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NAYA NAGAR, MITHAPUR, PATNA – 800001. SUBMITTED TO SUBMITTED BY MRS. SUSHMITA SINGH ARFATUL AZAM LAW ASSOCIATE B.B.A. LL.B (Hons.) ROLL NUMBER – 2012
It is a fact that any research work prepared, compiled or formulated in isolation is inexplicable to an extent. This research work, although prepared by me, is a culmination of efforts of a lot of people who remained in veil, who gave their intense support and helped me in the completion of this project. Firstly, I am very grateful to my subject teacher Mrs. SUSHMITA SINGH, without the kind support and help of whom the completion of this project was a herculean task for me. He donated his valuable time from his busy schedule to help me to complete this project. I would like to thank him for his valuable suggestions towards the making of this project. I am highly indebted to my parents and friends for their kind co-operation and encouragement which helped me in completion of this project. I am also thankful to the library staff of my college which assisted me in acquiring the sources necessary for the compilation of my project. Last but not the least, I would like to thank the Almighty who kept me mentally strong and in good health to concentrate on my project and to complete it in time. I once again Thank them all. ARFATUL AZAM ROLL NUMBER – 2012 B.B.A. LL.B (Hons.) SESSION – 2018 – 2023.
This is to certify that the project report entitled “CONDITIONS OF VALID ACCEPTANCE” submitted by ARFATUL AZAM in partial fulfilment of the required for the award of degree of B.B.A. LL.B(Hons.) to Chanakya National Law University, Patna is a record of the candidate’s own work carried out by him under my supervision. The matter embodied in this project is original and has not been submitted for the award of any other degree. DATE - ____/______/2019. (Mrs. SUSHMITA SINGH) Law Associate.
i. What is Acceptance? ii. What are the conditions of valid acceptance? iii. What are the various types of acceptance? iv. How can acceptance be revoked? v. What are the various rules of acceptance in India and in England? 1.3 RESEARCH METHADOLOGY The Researcher would be using Doctrinal form of research which would include an exhaustive reading and understanding of all the necessary sections of the Indian Contract Act, 1872 and its commentaries by various Jurists regarding the subject matter. The Researcher would be also justifying his research by various case laws.
There are three different kinds of Acceptance. There are three types of acceptance including (i) express acceptance, (ii) implied acceptance and, (iii)conditional acceptance. In the world of merchant agreements, formal contracts are sometimes too tedious for a busy schedule. Instead, merchants, contractors, and buyers have developed these types of acceptance of a contract. While all of these methods are valid, it is always best to eventually sign a formal contract to ensure that there is something binding in case of a dispute. 2.1 EXPRESSED ACCEPTANCE Whether it’s a handshake or signing the contract, under express contract law, express acceptance is exactly as it sounds, you expressly give your consent for the contract. Examples of expressly accepting a contract include your signature, orally agreeing to the offer, shaking hands, or even exchanging business cards with the offer and accepted terms. Express acceptance is the most obvious and leaves no room for doubt that the offer was accepted. 2.2 IMPLIED ACCEPTANCE Implied acceptance typically only happens when a report has already been set between you and your customers. Implied acceptance typically does not involve a contract, but rather is oral and action-based in nature. For instance, if you’ve always hired the same person to paint your house every two years and you stop by their shop and tell them that it’s been two years, they may just simply show up and paint your house, knock on the door, and you pay them. This was implied acceptance of the offer. The customer offered to let the painter paint his house again, and the painter accepted by going over to his house and painting it. Remember that implied acceptance is typically only considered valid if you have a previous history of this type of acceptance already with this person.
In order that acceptance of an offer can result in a contract, the acceptance must satisfy the following requirements. 3.1 Acceptance must be communicated by the offeree to the offeror; It means that the offeree must signify his assent or communicate the acceptance. The communication of acceptance is deemed to be made by an act or omission of the party accepting, by which he intends to communicate such acceptance, or has the effect of communicating it.^5
Issues Paul Felthouse sued Mr Bindley in the tort of conversion, with it necessary to show that the horse was his property, in order to prove there was a valid contract. Mr Bindley argued there was no valid contract for the horse, since the nephew had not communicated his acceptance of the complainant’s offer. The issue in this case was whether silence or a failure to reject an offer amount to acceptance. Held It was held that there was no contract for the horse between the complainant and his nephew. There had not been an acceptance of the offer; silence did not amount to acceptance and an obligation cannot be imposed by another. Any acceptance of an offer must be communicated clearly. Although the nephew had intended to sell the horse to the complainant and showed this interest, there was no contract of sale. Thus, the nephew’s failure to respond to the complainant did not amount to an acceptance of his offer. 3.2 Acceptance Should be absolute and unqualified For a valid acceptance, it is also essential that the acceptance should be absolute and unqualified^7. When the letter of acceptance contemplates future negotiations for finalization of the terms of contract, there arises no contract^8. In Hyde v. Wrench^9 Facts The defendant, Mr Wrench, offered to sell the farm he owned to the complainant, Mr Hyde. He offered to sell the property for £1,200, but this was declined by Mr Hyde. The defendant decided to write to the complainant with another offer; this time to sell the farm to him for £1,000. He made it clear that this would be his final offer regarding the property. In response, Mr Hyde offered £950 for the farm in his letter. This was refused by Mr Wrench and he confirmed this with the complainant. Mr Hyde then agreed to buy the farm for £1,000, which was the sum that had previously been offered. However, Mr Wrench refused to sell his farm. (^7) Section 7(1) of the ICA, 1872. (^8) Satya Prakash Goel v. Ram Krishna Mission, AIR 1991, All. 343. (^9) (1840) 3 Beave 343
Prescribed Manner If the proposal prescribes any particular manner of acceptance, the acceptance must be made in that manner. The manner of acceptance may include the requirement of fulfilment of certain conditions, such as the payment of an advance. If such conditions are not fulfilled, there does not arise a valid contract. In State of Madhya Pradesh v. Gobardhan Dass^11 the chief conservator of forest invited from intending buyers tenders for sale of certain quantity of lac and lac products. One of the conditions was of the purchased price was that 25% of the money was to be deposited in advance. The tender was given to the highest bidder but the bidder failed to advance the 25% and the department cancelled the contract. It was held by the Supreme Court that the respondent failed to pay the asked amount and that was a necessary condition and hence there arises no acceptance and no contract. 3.4 Acceptance Should be made while the offer is still subsisting It has already been noted that the offeror is free to withdraw the offer, or the offer is revoked under various conditions mentioned under section 6 of the ICA, 1872. After the offer has been withdrawn or has lapsed, there is nothing which can be accepted. It is therefore necessary that the acceptance should be made while the offer is still alive and subsisting. Acceptance after the lapse of the offer cannot give rise to the contract. Similarly the offer is deemed to have ended by the rejection of the original offer or a counter offer. (^11) AIR 1973 S.C. 1164
As soon as the communication of acceptance is complete, a contract comes into being, whereby both the parties become bound. In case the parties to the contract are present at the same place, one making the offer and the other communicating the acceptance, both the parties become bound immediately. The problem arises when the parties are at different places and the communication of offer and acceptance is made by post or telephone, etc. 1 Acceptance by Post/Telegram Section 4^12 explains the following rules when the communication of acceptance is made by telegram/post;
Postal Rule of Acceptance Explained: Postal rule issues are one of the controversial parts of in the law of contract. The long-distance communication raises some questions regarding to the time and type of contract formation. Remote communications are needed when business parties are not available for fact to fact connection. This raised many questions in contracts offer and acceptance. Postal rules were developed to solve the conflicts and problems in contract communication and acceptance. Today, in the highly developed IT communication technologies, debates also emerged as to whether the postal rules could apply to contract through emails. This paper is divided into two parts. The first one illustrates on the history and current situation of postal rules while the second part examines the postal rule under the impact of two important Acts. Offer and acceptance is the most fundamental part in contract law which determined the existence and operation of contract among parties. Postal rules were created as an exception to the general offer and acceptance rules. In general offer and acceptance rules, an offer could be withdrawn or revoked anytime before its acceptance. There are often conflicts about when the offer was accepted or revoked. Postal rules were created to solve the problematic issues between offeror and offeree. Distant communication also raised some particular issues. Post or mailing is often referred as “snail mail” because it could take a long period of time to get to the recipient. This may cause some problems according to the formation and revocation of a contract. Offerors could not precisely know when the acceptance and revocation took place. The postal rule was first created in the Adam v Lindsell [1818] B & Ald 681. The court had to decide the contract formation period by mail. Two parties communicated by post in which the precise time of the acceptance could not be determined. Mailing often lasts for a few days and both parties could not aware of the communication at the same time. This caused lots of problems and led to the creation of postal rule. (Yamaguchi, 2004) According to Adams v Lindsell [1818] and Henthorn v Fraser [1892], the postal rule was stated as “Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as it is posted.” In the face-to face situation, business parties can communicate if any questions occur. While in the environment of distant contracting or indirect business, instantaneous method of communication is not available. In this kind of situation, business parties could hardly aware
of the acceptance or refusal of a contract. Postal rule is used to solve problematic cases such as the delay of communication. Postal Rule in India and in England, A detailed study The Indian Contract Act traces its roots back to the English Contract Law. But the Indian Contract Act shows some deviation from the English Contract Law. This deviation is propounded in the treatment of the acceptor i.e. the offeree wherein the Indian law on offer and acceptance seems to favor the acceptor more than the English Contract Law. The Mailbox rule, as the name suggests governs the communications taking place through post in English common law. According to this, a contract is formed as soon as the acceptor sends his letter containing the acceptance to the post office. This is a deviation from the usual rule involving other modes of communication like telephones, telex, etc. wherein the contract is formed only when the offeror is intimated of the acceptance of his offer by the offeree. The Indian Contract Act, 1872 differs with regard to communications by post. Section 4 of the India Contract Act deals with the communication when complete and reads as follows: “…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…” This means that the offeror is bound when the offeree posts the letter of acceptance so as to be out of the reach of the offeree and the offeree is bound when the offeror receives the letter. This is discriminatory against the offeror as the offeror will be liable even if the letter of acceptance fails to reach him. But the offeror will not be liable if the mistake is committed by the offeree. Dunlop v. Higgins, an English case demonstrates the reasons behind the conception of the mailbox rule which happens to be disadvantageous to the offeror. In this case, Higgins enquired about the price of iron and after subsequent communication, on the 28th^ of January Dunlop offered to sell iron to them at a specific price. Higgins received the letter on the 30th^ of January and sent their letter of acceptance on the same day but erroneously mentioned the date of
Revocation of Acceptance Section 5 also states that acceptance can be revoked until the communication of the acceptance is completed against the acceptor. No revocation of acceptance can happen after such a date. Illustration A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.
From the above research on the subject, “Conditions of Valid Acceptance”, the researcher has concluded the following things,
