What is the meaning of Acceptance in Contract Law?
Meaning of Acceptance in Contract Law: – Acceptance in contract law refers to the promise or act of a buyer who shows his willingness to be bound by the terms and conditions specified in a seller’s offer. Acceptance is a necessary element of a legally binding contract. If there is no acceptance, there is no deal. An acceptance may be conditional, express or implied. When it comes to business dealings, formal contracts can be too boring for a busy schedule.
According to section 2(b) of the Indian Contract Act, 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. A proposal when accepted, results in an agreement. It is only after the acceptance of the proposal that a contract between the two parties can arise.
So as the definition states, when the offeree to whom the proposal is made, unconditionally accepts the offer it will amount to acceptance. After such an offer is accepted the offer becomes a promise.
Say for example ‘A’ offers to buy B’s car for rupees two lakhs and ‘B’ accepts such an offer. Now, this has become a promise.
When the proposal is accepted and it becomes a proposal it also becomes irrevocable. An offer does not create any legal obligations, but after the offer is accepted it becomes a promise. And a promise is irrevocable because it creates legal obligations between parties. An offer can be revoked before it is accepted. But once acceptance is communicated it cannot be revoked or withdrawn.
When the proposal or acceptance is made in words, the promise is said to be express. When the proposal or acceptance is made otherwise than in words, the promise is said to be implied.
Types of Acceptance in contract law
Following are the types of acceptance in contract law: –
- Conditional Acceptance: – Conditional acceptance also referred to as a qualified acceptance, occurs when a buyer tells the seller that he will accept the offer provided that some adjustments are made in its terms. This type of acceptance is a counteroffer. Counteroffers need to be accepted by sellers before contracts can be made between parties. For instance, a customer buys an item for $3,000 on Craigslist, and the seller replies, “I accept your offer provided that you also pay the delivery fee.” The seller places a condition on the sale, and if the customer does not pay for the delivery fee, the offer is no longer acceptable.
- Express Acceptance: – Express acceptance occurs when an individual clearly and explicitly expresses his willingness to accept an offer. Examples of express acceptance include signing a contract, orally accepting the offer, shaking hands, or even exchanging business cards with the offer and accepted terms.
- Implied Acceptance: – Implied acceptance is an acceptance that is not directly stated but is demonstrated by any acts that indicate an individual’s willingness to accept an offer. Typically, it happens only when an agreement has already been set between a buyer and seller. It doesn’t involve a contract, but rather is oral or action-based in nature.
What is the effect of acceptance?
A contract is formed only at the acceptance of the offer. Before the acceptance, the offeror is free to revoke or withdraw his offer, and the offeree is free to reject the offer made by the offeror and neither party is bound to follow any terms and conditions made by the other party in the offer.
After the acceptance of the offer, it becomes a promise, and both the parties are bound to it. Each party becomes legally bound to the promises made by them through the medium of offer and acceptance.
Who can accept?
An offer can only be accepted by the person or persons to whom it is made. An offer made to a particular person (specific offer) can be accepted only by him and no one else.
What are the essentials of a valid acceptance?
The essential requirements of acceptance of an offer which results in a contract: –
- Acceptance should be communicated by the offeree to the offeror.
- Acceptance should be absolute and unqualified.
- Acceptance should be made in some usual and reasonable manner unless the proposal prescribes the manner of the acceptance.
- Acceptance should be made before the revocation of the offer.
- Reasonable Time
Explanation: –
- Acceptance must be Communicated: – To constitute a valid contract, acceptance must be communicated and such communication must be made to the offeror. Mere intention or mental determination to accept the offer does not amount to acceptance.
- Acceptance should be Absolute and Unqualified: – As per Section 7 of the Indian Contract Act 1872, acceptance should be complete. It is of the essence of a contract that there should be (expressly or by implication) a proposal to which an unqualified assent has been given: without such assent there is no contract as the minds of the contracting parties are not at one.
- Acceptance Should be Made in Some Usual and Reasonable Manner: – Acceptance should be expressed in the usual way or according to the prescribed mode. According to Section 7(2) of the Indian Contract Act, 1872, acceptance must be expressed in some general and proper manner, unless the offer determines how it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts the acceptance.
- Acceptance Should be Made Before the Revocation of the Offer: – Section 5 of the Indian Contract Act states that the offer can be revoked (cancelled) at any time before the communication of acceptance but not later. Therefore acceptance must be given before such revocation.
- Reasonable Time: – Effective acceptance must be given within the specified time limit and if no time limit is mentioned then, acceptance must be given within a reasonable time, because a proposal cannot be kept open indefinitely.
Communication of acceptance in contract law
Rules related to the communication of acceptance in contract law should be studied from the point of view of offeror and as well as of offeree because the communication of acceptance will be done from both the sides; offeror and offeree at different time.
- Acceptance can be done in two ways
- Communication of acceptance by an act: – This would include communication through words, whether oral or written. For Example, communication through a telephone call, letter, e-mail, telegraph etc.
- Communication of acceptance by conduct: – Offeree may also give its acceptance through its action, or by its conduct. For Example, that when you board a bus, you are accepting the bus fare through your conduct.
- Acceptance time: – Communication of acceptance has two parts
- Against the proposer: – For the proposer, the communication of acceptance is complete when he gives such acceptance during transmission. After this the cancellation of such acceptance is out of his hands, so his communication will then be completed. Therefore, for example, ‘A’ accepts B’s proposal through a letter. He posts the letter on 10th July and the letter arrives to ‘B’ (proposer) on 14th july. Communication of acceptance is completed only on the 10th of July from the side of an acceptor.
- Against the acceptor: – In the case of the acceptor, the communication is complete when the proposer acquires knowledge of such acceptance. Therefore, in the above example, A’s communication will be complete on 14th July, when ‘B’ receives acceptance letter.
What is revocation of acceptance in contract law?
Meaning of Revocation of Acceptance in Contract Law: – Section 5 of the Indian Contract Act, says that, an acceptance in contract law may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but no afterwards.
The acceptor can cancel this acceptance before the communication of acceptance reaches the proposer. That is before the communication of acceptance is complete as against the acceptor. If the revocation of acceptance reaches the proposer before the acceptance comes to the knowledge of the proposer, then there can be a valid revocation of acceptance. The Revocation of Acceptance is complete only at any time before the communication of acceptance is complete as against the acceptor, but not afterwards.
When the contract is created through the post, according to section 4, by the posting of the letter of acceptance, the offeror will become bound when the letter of acceptance is posted to him and the acceptor will become bound when the letter of acceptance comes to the knowledge of the offeror. Since the acceptor does not become bound immediately on posting his letter of acceptance, he is free to revoke the acceptance by adopting the speedier mode of communication, but his communication of revocation of acceptance must reach earlier than his letter of acceptance.
Section 5 expressly permits the revocation of acceptance: – An acceptance can be revoked at any time before the communication of the acceptance is complete against the acceptor, but not afterwards.
Illustration: – ‘A’ proposed a letter to sell his house to ‘B’ and sent it by post, to ‘B’. ‘B’ also accepts the proposal and made the acceptance through a letter sent by post. Here, ‘B’ can revoke his acceptance at any time before the acceptance letter comes to the notice of ‘A’, but not afterwards.
Case Laws of Acceptance in Contract Law
Facts of the Case: – The tender submitted by the first respondent, who has been blacklisted for five years, was rejected on the ground that he stood blacklisted at the time was justified and valid.
Judgment of the Case: – It was held that the rejection of the tender was justified and valid. The tender had not challenged his blacklisting when the tender committee decided about this tender. Rejection of the tender by the tender committee could not be considered to be arbitrary or unreasonable.
Facts of the Case: – There was a contract for the supply of goods by plaintiffs to defendant. The Default was made by the defendant in making payment. The Defendant had made an offer in writing to pay a certain amount in the full and final settlement of dues. It was shown by the conduct of the parties that the plaintiff had impliedly accepted the offer and receive part of the amount.
Judgment of the Case: – The court held that the receipt of the amount by the plaintiff, amounted to an acceptance of the offer.
- Progressive Constructions Ltd. vs. Bharat Hydro Power Corp. Ltd.
Judgment of the Case: – It was held that when the parties enter into a contract by post, the contract would be deemed to be complete where the offer was received and the acceptance was posted. The place of delivery of letter is irrelevant and therefore, the cause of action does not arise where the letter is delivered.
- Bhagwandas vs. Girdharilal
Judgment of the Case: – 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 to the offeror.