Acceptance

Role of acceptance

After an offer is made, the next important and essential

element in the formation of a contract is acceptance. It has
been remarked that it is acceptance alone that converts an
offer into a promise, thus creating mutual obligations and rights
between the contracting parties. In ordinary language, it means
to signify the unconditional assent to the proposal by the
acceptor.

According to Section 2(h) of the Indian Contract Act, 1872, the

definition of acceptance states that “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 and creates mutual obligations and rights between the
contracting parties.
Types of acceptance

● Expressed acceptance: If the acceptance is written or oral.

● Implied acceptance: If the acceptance is shown by conduct
● Conditional acceptance: When a person to whom an offer
has been made tells the offeror that he or she is ready to
accept the offer with certain changes made to the condition of
the offer.
Legal rules relating to acceptance

Acceptance in contract law must be absolute and unqualified.

This means that for an acceptance to be valid and result in a
binding contract, it must agree fully and without modification
to the terms of the offer as stipulated. Under Section 7 of the
Act of 1872, any deviation from the terms of the original offer
does not constitute acceptance but rather a counter-offer. This
counter-offer must then be accepted by the original proposer
for a contract to be formed.

For instance, consider a scenario where A offers to buy a

property with the condition that possession be transferred by
March 5. If B responds by agreeing to sell but states that
possession will only be transferred on April 1, this does not
count as an acceptance of A's initial offer. Instead, it is a
counter-offer because B has introduced a new term that
changes the original conditions set by A.
Communication of acceptance must be made by the acceptor or his agent

A valid communication of acceptance must be made either by

the offeror himself or his authorised agent. Any communication
of acceptance by any other person will not be valid.
The acceptance must be expressed in some usual and reasonable manner

Acceptance of an offer must be communicated in a reasonable

and customary way as outlined in Section 7 of the Indian
Contract Act, 1872. If the offer specifies a particular method of
acceptance, then it must be followed exactly. For example, if
the offer states that acceptance must be via telegram, then
responding by telegram is necessary. If a different method is
used, the offeror has the right to reject it unless they explicitly
accept the alternative method.
Acceptance of an offer is the acceptance of all its terms

If the terms of an offer are not clearly communicated to the person

accepting the offer, those terms are not binding. For example, if a bus
company fails to adequately inform passengers of a clause exempting
them from liability for lost luggage, they cannot enforce this clause if a
passenger's luggage is lost.

This principle was illustrated in the case of Harris vs. Chicago Great
Western Ry. Co. (1952). Harris left his luggage in a cloakroom and was
given a ticket that indicated terms were stated on the back. Although he
was aware there were terms, he did not read them. The terms specified
that the company would not be liable for losses over $5 unless an extra
fee was paid. Harris did not pay the extra fee, and when his luggage was
lost, the court ruled that the company was not liable because he was
made aware of the terms, even though he chose not to read them. This
case highlights the importance of explicitly communicating terms and
the responsibility of parties to understand them if they are made
reasonably accessible.
Communication of acceptance is necessary

Mental acceptance is no acceptance

According to Section 2(b), for an acceptance to be binding, it

must be communicated. An intention to accept or even a
mental decision to accept a proposal does not give rise to a
contract. There must be some external expression of speech,
writing, or other act. Even if the offeree has made up his mind
about a final acceptance, the agreement is still not complete.
There should be an eternal manifestation of assent in the
words spoken or act done by the communication of acceptance
to the offeror.
Felthouse v Bindley (1862) is a foundational
case in English contract law, primarily dealing
with the necessity of communication in the
acceptance of an offer to establish a contract.

Case Overview
Paul Felthouse, the plaintiff, wanted to buy a
horse from his nephew, John Felthouse. In
their correspondence, Paul stated that if he
did not hear back from his nephew, he would
consider the horse his at a specified price.
The nephew did not respond to this letter and
later, during an auction managed by William
Bindley, the horse was mistakenly sold to
another party. Paul sued Bindley for
conversion, arguing that his nephew had
accepted the offer through silence, thereby
making him the owner of the horse at the
time of the auction.
Knowledge and Acceptance in Contract Formation: The Case of Lalman Shukla vs. Gauri Dutt"

Gauri Dutt's nephew went missing, and without his servant

Lalman Shukla's knowledge, Dutt issued a handbill offering a
reward for finding his nephew. Shukla, already searching for the
nephew, succeeded in finding him but was unaware of the
reward at the time. When Shukla later learned of the reward,
he claimed it, but Dutt refused, leading to the lawsuit.

The central legal issue in this case was whether Shukla could
claim the reward despite not knowing about it when he found
the nephew. The Allahabad High Court ruled that for an
acceptance to be valid, the offeree (Shukla) must have
knowledge of the offer at the time of completing the requested
task. Since Shukla did not know about the reward when he
found the nephew, there was no valid acceptance of the offer,
and thus no contract was formed.
Acceptance of the general offer need not to be communicated
To form a legit and valid contract, acceptance of the terms of
the offer by the person to whom it was made must be
communicated to the person making the offer. An acceptance
not communicated to the person making the offer will not bind
him to the contract. But in the case of general offers, formal
communication of acceptance is not necessary. Fulfilment of
the conditions given about the offer is sufficient.
Revocation of Offer

Revoking an offer involves cancelling or withdrawing an offer

before it becomes a binding contract. Here’s a simpler
explanation:

• Before Acceptance is Complete: An offer can be withdrawn

any time before the acceptance is fully communicated. For
example, if A offers to sell land to B, and B decides to accept
by sending a letter, A can withdraw the offer at any point
before B’s letter reaches him.

• How Acceptance is Communicated: If B mails his

acceptance, A can no longer withdraw the offer once the
acceptance letter is posted. Similarly, B can stop his
acceptance from taking effect if he manages to do so before
his acceptance reaches A.
Modes of revocation

Section 6 provides the ways in which revocation can be put to practise. The 4
methodologies that are so prescribed by the law specifically are-

1. By the communication of notice of revocation by the proposer to the other

party;
2. By the lapse of the time prescribed in such proposal for its acceptance, or, if
no time is so prescribed, by the lapse of a reasonable time, without
communication of the acceptance;
3. By the failure of the acceptor to fulfil a condition precedent to acceptance;
or
4. By the death or insanity of the proposer, if the fact of his death or insanity
comes to the knowledge of the acceptor before acceptance.
Revocation of Acceptance

Revoking an acceptance in contract law is complex, especially

when the acceptance has already been sent and is considered
complete under the postal rule. Once acceptance is dispatched,
the contract is typically regarded as final, making any
revocation challenging and legally uncertain.

In English law, there is no clear authority that explicitly allows

for a contract to be rescinded simply by communicating
revocation after sending the acceptance. Allowing parties to
retract acceptances freely could lead to uncertainty and
manipulation, as parties might retract their acceptance if they
find a better deal elsewhere, undermining the reliability of
contracts.
Under the Indian Contract Act, 1872, the revocation of an
acceptance is permissible, but it must be done before the
acceptance becomes complete. According to Section 5 of the
Act, an acceptance may be revoked at any time before the
communication of the acceptance is fully complete as against
the acceptor. This means that the revocation must reach the
offeror before the acceptance does.

Once the acceptance has been communicated to the offeror

and received by them, it cannot be revoked. This principle
ensures that both parties have a clear understanding of the
contract's status and prevents any ambiguity that could arise
from late revocations.
Capacity to Contract | Disqualification of person to contract

India Contract Act has defined who shall be able to contract

and who are either temporarily barred or permanently barred.
It has been described in Section 11 of the Act.

The section states, “Every person is competent to contract who

is of the age of majority according to the law to which he is
subject,1 and who is of sound mind and is not disqualified from
contracting by any law to which he is subject. —Every person is
competent to contract who is of the age of majority according
to the law to which he is subject, and who is of sound mind and
is not disqualified from contracting by any law to which he is
subject”.
Now the essential aspect of Capacity to Contract i.e.
disqualification of person to contract can be broken down into
3 considerations:-

1.Disqualification because of infancy

2.Disqualification because of insanity
3.Other methods of disqualification as prescribed by law
Minor

In India, a minor is defined as anyone under the age of 18.

Contracts involving minors are considered void from the start
because minors are not deemed capable of understanding the
legal implications of their agreements. This means any contract
signed by a minor cannot be enforced by law, and a minor
cannot be required to fulfill any contractual obligations.
A landmark case illustrating this
principle is Mohori Bibee vs.
Dharmodas Ghose. In this case, a
minor mortgaged his property to
secure a loan. Despite the
moneylender being informed of the
minor's age, the contract declared the
minor as an adult. The minor's mother
contested the mortgage, arguing it was
void because her son was underage.
The Indian courts, up to the Privy
Council, upheld that the mortgage was
void as it involved a minor, reiterating
that a minor cannot be legally bound
by contract terms, in line with Section
7 of the Transfer of Property Act, 1882,
which aligns contractual competency
with the legal capacity to transfer
property.
Exceptions
In Indian contract law, while contracts involving minors are
generally void, there are specific exceptions where obligations
related to minors are recognized. Here are the key exceptions:

• Necessaries: Contracts for the supply of necessaries (goods

suitable to a minor's condition in life and actual
requirements) to a minor are enforceable. The supplier can
claim reimbursement from the minor’s estate but not from
the minor personally.

• Beneficiary Contracts: A minor can be a beneficiary in a

contract. If a contract is for the minor’s benefit, like
scholarship agreements or contracts for life insurance, the
minor can enforce such benefits without incurring
obligations.
Representative or Agent: A minor can act as an agent where
they do not incur personal liability.

Partnership: While a minor cannot be a full partner in a firm

due to the incapacity to contract, they can be admitted to the
benefits of a partnership with the consent of all partners.
Disqualification by insanity

• Idiots: Individuals who lack the capacity to form rational

judgments due to significant intellectual disabilities. Any
contracts made with them are void, except for those
pertaining to necessities, which their estate can be held
liable for.

• Lunatics: These individuals experience intermittent periods

of mental disturbance. Contracts made during lucid periods
when they are of sound mind are valid, as are contracts for
necessities, for which their estate can be held responsible.

• Drunkards: People under the influence of alcohol or drugs

are treated similarly to lunatics in legal terms. Contracts
made while intoxicated are generally not enforceable,
especially if the intoxication affects their judgment, unless
the intoxication was involuntary and the contract terms are
found to be significantly unfair. In such cases, the contract
can be voided.
"Evaluating Contractual Capacity in the
Elderly"
An elderly person who is frail and suffering from mental or
physical conditions that impair their cognitive functions can be
considered incapable of entering into contracts if these
conditions affect their ability to understand the nature and
consequences of the contract. This is based on the general legal
principle that a person must have sufficient mental capacity to
understand and agree to the terms of a contract for it to be
valid.
Banks v. Goodfellow (1870) is a landmark legal decision that
established the test for testamentary capacity, which is the
mental capacity required to make a valid will. The case involved
John Banks, who had suffered from delusions and had a history
of mental illness, including time spent in a lunatic asylum.
Despite these challenges, he made a will in 1863, leaving his
estate to his niece. After his death, the validity of the will was
challenged on the grounds of his mental capacity.

The court ultimately held that Banks had the necessary

testamentary capacity to make a valid will. The key aspects
considered were his understanding of the nature and effect of a
will, awareness of the property he was disposing of, and
knowledge of those who might have a claim to his estate. The
court found that although Banks had delusions, they did not
interfere with his rational decisions regarding the disposition of
his property.
Other special disqualification prescribed by law

Following are the list of persons who are not in the Capacity to Contract or were disqualified by law to make a
contract;-

Alien Enemies: During wartime, contracts with alien enemies

are prohibited unless prior government permission is obtained.
This is stipulated under section 83 of the Civil Procedure Code.

Foreign Sovereigns and Diplomats: According to section 86 of

the Civil Procedure Code, foreign sovereigns and diplomatic
staff have special privileges. They can initiate lawsuits in case of
contractual breaches but cannot be sued unless they explicitly
agree to submit to the court or if special government
permission is granted.
Corporations: Companies, including local bodies and city
corporations, are recognized as legal entities capable of owning
property, conducting business, and suing or being sued. Their
contracts must be sealed and should align with the company’s
objectives as defined in the Companies Act; contracts outside
these objectives are considered ultra vires.

Insolvents: Insolvents lose the right to enter into contracts

regarding their property, as such rights are transferred to the
official assignee, per the Insolvency & Bankruptcy Code, 2016.
Governments and Municipalities: Contracts involving the
government or municipalities need to adhere to specific
formalities as outlined in Article 299(1) of the Indian
Constitution. Failure to comply with these formalities renders
the contracts void.

Professional Persons in England: Unlike in India, barristers in

England cannot sue their clients for non-payment of fees due to
specific legal restrictions.