“Acceptance” means when the person to whom the proposal is made signifies his assent to it. Once accepted, the proposal becomes a promise. (Section 2(b))
Also remember: acceptance can be express (words) or implied (conduct). (Section 9)
Legal Basis as Per Indian Contract Act, 1872 #
- Section 2(b): “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.”
So, the definition of acceptance is in Section 2(b).
And the main provisions that govern how acceptance works are:
- Section 7: Acceptance must be absolute and unqualified and must be expressed in a usual and reasonable manner (unless the proposer prescribes the manner).
- Section 8: Acceptance by performing conditions of the proposal or by accepting consideration (implied acceptance by conduct).
Essentials of a valid Acceptance #
1) Acceptance must be absolute and unqualified #
Section: 7(1)
Meaning: Acceptance must match the offer exactly. Any change = counter-offer (not acceptance).
Illustration:
A: “I will sell for ₹10,000.”
B: “I accept if you deliver free.” → counter-offer, no contract yet.
Case laws #
(a) Harvey v Facey (Bumper Hall Pen)
- Facts: Harvey asked by telegram: “Will you sell Bumper Hall Pen? Telegraph lowest cash price.” Facey replied: “Lowest price … £900.” Harvey replied agreeing to buy. Facey refused.
- Issue: Was “lowest price £900” an offer capable of acceptance?
- Held: No. It was only information, not an offer → no valid acceptance, no contract.
(b) Hyde v Wrench
- Facts: Offer to sell at £1000. Offeree counter-offered £950 (rejected). Offeree later tried to accept £1000.
- Issue: Can original offer be accepted after a counter-offer?
- Held: No. Counter-offer destroys the original offer → no contract.
2) Acceptance must be communicated #
Sections: 3 and 4 (also aligns with Section 7 requirement of proper acceptance)
Meaning: Mental acceptance or silence is not enough. Acceptance must be communicated by words or conduct.
Illustration:
B thinks “I accept” but doesn’t inform A → no acceptance.
Case laws #
(a) Felthouse v Bindley
- Facts: Uncle wrote: “If I hear no more, I consider the horse mine.” Nephew did not reply. Horse was later sold at auction by nephew’s auctioneer.
- Issue: Can silence amount to acceptance?
- Held: No. Silence is not acceptance; acceptance must be communicated.
(b) Powell v Lee
- Facts: Managers decided to appoint Powell as headmaster, but an unauthorised member informed him. Later they appointed someone else.
- Issue: Is acceptance valid if communicated by an unauthorised person?
- Held: No. Acceptance must be communicated by the offeree/authorised agent → no contract.
(c) Lalman Shukla v Gauri Dutt
- Facts: Reward was announced for finding a missing boy. Lalman found the boy without knowledge of the reward and later claimed it.
- Issue: Can there be acceptance without knowledge of the offer?
- Held: No. Knowledge of offer is essential; no acceptance → no contract for reward.
(d) Bhagwandas Goverdhandas Kedia v Girdharilal Parshottamdas (telephone)
- Facts: Contract negotiations by telephone raised dispute on where contract was made (jurisdiction).
- Issue: In instantaneous communication, where is acceptance complete?
- Held: Acceptance is complete where it is received/heard by the offeror (place where offeror gets the acceptance).
3) Acceptance must be in the prescribed manner (if any) #
Section: 7(2)
Meaning: If offer prescribes a method, acceptance should follow it. But if the requirement is only meant to ensure receipt (and receipt happens), courts may treat it as directory unless the offer clearly insists “only by this method”.
Illustration:
Offer: “Reply only by registered post.”
Offeree replies by ordinary post; offeror receives and acts on it → generally treated as valid if method wasn’t made strictly exclusive.
4) Acceptance must be made within the time limit #
If no time is fixed, then within reasonable time
Support: Section 6 (lapse of time causes revocation/lapse of offer)
Illustration:
Offer open till 10 PM today → acceptance at 11 PM is too late.
Case law #
Ramsgate Victoria Hotel Co v Montefiore (1866)
- Facts: Montefiore applied for (i.e., offered to take) shares in the company and paid a deposit. The company did not notify allotment (acceptance) for several months (application in June; allotment communicated in November). By then, Montefiore refused to take the shares and sought return of his money.
- Issue: Where no time for acceptance is fixed, can the company validly accept a share application after a long delay, or does the offer lapse after a reasonable time?
- Held: No contract. The offer (share application) had lapsed after a reasonable time. An allotment communicated after such delay was too late and could not amount to a valid acceptance. Montefiore was not bound.
- Principle / Ratio: If no time is prescribed, acceptance must be made within a reasonable time; what is “reasonable” depends on context—here, dealing in shares (a fluctuating subject-matter) required prompt acceptance.
5) Acceptance must be made before the offer lapses or is revoked #
Sections: 5 and 6
Meaning: If offer is revoked/lapses before acceptance is complete, no contract.
Illustration:
Revocation reaches B before B accepts → offer ends.
Case law #
Byrne & Co v Van Tienhoven
- Facts: The defendant posted an offer to sell goods to the plaintiff. A few days later, the defendant posted a revocation. Before that revocation letter reached the plaintiff, the plaintiff accepted (by telegram/letter). The revocation arrived after acceptance was already sent.
- Issue: For revocation sent by post, is it effective when posted or only when it is communicated (received) by the offeree?
- Held: Revocation is effective only when it reaches the offeree. Since the plaintiff accepted before receiving the revocation, a valid contract was formed. The postal rule applies to acceptance, not to revocation.
6) Acceptance must be by the person to whom the offer is made #
Meaning: A stranger cannot accept an offer addressed to someone else.
Illustration:
A offers to sell to B; C “accepts” → no contract.
Case law #
Boulton v Jones
- Facts: Jones regularly dealt with Brocklehurst and sent him an order for goods. Unknown to Jones, Brocklehurst had sold his business to Boulton, who supplied the goods on that order. Jones accepted and used the goods believing they came from Brocklehurst, and later refused to pay Boulton.
- Issue: Can a buyer be made liable to pay a person he never intended to contract with, where the identity of the seller mattered to him?
- Held: Jones was not bound to Boulton because his offer/order was intended for Brocklehurst, and there was no intention to contract with Boulton. Boulton could not “step into” Brocklehurst’s place without Jones’s knowledge.
7) Intention to create legal relations #
(Not in one single ICA section, but treated as essential for enforceability)
Illustration:
Family/domestic promises usually not contracts.
Case law #
Balfour v Balfour
- Facts: The husband and wife, while still in a normal marital relationship, agreed that the husband would pay the wife £30 per month when she stayed in England for medical reasons. Subsequently, the marriage deteriorated and the husband stopped the payments. The wife sued to enforce the promise.
- Issue: Whether a promise made between spouses in the course of ordinary domestic life constitutes an enforceable contract—specifically, whether there was intention to create legal relations.
- Held: The Court of Appeal held no contract existed. Domestic arrangements between spouses, made while living together in amity, are presumed not to be intended to have legal consequences. In the absence of clear evidence rebutting that presumption, the wife could not enforce the promise.
Extra (postal rule cases—useful under “communication/when acceptance is complete”) #
Adams v Lindsell
- Facts: Defendants wrote to the plaintiffs offering to sell wool and asked for a reply “in the course of post.” The offer letter was misaddressed, so it reached the plaintiffs late. As soon as the plaintiffs received it, they posted their acceptance immediately. Because of the delay, the defendants (thinking no reply had come) sold the wool to someone else.
- Issue: When parties negotiate by post, is acceptance effective only when it reaches the offeror, or when it is posted, even if it reaches late?
- Held: A contract was formed when the acceptance letter was posted. This case is the foundation of the postal rule: acceptance by post is complete on posting, not on receipt, to avoid endless uncertainty (“no contract until receipt” would make parties chase each other in circles).
Household Fire & Carriage Accident Insurance Co v Grant
- Facts: Grant applied for shares in the company. The company allotted the shares and posted a letter of allotment to Grant. The letter never reached him (it was lost in the post). When the company later went into liquidation, it claimed Grant was a shareholder liable to contribute. Grant argued he never received the allotment letter, so no contract.
- Issue: If acceptance is sent by post but never delivered, is the contract still formed?
- Held: Yes. A binding contract was formed when the company posted the allotment letter. Under the postal rule, acceptance is complete on dispatch, and the risk of loss/delay in the post falls on the party who contemplated post as the mode of communication.
Conclusion #
Acceptance is what finally converts an offer into a promise and creates a contract. The single most important requirement is that acceptance must exactly match the offer—it has to be absolute and unqualified; even a small change becomes a counter-offer and ends the original offer. Next, acceptance must be effectively communicated (silence or mental assent is useless), and it must be made in time and before the offer is revoked or lapses. If the offer prescribes a mode, it should generally be followed, and only the person to whom the offer is made can accept it. Ultimately, these rules ensure certainty: only a clear, communicated, timely “yes” to the exact terms creates legal obligations.
