"Performance of conditions of a proposal is an acceptance of the proposal." Discuss.

Question: "Performance of conditions of a proposal is an acceptance of the proposal." Discuss. [JJS 2015]

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Answer

Section 8 of the Indian Contract Act, 1872 lays down the provision regarding Acceptance by performing conditions or receiving consideration. The section runs down as under:-

“Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.”

It is well-settled law that an offer may be accepted expressly or impliedly including by conduct. But conduct would only amount to acceptance if it is clear that the offeree did the act with the intention (actual or apparent) of accepting the offer.

Each case must rest on its facts. The courts must examine the evidence to find out whether in the facts and circumstances of the case the conduct of the "offeree" was such as amounted to an unequivocal acceptance of the offer made.

If the facts of the case disclose that there was no reservation in signifying acceptance by conduct, it must follow that the offer has been accepted by conduct. On the other hand, if the evidence discloses that the "offeree" had reservations in accepting the offer, his conduct may not amount to acceptance of the offer in terms of Section 8 of the Contract Act.

One of the landmark judgments is Carlill v. Carbolic Smoke Ball Company [1893] 1 QB 256. In this case, the ‘X’ company advertised that it would pay £100 to anyone who used their product as directed and still contracted influenza. Mrs Carlill used the product as directed and contracted influenza. The court held that Mrs. Carlill’s performance of the condition (using the smoke ball) constituted acceptance of the offer, forming a binding contract. This aligns with Section 8’s principle that the performance of specified conditions (use of the product) indicates acceptance.

Reliance is placed on another Indian case of Rameshwarlal Bhagchand Case, AIR 1973 Gau 11. In this case the plaintiff-respondent, M/s. Rameshwarlal Bhagchand had transported 210 bags of groundnut through Railways, but when it took delivery, the consignments were found to be so damaged as not fit for human consumption. It was so certified by the Railway Officer concerned. The consignee served a notice on the Railway Administration claiming compensation in the sum of Rs.2,368.25.

The General Manager sent a cheque in the sum of Rs.1173.19 to the consignee on May 5, 1964, along with a letter stating that the cheque was being sent in full and final settlement of the claim. The consignee encashed the cheque but subsequently communicated to the General Manager by its letter dated July 29, 1964, that the cheque received satisfied only a part of the claim and that the balance amount should be remitted. Since the General Manager failed to make payment of the balance amount claimed by the consignee a suit for recovery of the balance amount was filed.

In these Facts the Hon’ble High Court took the view that the plaintiff having encashed the cheque without first communicating to the General Manager that it did not agree to the proposal made by him, it must be assumed in terms of Section 8 of the Contract Act to have accepted the proposal by mere acceptance of the cheque.

It was further held that the fact that he wrote a letter on July 29, 1964 after encashing the cheque, and denying that the amount had fully settled its claim, did not alter the position. If the consignee did not agree to the offer made by the General Manager in his communication dated May 5, 1964, it should have communicated its refusal to accept the offer, before encashing the cheque. Otherwise, it would be assumed that the cheque was encashed on the terms offered by the General Manager, and only later the consignee changed his mind after realizing the proceeds of the cheque.