Indian Legal System > Civil Laws > Indian Contract Act, 1872 > Communication of Acceptance
In contract proposal and acceptance of proposal are important ingredient. In last few articles, we have discussed, proposal, types of proposal, revocation of proposal. In this article, we shall discuss the communication of acceptance.
Section 2(h) of the Indian Contract Act , 1872, defines the term ‘Contract’ as “An agreement enforceable by law is a contract.” Section 2(e) of the Act defines the term “agreement’ as “Every promise and every set of promises, forming the consideration for each other, is an agreement.”
The term ‘Proposal’ is defined under Section 2(a) of the Act as “When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”
Section 2(b) of the Act defines the term ‘Promise’ and and 2 (c) of the Act defines the terms ‘Promisor’ and ‘Promisee’. According to Section 2(b) of the Act, When a 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; According to Section 2(c) of the Act, the person making the proposal is called the “promisor”, and the person accepting the proposal is called “promisee”,
A contract comes into being from the acceptance of an offer. Section 2(b) of the Act defines acceptance as follows: “When the person to whom the offer is made signifies his assent thereto, the proposal is said to be accepted .” The acceptance of the offer must be absolute and unqualified i.e. it cannot be conditional. Sections 7 and 8 lay down criteria of valid acceptance.
Section 3:Communication, acceptance and revocation of proposals:
The communication of proposals the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.
Section 4: 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 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.
Illustrations
a) A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter.
(b) B accepts A‟s proposal by a letter sent by post. The communication of the acceptance is complete, as against A when the letter is post; as against B, when the letter is received by A.
(c) A revokes his proposal by telegram. The revocation is complete as against A when the telegram is despatched. It is complete as against B when B receives it. B revokes his acceptance by telegram. B‟s revocation is complete as against B when the telegram is despatched, and as against A when it reaches him.
Communication of Acceptance:
Section 4 para 2 of the Indian Contract Act lays down conditions for communication for acceptance. In section 4 para 1 lays down that the communication of offer is completed when it comes to the knowledge of the person to whom it is made. Similarly, the acceptance by the offeree needs to be communicated to the offeror. This is important because, the promisor can always revoke his or her offer before there is an acceptance, but not after.
In case of a specific offer, it is made to a specific person, and only that person or his agent can accept the offer. Communication from acceptor or his agent for acceptance or rejection is necessary. In the case of a general offer, it is made to the public in general. A General offer can be accepted by anyone. If offeree fulfills the terms and conditions which are given in offer then offer is accepted. Communication of acceptance is not necessary in the case of a general offer
The Section 4 para 2 of the Act lays down that the communication of an acceptance is complete:- as against the proposer, when it is put in the course of transmission to him, so as to be out of the power of the acceptor to withdraw, and as against the acceptor, when it comes to the knowledge of the offeror.
In Ram Das Chakrabarti v. Cotton Ginning Co. Ltd. ILR (1887) 9 All 366 case the Court held that the offeror becomes bound when a properly addressed and adequately stamped letter of acceptance is posted.
In Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas, AIR 1966 SC 543 case, the Supreme Court made clear the confusion about the completion of the contract by telephone or telex. The majority of judges held that the communication on telephone or telex is like an exception of section 4 and held where a contract is made by telephone, the contract is complete only when acceptance is received by the proposer. The contract is made at a place where acceptance is received, it means at the place of the proposer.
Mode of Acceptance:
Acceptance can be done in two ways, namely
Communication of Acceptance by words: In this case, communication is initiated via words, whether oral or written. For this communication telephone calls, letters, e-mails, telegraphs, etc. may be used. A written application by a candidate for a post of manager in a written form is an express offer. Confirmation of his appointment with the explanation of terms of employment by the vice president of a company who is authorized to do so by telephone is acceptance of the offer by Act. This mode of acceptance is expressed acceptance.
Communication of Acceptance by Conduct: The offeree can also convey his acceptance of the offer through some action of his, or by his conduct. When we are waiting for a bus to go to a certain place, the bus which can take us to the place where we desire to go arrives and halts at the bus stop. We enter the bus and pay requisite fair. A ticket is given to us. When destination comes we board down the bus. The bus halts at the stop. By this conduct, he is giving an offer to us. By entering the bus we accept the offer. Thus acceptance is also by conduct. This mode of acceptance is implied mode of acceptance.
In Tinn v. Hoffman & Co., (1873) 29 LT 271 case, the defendant wrote to the plaintiff offering to sell a certain quantity of iron at a certain price. On the same day without knowledge the plaintiff wrote to the defendant that he want to buy the same quantity of iron at the same price. The letters crossed in the Post. The plaintiff contended that there was a concluded contract. But the Court held that the defendant were not liable by the simultaneous offers, each made in ignorance of the other. Blackburn J. said “when contract is made between two parties, there is a promise by one in consideration of the promise made by the other, there are two assenting mind, the parties agreeing in opinion and one having promises in consideration of the promise made by the other- there is exchange of promise. But I do not think exchanging offers would , upon the principle, be at all the same thing….. The promise or offer made on each side in ignorance of the promise or offer made on the other side, neither of them can be construed as an acceptance of the other.”
Timing of Acceptance
As against the offeror, the communication of the acceptance is complete when he puts such acceptance in the course of transmission. After this it is out of his hand to revoke such acceptance, so his communication will be completed then. So, the offer of the offeror is deemed to be accepted the moment the offeree has transmitted the acceptance to the offeror and there is no possibility for him to retract it, even before the offeror has received it or comes to know about it.
As against the offeree, the communication in case of the acceptor is complete when the proposer acquires knowledge of such acceptance. For the offeree, the acceptance is considered to be communicated to the offeror only when the offeror has received it and come to know about it. An offeror cannot stipulate in the offer that silence or no communication will deem to be an acceptance.
Understanding the TimeLine of Communication of Acceptance:
A of Agra by a letter to B of Bhatinda offers his car for ₹ 2,00,000 through by a letter dated on 15th August 2017. B receives the offer letter on 17th August 2017. Now the communication of offer is complete on 17th August 2017. B writes a letter of the acceptance to A on 20th August 2017 and posts it on the same day. A receives the letter of acceptance on 22nd August 2017. The communication of acceptance is done by B on 20th August 2017. Now the control of letter of acceptance is not with B. Thus for B the communication of acceptance is completed on 20th August 2017and for A the communication of A is completed on 22nd August 2017.
In Ramsgate Victoria Hotel v Montefiore, (1865-66) LR 1 Ex 109 case, the defendant, Montefiore wanted to buy shares in the complainant’s hotel (Ramsgate Victoria Hotel). He communicated his offer to the complainant that he wanted to buy shares in the hotel at a certain price. After six months, the complainant accepted the offer. However, by this time, the value of shares had gone down and Mr. Montefiore was no longer interested in buying shares. The defendant did not formally revoke the offer, but he did not proceed with the sale. The Complainant brought an action against the defendant for specific performance of contract. The Court passed an order in favour of the defendant. The Court held the company’s claim for specific performance was not successful because the Company had sufficient time to accept the defendant’s offer. Six months was sufficient time to accept an offer. The company accepted the offer after six months so, it was no longer valid due to expiry / lapses of a reasonable period of time. The Court was of the view that an offer must be accepted within the prescribed time and if a time is not prescribed, then it must be accepted within a reasonable period of time.
In Dickinson v Dodds, (1876) 2 Ch D 46 case, on 10th June Dodds offered to sell house to Dickinson, stating: this offer to remain open until 9.00am on 12th June. Dickinson decided to accept on 11th June but did not advise Dodds immediately. Later on the 11th, Dickinson was informed by a third party that Dodds had sold to someone else. Dickinson then purported to accept the offer. Dodds replied that it was too late – the property had already been sold. The Court held that no particular form of revocation is required. All that is required is that the offeror in some way conveys (directly or indirectly) to the offeree that s/he had changed his or her mind about the offer. There was no question that this had occurred here – Dickinson knew Dodds was no longer prepared to sell before purporting to accept. The promise to keep the offer open was not binding because it was not supported by consideration.
In Byomkesh Banerjee v. Nani Gopal Banik, AIR 1987 Cal 92 case, A letter of allotment of shares was claimed to have been posted by a company, but the applicant denied to have received it. The Court said: “It follows from S. 4 and S. 5 that a notice of allotment, which is acceptance of the offer to purchase shares, is communicated to the allottee when it is dispatched, and from that moment there is a complete contract with him. Whether or not he receives the letter is absolutely immaterial”. In this case, the company failed to furnish any evidence of the posting of the notice of allotment.
In Financings Ltd v Stimson, [1962] 3 All ER 386 case, the parties entered into a hire-purchase agreement for a car. The claimant, a finance company, gave the dealer authority to draw up the agreement on its behalf. That agreement stated that it would only be binding on the claimant once the claimant had signed and accepted it. Two days later, before the claimant signed the agreement, the defendant informed the dealer that he no longer wanted to go through with the agreement. The night before the claimant signed the agreement, the car was stolen from the dealer. By the time the car was found, it had been damaged. The claimant sued the defendant for the price of the car, minus a deduction for the value of the damage. The defendant then argued that he was not obliged to pay, because he had revoked his offer before the claimant signed the agreement. The Court of Appeal held in favour of the defendant. The dealer acted as the claimant’s agent. In that capacity, he had ostensible authority to accept the defendant’s revocation of the offer. Since the claimant had to sign the contract to accept the offer, and they had not done so before the offer was revoked. Therefore, there was no contract. Additionally, the Court held that the offer was conditional on the car being in the condition it was when the offer was made. As such, even if the offer had not already been revoked, it was no longer capable of being accepted once the car was damaged.
In Hairoon Bibi v. united India Life Insurance Co, AIR 1947 Mad 122 case, where a premium due on a life insurance policy was sent by money order, it was held that the policy had revived from the date of the money order and not from the date of its receipt by the company. The assured having died in the meantime, his widow recovered the proceeds.
Conclusion:
Acceptance, only effective once communicated to the offeror. An offeror can however dispense (expressly or impliedly) with the need for actual communication of the acceptance- by treating the doing of the act as an effective acceptance (unilateral contract). The general rule is that an acceptance must be communicated to the offeror. Until and unless the acceptance is so communicated, no contract comes into existence. The acceptance must be communicated by the offeree or someone authorized by the offeree. If someone accepts on behalf of the offeree, without authorization, this will not be a valid acceptance.
One reply on “Communication of Acceptance (S. 3 and S. 4)”
Nice work it’s so helpful