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BUSINESS LAW NOTES

INDIAN CONTRACT ACT 1872
ACCEPTANCE A. RULES
1.

Acceptance must be communicated to the person who has made an offer.

Mental acceptance, failure to answer or silence on part of the offeree is not acceptance, as it is not communicated. However for a general offer, no acceptance is necessary, if it is made by complying with the terms of the offer.(Carbolic Smoke Ball Case) Eg- A offers to B to sell his house in a prime locality for Rs. 25 lakhs. B had made up his mind to purchase it, but does not say anything to A. There is no acceptance as it is not communicated.

Case: Felthouse v/s Bindley
Facts- Felthouse wrote a letter to his nephew, “I want to buy your horse. If I hear no more from you, I shall assume the horse to be mine.” Nephew informed Bindley, an auctioneer, to keep the horse out of sale. Bindley by mistake sold the horse to somebody. When Felthouse came to know this, he brought an action against Bindley. Held- An uncommunicated acceptance is not an acceptance at all. Further acceptance cannot be waived by the proposer.
2.

Acceptance must be communicated by the person to whom an offer has been made.

Acceptance shall be made only by the person to whom the offer was made. However, in case of general offer, acceptance can be inferred from any member of the public, by their adherence to the terms of the offer. Case: Powell v/s Lee Facts- Powell was a candidate for headmastership of a school. The school managing committee passed the resolution appointing Mr. Powell. Lee, who was one of the members of the managing committee happened to be a friend of Mr. Powell. He informed Powell of his appointment. However, due to some external pressures, the resolution was withdrawn. Held- Lee had informed Powell in his friendly capacity and the communication was not on behalf of the school authorities.

Acceptance must be absolute and unqualified. then it shall be made in that mode only. he is deemed to have assented to B’s acceptance in such mode as had been made by B. Eg. Acceptance should only be in response to an offer i. 6. a valid acceptance can be only for the exact terms of the offer as proposed by the offered. Eg. B shall reply only by telegram and not otherwise. If the person to whom an offer is made accepts the same subject to some conditions. Acceptance must be communicated in the prescribed manner only else it is not binding on the proposer. Acceptance should emanate from an offer. Illustration Counter offers. it shall be made in some usual and reasonable manner. If acceptance is communicated in some other manner and the offered remains silent. even if it not in the prescribed manner.A sends a letter to B offering to sell his old carriage and asks B to reply by telegram. 2) J offers to sell his cow to K. If the offer prescribes a mode of acceptance. . Illustrations 1) A prospective buyer offers to buy an article from a seller at a certain price to be paid after three months.e acceptance cannot precede an offer. If A does not so insist within a reasonable time. Such an acceptance is not binding on the offerer. 4. In other words. Acceptance with a variation constitutes a counter offer and is not a valid acceptance. Seller accepts the offer provided cash is immediately paid. This is not a valid acceptance as it is qualified. he is deemed to have consented to the acceptance. K replies that he would buy it only if he gave the calf along with it. A can insist on receiving a telegram. Even if B accepts otherwise.3. An offer once rejected is dead and cannot be accepted unless it is revived. it is called qualified acceptance and is not binding on the person who makes the proposal. 5.X cannot say that he accepts to buy Y’s house without an offer from Y. When no mode is prescribed.

' A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer. And as regards H. when the letter of acceptance is put in the course of transmission to him.H. communicates his acceptance by post.ACCEPTANCE THROUGH POST In case of acceptance through post. and as against the acceptor. the communication of acceptance is complete.Section 5 Revocation means 'withdrawing' or 'taking back. a) b) as against the proposer. offer comes to an end. communication of acceptance is complete when the letter is posted. Section 6 A proposal can be revoked in any of the following four ways1. When a proposal is revoked. 4. By death or insanity of the proposer. By failure of the acceptor to fulfil a condition precedent to acceptance. acceptance is said to be communicated when the letter reaches G. REVOCATION OF ACCEPTANCE . By lapse of time prescribed in such proposal for its acceptance. What is reasonable time will depend upon the facts and circumstances of each case. By communication of notice of revocation by the proposer to the other party. 3.Section 5 . If no time is so prescribed. As regards G. 2. Eg. Note:. when it comes to the knowledge of the proposer. by the lapse of a reasonable time. REVOCATION OF A PROPOSAL .The proposer becomes bound only when a properly addressed and adequately stamped letter is posted. in response to G’s offer. but not afterwards.

. when B receives it. when it is put in the 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.Acceptance is made before the revocation of the offer by M and well within the specified time limit set by M in his letter of offer.Hence.Overhearing by N does not amount to valid revocation by M. when it comes to his knowledge. before acceptance by N. Illustrations1) A revokes his proposal by telegram. i) ii) as against the person who makes it. as against the person to whom it is made.The treatment would have been different if.m. The revocation is complete as against A when the telegram is despatched. It is complete as against B.” In the meantime on Wednesday. .M agreed on Monday to sell his property to N by a written agreement which stated that “this offer to stay open till Saturday 10 a. who was sitting in the next room at that time. hears about the deal between M and P. . On Friday. . but not afterwards. 2) Facts . N. COMMUNICATION OF REVOCATION Section 4 Communication of revocation is complete. N accepts the offer and delivers to M the letter of acceptance. Is N’s acceptance valid? Held – . M enters into a contract to sell the property to P.An acceptance may be revoked at any time before the communication of acceptance is complete as against the acceptor. N’s acceptance is perfectly valid. M had formally communicated his revocation to him.