, the offer will be revoked.
âCondition precedentâ is a condition which prevents an obligation from coming into
existence until the condition is satisfied. An offeror may impose conditions such as
executing certain documents or depositing certain amounts as earnest money. Failure to
satisfy any such condition makes the proposal lapsed.
4)
By the death or insanity of the proposer:-
Death or insanity of the proposer, under Indian law, operates as the revocation of
the proposal.
25
[(1892) 2. Oh. 27]
âLaw Masterâs Publicationâ
D) Revocation of Acceptance-
In English law, acceptance, is once given, cannot be revoked. Therefore, Anson has
âCompetency to Contractâ
Prof. Santosh D. Bhosale
23
stated that âacceptance is to offer what a lighted match is to a train of gunpowderâ.
However, in India, acceptance is revocable. Acceptance can be revoked only by adopting
Present scenario-
In modern times and in the digital age, communication has become faster than the
modes of communication existing at the time of the enactment of this Act. Communication
through post and telegraph has almost become outdated. Therefore, the object of this topic
of communication of an offer, acceptance, and revocation has lost its relevance to a great
extent in todayâs modern time.
*****
27
S. 5 provides that an acceptance may be revoked at any time before the communication of
acceptance is complete as against the acceptor but not afterwards.