Acceptance

Consideration, Object, Capacities

of The Parties And Free Consent
Miss Rabia Asad
Summer semester 2020
 Acceptance
• Assent to the terms of an offer.  Acceptance must be judged
objectively, but can either be expressly stated or implied by
the offeree's conduct.  To form a binding contract, acceptance should
be relayed in a manner authorized, requested, or at least reasonably
expected by the offeror.
• The Contract Act 1872 defines acceptance in Section 2 (b) as “When
the person to whom the proposal has been made signifies his assent
thereto, the offer is said to be accepted. Thus the proposal when
accepted becomes a promise.”
• Say for example A offers to buy B’s car for rupees two lacs and B
accepts such an offer. Now, this has become a promise.
 Essentials of valid Acceptance
• Acceptance can only be given to whom the offer was made
• In the case of a specific proposal or offer, it can only be accepted by the
person it was made to. No third person without the knowledge of the
offeree can accept the offer.
• Let us take the example of the case study of Boulton v. Jones. Boulton
bought Brocklehurst’s business but Brocklehurst did not inform all his
creditors about the same. Jones, a creditor of Brocklehurst placed an
order with him. Boulton accepted and supplied the goods. Jones refused
to pay since he had debts to settle with Brocklehurst. It was held that
since the offer was never made to Boulton, he cannot accept the offer
and there is no contract.
• When the proposal is a general offer, then anyone with knowledge of the
offer can accept it.
 2) It has to be absolute and unqualified

• Acceptance must be unconditional and absolute. There cannot be

conditional acceptance, that would amount to a counteroffer which
nullifies the original offer. Let us see an example. A offers to sell his cycle
to B for 2000/-. B says he accepts if A will sell it for 1500/-. This does not
amount to the offer being accepted, it will count as a counteroffer.
• Also, it must be expressed in a prescribed manner. If no such prescribed
manner is described then it must be expressed in the normal and
reasonable manner, i.e. as it would be in the normal course of business.
Implied acceptance can also be given through some conduct, act, etc.
• However, the law does not allow silence to be a form of acceptance. So
the offeror cannot say if no answer is received the offer will be deemed
as accepted.
 3] Acceptance must be communicated

• For a proposal to become a contract, the acceptance of such a

proposal must be communicated to the promisor.
The communication must occur in the prescribed form, or any such
form in the normal course of business if no specific form has been
prescribed.
• Further, when the offeree accepts the proposal, he must have known
that an offer was made. He cannot communicate acceptance without
knowledge of the offer.
• So when A offers to supply B with goods, and B is agreeable to all the
terms. He writes a letter to accept the offer but forgets to post
the letter. So since the acceptance is not communicated, it is not valid.
 4] It must be in the prescribed mode

• Acceptance of the offer must be in the prescribed manner that

is demanded by the offeror. If no such manner is prescribed, it must
be in a reasonable manner that would be employed in the normal
course of business.
• But if the offeror does not insist on the manner after the offer has
been accepted in another manner, it will be presumed he has
consented to such acceptance.
• So A offers to sell his farm to B for ten lakhs. He asks B to
communicate his answer via post. B e-mails A accepting his offer. Now
A can ask B to send the answer through the prescribed manner. But if
A fails to do so, it means he has accepted the acceptance of B and a
promise is made.
 5. Implied Acceptance

• Section 8 of the Contract Act 1872, provides that acceptance by

conduct or actions of the promisee is acceptable. So if a person
performs certain actions that communicate that he has accepted the
offer, such implied acceptance is permissible. So if A agrees to buy
from B 100 bales of hay for 1000/- and B sends over the goods, his
actions will imply he has accepted the offer.
• Q: Mere silence can amount to acceptance. True or False?
• Ans: The statement is false. Mere silence can never amount to the
offer being accepted. Acceptance has to be communicated to the
offeror whether it is expressed, or implied.
 6.Reasonable time
• Q: What is the reasonable time to accept a proposal?
• Ans: The proposal must be accepted within the time limit given by the
offeror. If no such time limit is prescribed then it must be accepted
within a reasonable time or before the offer lapses. Now a reasonable
time has no definition in law, it will depend entirely on the situation,
circumstances, and the usual norms.
 7.Acceptance follow offer
• Any acceptance made without the knowledge or the offer does not
make a contact because no acceptance can be made without offer
• Example: A offered reward for am one who finds his lost bag. B, being
unware of the offer, finds an returns the bag. B cannot calim the
reward
 Communication of offer, Acceptance &
Revocation
• Communication of offer
• the communication of a proposal is complete when it comes to knowledge of
the person to whom it is made
• An offer sent by post is only completed when it reaches and comes to the
knowledge of the offree
• Communiation of acceptance
• The communication of acceptance is complete
• As against the proposal, when it is put in the course of transmission to him, so as to be
out of power of the accepter
• As against the accepter, when it comes to the knowledge of the proposer
 Communication of offer, Acceptance &
Revocation
• Communication of Revocation
• Revocation means cancellation
• The communication of revocation is complete
• As against the person who makes it, when it is put in the course of transmission to the
person to whom it is made, so as to the out of the power of persn who makes it
• As against the person to whom is made, when it comes to his knowledge
• Time of Revocation
• An offer may be revoked at any time before communication of its acceptance
is complete as against the offeror, but not afterwards
• An acceptance may be revoked at any time before communication of the
acceptance is complete as against the acceptor, but not afterwards
 Loss of Letter of Acceptance
• If the letter of acceptance is delayed or lost following is the effect
• Position of offeror
• When the letter of acceptance is posted the offeror is bound by that acceptance even if
letter of acceptance is delayed or lost
• In order to bind the offeror, the letter must be stamped, correctly addressed and
proporly posted
• Postion of acceptor
• The acceptor is not bound by the letter of acceptance till it reaches the offeror
• Until the letter of acceptance reaches the offeror, the contract remains voidable at the
option of acceptor
 Loss of Letter of Acceptance
• If the letter of acceptance is delayed or lost following is the effect
• Formation of contract
• When both the letter of acceptance and letter of revocation of acceptance are received
at the same time by the offeror, the formation of the contract depends upon chance
• If offeror first reads the letter of acceptance, a contract will arise but if the offeror first
reads the letter of revocation then there is no contract
• Contact over telephone
• There is immediate communication of offer acceptance and revocation
• The rules which apply to contracts made when parties are face to face reach other shall
also apply here
• If acceptance is not communicated to the offeror due to a fault in a telephone of the
offeror, there will be no contract
 Consideration and object
•
What is Consideration in Contract Law?
• The special word “consideration” in contract law refers to something that has economic value in the
eyes of the law.
• Consideration:
• is an essential element to make a contract
• must be provided for a contract to be legally binding.
• In contract law, it is said that "consideration must move from the promisee".
• Drawing out the subtlety of this statement:
• If there is "a promisee", there must already be a promisor
• The promisor has already made a promise to the promisee, which is sufficient to form a contract (but
it's not formed at this point)
• The promisee must give something back to the promisor - a promise 
• When the promisee promises to do something - gives consideration (and it doesn't have to be given to
the promisor) - a legally binding contract is formed, provided the other elements have been satisfied 
 Types of Consideration

• A promise - ie consideration - can be:

• a promise to do something, such as to:
• transfer ownership in property, such as intellectual property, a car or house
• create an art work
• develop software
• grant a licence to intellectual property rights
• pay money
• a promise to refrain from doing something (known as a restrictive covenant):
• not work with another employer of a particular description for a period of time after employment ceases.
• not to build property over a specified height
• not take ownership of shares in another business
• a promise to pay money to the other contracting party, or to someone else
• Consideration is classified as one of two types:
• executed: when the promise has been performed within the meaning of the contract, or
• executory: when the promise has not been performed.
 The Essential Characteristic of Consideration

• There's an essential characteristic of consideration which must exist

to form a contract. 
• Above, 3 types of consideration were listed:
• a promise to do something
• a promise not to do something, and
• a promise to pay money.
 What is the purpose of contractual consideration?

• Reciprocity of consideration is fundamental to contract law. 

• The exchange of consideration creates a benefit and a burden for each party
entering into a contract.
• The consideration which is the benefit of the contract for one party (say,
receiving money) is the burden of the other (say, paying money).
• Without consideration being given by each party to the contract, the contract
can't be legally binding. 
• It's a gratuitous promise.  One person promises to do something but the other
(you) does not promise anything. The promise to pay the £10 is not
enforceable.
• In legal language, "the offer to pay the £10 is not supported by consideration"
or consider does not move from the promisee.
• As there is no consideration provided by one party, there is no contract.
Exception to requirement for Consideration: Deeds

• The exception to this, is use of a Deed. 

• Deeds:
• are written contracts
• must state that they are a Deed
• must be "signed, sealed and delivered" by both of the parties. 
Those words have a technical meaning which we don't cover here
• are not required to be supported by consideration to be legally binding
• have other special requirements which prevent them from being abused.
• Let's put that exception to the general rule to one side.
• What sort of consideration is required to properly form a legally binding
contract?
 consideration

• Once a contract is signed, consideration can be either:

• Executed consideration, which is consideration which has been
provided by the party promising it.
• For example, money which has been promised to be paid under a
contract which has been paid is executed consideration.
• Executory consideration is consideration has been promised but not
yet performed or delivered to the other party.
• It may be products yet to be delivered or services yet to be
performed. it could be money to be paid, which has not been paid.
• 1.   Past Consideration:
• When contracting parties are already contracted with one another, a
promise to do something that they have already contracted to do can't
be "fresh" consideration. 
• It's consideration which has been provided in the past, and not at the
time of formation of the contract.
• For example, a buyer of goods who paid £10 in the past. It is not good
consideration for supply of new goods, so as to form a new contract.
2.   Existing Obligation or Duty:
• Likewise, if a party is already required to do something by law, then that
also can't be fresh consideration.
• The usual forms of these are:
• an existing obligation to perform a contract
A promise to perform an existing contractual obligation in an existing contract is
something which the person is already legally bound to do.
However if a party promises a superior performance of the requirement, that
might be sufficient.
Nevertheless, the fresh consideration must be offered freely and not under
threat, and the receiving party receives a benefit from increase in standard of
performance of the existing contract.
• an obligation imposed under the general law, such as performance of a public
duty or a duty imposed by statute.
For instance, companies are required to file tax returns. Suppose a company was
to promise to file its tax return in return for the supply of goods from a supplier.
Filing the tax return isn't good consideration to form a contract. 
However, where the consideration offered exceeds the requirements of the duty,
then that may well be good consideration and sufficient to form a contract.
 Illegal Consideration

• Types of Illegal Consideration

• Types of illegal consideration include performing some act which is illegal, such as:
• committing a crime, such as to give false evidence to a court
• manipulating stock market prices or insider trading
• fix or maintain pricing levels - price fixing - contrary to competition law
• performing some service after an offer of payment of a bribe (whether it's called a bribe or
not)
• a restrictive covenant which is actually a restraint of trade at law
• a public official - say a member of a local council - receives a payment for something that
they are required to do as part of their office.
• On the flip side of the coin, the illegal consideration could be a promise not to do
something which a party has legal obligation to do,  such as pay tax or comply with
some statutory regulatory requirement. 
• 
• One party to a contract promises to £10 for a witness to give false
evidence to a court.
• The witness promises to give false evidence to the court, by verifying a
witness statement with a statement of truth or in the witness box
• Let's put aside the fact that it would be perjury to do so and probably
result in imprisonment of both contracting parties. The consideration (to
give false evidence) is (obviously) illegal.
• The agreement reached - whether recorded in writing or not - is not
supported by consideration.
• There's no contract for at least two reasons:
• there is no (lawful) consideration to support the payment, and
• it's an illegal contract.
 Exceptions to consideration
1. Nature love and affection:all such contracts are valid without consideration.
2. VOLUNTARY CONSIDERATION: voluntary performance is enforceable without
consideration. But:
• Service must be redered volunatrily
• Promisor must exist
• Intention must be to compensate the promisee
• Services must be legal

3. Time barred debt: a debt becomes time bared and irecoverable if it is not
claimed and paid within three years of the time it becomes due.
4. Completed gift: Gift is a valid promise wihtout consideration and is completed
once the possession is transfered from donor to donee.
5. Remission by promisee: when a person agrees to receive less than what is due.
6. Stranger to the contract: (privity of contract) consideration can be provided by
the promisee or anyother person as long as he or she is familiar with the
contract.
 Execptions: Principal of privity of contract
1. Trust: person for whom the trust is created can sue to enforce his
rights under the trust.
2. Immoveable property: (containing rights of others) mortgage,
inheritence rights , charges .
3. Family settlement: any provision made for the benefit of a member
of family is enforaceable.
4. Agent and assignment: in case of a contract of agency , the
principal can sue for his rights and if the contract is assigned to a
third party, the asignee can enforce the contract.