Introduction
Acceptance is the second essential stage in the formation of a contract. An offer by itself does not create a contract. The person to whom the offer is made must signify his assent to the proposal in accordance with the law.
Section 2(b) of the Indian Contract Act, 1872 provides:
“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.”
Thus, acceptance converts a proposal into a promise.
The basic sequence can be represented as:
Offer → Acceptance → Promise → Agreement → Contract
However, acceptance must satisfy the requirements prescribed by the Indian Contract Act. A conditional, vague, improperly communicated, or otherwise defective acceptance may not result in a binding contract.
Meaning of Acceptance
Acceptance means the assent of the offeree to the terms of the offer.
The person who makes the offer is called the offeror or proposer, while the person who accepts the offer is called the offeree or acceptor.
Example
A offers to sell his house to B for ₹20 lakh.
B says:
“I agree to purchase your house for ₹20 lakh.”
B has accepted A’s offer, assuming all other legal requirements are satisfied.
Once accepted, the proposal becomes a promise under Section 2(b).
Legal Rules of Valid Acceptance
1. Acceptance Must Be Absolute and Unqualified
Section 7(1) provides that, in order to convert a proposal into a promise, the acceptance must be absolute and unqualified.
The acceptor must accept the offer exactly as it is made. If the offeree changes, adds to, or qualifies the terms of the offer, the response will generally amount to a counter-offer rather than acceptance.
Example
A offers to sell his house to B for ₹2,00,000.
B replies:
“I accept, but I will pay the amount in four instalments.”
This is not an absolute and unqualified acceptance if the original offer required payment on different terms. B has introduced a variation, and the response may operate as a counter-proposal.
The Supreme Court and High Courts have repeatedly emphasized that acceptance containing material modifications or conditions does not ordinarily result in a concluded contract.
Easy Rule
Acceptance must be “Yes” to the offer, not “Yes, but…”
2. Acceptance Must Be Communicated
A person’s mere mental decision to accept an offer does not ordinarily constitute acceptance.
There must generally be an external manifestation of assent through words, conduct, or another legally recognized method of communication.
The Supreme Court in Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co. explained that a mere mental resolve to accept an offer does not create a contract; there must ordinarily be an external manifestation of acceptance communicated in an effective manner.
Example
A offers to sell his motorcycle to B for ₹50,000.
B thinks:
“I accept A’s offer.”
But B does not communicate his acceptance and does not perform an act that amounts to acceptance.
Mere mental acceptance will not ordinarily create a contract.
3. Acceptance Must Be Made in the Prescribed or Appropriate Manner
Section 7(2) provides that acceptance must be expressed in a usual and reasonable manner, unless the proposal prescribes a particular manner of acceptance.
Where the offeror prescribes a particular method and the offeree uses another method, the offeror may, within a reasonable time after the acceptance is communicated, require acceptance in the prescribed manner.
If the offeror fails to insist upon the prescribed manner within a reasonable time, the law treats the offeror as having accepted the acceptance.
Example
A tells B:
“Accept this offer by telegram.”
B instead sends a letter accepting the offer.
The acceptance does not automatically become invalid merely because B used a different method. A may insist, within a reasonable time, that B comply with the prescribed method.
4. Acceptance Must Be Communicated by the Offeree or an Authorized Person
Acceptance must be communicated in a manner attributable to the offeree or a person authorized to communicate on his behalf.
A decision of an authority that remains undisclosed to the person making the offer will not ordinarily create a contract merely because an unauthorized third person happens to inform the offeror or applicant.
Example
A applies for a position at a school. The appointing authority decides to appoint A but does not communicate the decision to A. A member of the authority, acting in an individual capacity and without communicating an official acceptance, tells A that he has been selected. If the authorized acceptance was never communicated, the question whether a binding contract arose depends on the authority’s actual conduct and the applicable circumstances.
The essential principle is:
Acceptance must be effectively communicated through an authorized channel or conduct recognized by law.
5. Acceptance Must Be Communicated to the Offeror
The general rule is that acceptance must be communicated to the offeror, unless the nature or terms of the offer indicate that performance itself constitutes acceptance.
The Supreme Court has explained that an acceptance ordinarily requires an external manifestation of assent, unless the offeror has waived the requirement of notification or the nature of the transaction indicates otherwise.
This distinction is particularly important when dealing with general offers.
6. Acceptance Within the Prescribed Time
An offer must be accepted within the period specified by the offeror.
If the offer prescribes a particular period, acceptance after that period will ordinarily not constitute acceptance of the original offer.
Where no time is prescribed, acceptance must take place within a reasonable time, depending upon the facts and circumstances.
Example
A offers to sell shares to B and asks B to accept the offer within seven days.
B communicates acceptance after one month.
The original offer may have already lapsed because it was not accepted within the prescribed time.
The question of reasonable time depends upon factors such as the nature of the transaction, the subject matter, market conditions, and the manner of communication.
7. Acceptance May Be Express or Implied
Acceptance can be communicated in different ways.
Express Acceptance
Acceptance is express when it is made through words, whether written or spoken.
Example
A offers to sell a laptop to B for ₹40,000.
B says:
“I accept your offer.”
This is express acceptance.
Implied Acceptance
Acceptance may be inferred from conduct where the conduct objectively demonstrates assent.
Section 8 also recognizes acceptance through performance of the conditions of a proposal or acceptance of consideration offered with a reciprocal promise.
Example
A bus operator offers transportation services on payment of the prescribed fare. A passenger boards the bus and travels in accordance with the applicable terms.
The passenger’s conduct may constitute acceptance.
8. Acceptance by Performing the Conditions of a Proposal
Section 8 recognizes a particularly important form of acceptance:
Performance of the conditions of a proposal may itself amount to acceptance.
This is especially significant in the case of a general offer.
Example
A announces:
“₹10,000 will be paid to anyone who finds and returns my lost dog.”
B, knowing of the offer, finds the dog and returns it in accordance with the conditions.
B’s performance of the specified condition may constitute acceptance of the offer.
Therefore:
General Offer + Performance of Conditions = Acceptance
9. Mere Silence Is Not Ordinarily Acceptance
The general rule is:
Silence does not, by itself, ordinarily amount to acceptance.
An offeror cannot normally impose a contractual obligation on the offeree simply by stating that failure to respond will be treated as acceptance.
Example
A writes to B:
“I offer to buy your house for ₹5 lakh. If I hear nothing from you within one week, I will assume that you have accepted.”
B remains silent.
B’s silence does not ordinarily amount to acceptance.
Indian courts have recognized that a person making a proposal cannot ordinarily place the other person under a legal obligation to reject the proposal in order to avoid being bound.
Important Qualification
Silence may have legal significance where it is accompanied by conduct, previous dealings, a course of performance, or other circumstances from which assent can properly be inferred.
For example, courts have recognized that continued performance between parties may establish acceptance by conduct.
Therefore, it is better to remember:
Mere silence ≠ acceptance
but
Silence + Conduct/Circumstances may, in an appropriate case, evidence assent.
10. Acceptance “Subject to Contract”
A statement such as:
“Accepted subject to contract”
or
“Subject to approval”
does not necessarily amount to a concluded contract.
Whether such a statement creates a binding contract depends upon the intention of the parties and the construction of the documents and surrounding circumstances.
Where the language shows that the parties intend to remain bound only after a formal agreement is executed or approval is obtained, no concluded contract may yet exist.
Courts have emphasized that the legal effect of a letter or communication described as an acceptance depends upon its wording and the intention demonstrated by the parties, rather than merely its label.
Thus, a conditional acceptance should be examined carefully.
Communication of Acceptance under Section 4
Section 4 contains special rules regarding when communication of acceptance becomes complete.
1. Communication as Against the Proposer
Where the acceptance is sent through a mode to which the statutory rule applies, communication of acceptance is complete when it is put into a course of transmission to the proposer so as to be beyond the power of the acceptor.
This is the statutory basis for the traditional postal acceptance rule.
Example
A makes an offer to B.
B posts his acceptance on 10 July in an appropriate case where acceptance by post is contemplated.
The communication of acceptance may be complete against A when B posts the acceptance.
2. Communication as Against the Acceptor
As against the acceptor, communication is complete when the acceptance comes to the knowledge of the proposer.
Thus, Section 4 creates two different points of completion for communication of acceptance.
| As against | When communication is complete |
|---|---|
| Proposer/Offeror | When acceptance is put into transmission so as to be beyond the power of the acceptor, under the statutory rule |
| Acceptor | When acceptance comes to the knowledge of the proposer |
Acceptance by Post
The Indian Contract Act gives special treatment to communication through post.
Where postal acceptance is properly authorized or contemplated, acceptance becomes complete against the proposer when the acceptance is put into transmission beyond the acceptor’s control.
Example
A offers by letter to sell a bicycle to B.
B posts a properly addressed acceptance letter.
Even if the letter is delayed in transit, the statutory rule may make acceptance complete against A from the relevant point of posting, assuming the conditions for application of the postal rule are satisfied.
The Supreme Court has recognized the postal rule as an exception to the general principle that acceptance must ordinarily be communicated to the offeror before a contract is complete.
Delayed or Lost Letter of Acceptance
Where the postal rule applies, a delay or loss of the letter after valid dispatch does not necessarily destroy the acceptance.
The precise result depends upon whether post was an authorized or appropriate means of acceptance and whether the statutory requirements are satisfied.
Therefore, students should avoid treating the postal rule as universally applicable to every letter. Its application depends on the circumstances and the authorization or contemplation of postal communication.
Acceptance Through Telephone and Other Instantaneous Communication
Acceptance through telephone communication is governed by different practical considerations from postal correspondence.
In Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co., the Supreme Court considered acceptance made through a long-distance telephone conversation. The Court treated telephone communication as instantaneous communication and considered the point at which acceptance was communicated to the offeror.
The case is an important authority for understanding the distinction between:
Postal communication → Traditional rule based on putting acceptance into transmission
and
Instantaneous communication → Effective communication to the offeror is central
Time and Place of Contract
The rules concerning the time and place of formation can depend on the mode of communication.
Postal Communication
Where the postal rule applies, the statutory rule may make acceptance complete against the proposer when the acceptance is put into transmission.
Telephone Communication
For instantaneous communications such as telephone conversations, the Supreme Court’s decision in Bhagwandas Goverdhandas Kedia gives importance to the place where the acceptance is communicated and received.
Therefore, the old textbook formula that every contract by post is necessarily made at the place of posting should be used cautiously. The legal position depends upon the statutory rules and circumstances of the particular transaction.
Acceptance Through Conduct
Acceptance does not always have to be expressed through spoken or written words.
Section 8 provides that performance of the conditions of a proposal, or acceptance of consideration offered with a reciprocal promise, may constitute acceptance.
Courts may also infer acceptance from the conduct of the parties.
Example
A supplier receives an order and begins supplying goods in accordance with the terms of the order without raising objection.
Depending upon the circumstances, the conduct may evidence acceptance.
Acceptance Through an Agent
Where an authorized agent is involved in the transaction, communication made through or received by the agent may have legal consequences for the principal, depending upon the scope of the agent’s authority and the circumstances.
It is therefore not correct to state that communication to any agent will automatically bind the principal. The agent must have the relevant authority, or the principal’s conduct must otherwise justify treating the communication as effective.
Can Acceptance Be Revoked?
Section 5 provides that a proposal may be revoked before communication of its acceptance is complete as against the proposer.
It also provides that an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.
This is an important rule.
Example
A makes an offer to B.
B sends acceptance by post.
Where the postal rule applies:
- Acceptance becomes complete against A when B puts it into transmission.
- Acceptance becomes complete against B when it comes to A’s knowledge.
Therefore, B’s ability to revoke the acceptance ends when communication becomes complete against B.
Difference Between Offer and Acceptance
| Particular | Offer/Proposal | Acceptance |
|---|---|---|
| Meaning | Willingness to do or abstain from doing something with a view to obtaining assent | Assent to the proposal |
| Section | Section 2(a) | Section 2(b) |
| Made by | Offeror/Proposer | Offeree/Acceptor |
| Purpose | Seeks assent | Gives assent |
| Requirement | Must be communicated to the offeree | Must generally be communicated to the offeror |
| Nature | Can be conditional, provided it is sufficiently certain | Must be absolute and unqualified |
| Effect | Creates a proposal | Converts proposal into a promise |
| Revocation | May generally be revoked before acceptance becomes complete against proposer | May be revoked before communication becomes complete against acceptor |
Important Case Law on Acceptance
1. Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co. (1965)
Principle: The Supreme Court explained the rules concerning communication of acceptance under Section 4 and considered acceptance through long-distance telephone communication.
Importance
The case is particularly useful for understanding:
- Communication of acceptance;
- Postal versus instantaneous communication;
- Telephone contracts; and
- Time and place of contractual formation.
2. Felthouse v. Bindley
This English case is commonly cited for the principle that silence cannot ordinarily be imposed as acceptance.
The Indian courts have also referred to this principle while considering whether mere failure to respond can constitute acceptance.
3. Brogden v. Metropolitan Railway Co.
This case illustrates that acceptance may, in appropriate circumstances, be inferred from conduct and continued performance between the parties. Indian courts have referred to this principle while considering implied acceptance.
Quick Revision Notes
Section 2(b)
Acceptance: When the person to whom the proposal is made signifies his assent to it, the proposal is said to be accepted.
Section 7
Acceptance must be:
Absolute and unqualified
It must also be expressed in the prescribed manner or, where no special manner is prescribed, in a usual and reasonable manner.
Section 8
Acceptance may occur through:
Performance of the conditions of a proposal
or through acceptance of consideration for a reciprocal promise.
Main Rules of Acceptance
- Acceptance must be absolute and unqualified.
- Acceptance must generally be communicated.
- Mental acceptance is not ordinarily sufficient.
- Acceptance should follow the prescribed or legally appropriate mode.
- Acceptance must be within the prescribed time or a reasonable time.
- Acceptance may be express or implied.
- Acceptance may be communicated by conduct.
- Performance of conditions may amount to acceptance.
- Mere silence does not ordinarily amount to acceptance.
- A conditional acceptance may constitute a counter-offer.
- The rules of communication vary depending on the mode of communication.
- Acceptance may be revoked before communication becomes complete as against the acceptor, subject to Section 5.
Conclusion
Acceptance is a fundamental element in the formation of a contract. Section 2(b) of the Indian Contract Act, 1872 provides that when the person to whom a proposal is made signifies his assent, the proposal is accepted and becomes a promise.
For acceptance to create a binding contractual relationship, it must ordinarily be absolute, unqualified, properly communicated and made within the prescribed or reasonable time.
The law also recognizes acceptance through conduct and performance, particularly under Section 8. At the same time, mere silence will not ordinarily constitute acceptance unless the surrounding circumstances and conduct demonstrate assent.
The rules concerning communication are particularly important. Section 4 distinguishes the point at which communication is complete against the proposer from the point at which it is complete against the acceptor. These rules become especially significant in cases involving postal communication, telephone conversations and other forms of communication. The Supreme Court’s decision in Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co. remains an important authority on this subject.
The central principle can therefore be remembered as:
Offer + Absolute and Unqualified Acceptance = Promise
and, when the remaining statutory requirements are satisfied:
Agreement + Enforceability by Law = Contract