Briefly discuss rules of acceptance of proposals. ‘A’ offers to purchase B’s car for Rs. 7,000/- and adds that if the offer is not rejected, it will become a binding contract. ‘B’ keeps silence. Is ‘B’ bound to sell?

Question: Briefly discuss rules of acceptance of proposals. ‘A’ offers to purchase B’s car for Rs. 7,000/- and adds that if the offer is not rejected, it will become a binding contract. ‘B’ keeps silence. Is ‘B’ bound to sell? [JJS 2017]

Find the answer to the mains question only on Legal Bites. [Briefly discuss rules of acceptance of proposals. ‘A’ offers to purchase B’s car for Rs. 7,000/- and adds that if the offer is not rejected, it will become a binding contract. ‘B’ keeps silence. Is ‘B’ bound to sell?]

Answer

It is often said that acceptance is to a proposal is what a lighted match is to a barrel of gunpowder. For successful completion of the contract, there must be a valid proposal made followed by the proposal being accepted.

According to Section 2(b) of the Indian Contract Act, 1872, “When the person to whom the proposal has been made signifies his assent thereto, the offer is said to be accepted. The signifying of unconditional assent to the offer must be communicated to the offeror so that it amounts to acceptance.

Rules regarding Valid Acceptance

1. Acceptance can only be given to whom the offer was made

Communication of acceptance of a proposal should be communicated to the offerer himself. If it is made to any other person, it will be ineffectual as if there was no communication. Moreover, as held in the case of Felthouse v. Bindley [(1863) 7 LT 835], an offeror cannot say that if no answer is received within a certain time, the offer shall be deemed to have been accepted. It is also pertinent that the communication of acceptance should be from a person who has the authority to accept. In Powel v Lee [(1908) 24 TLR 606], it was held that information from an unauthorized person is of no value.

2. It has to be absolute and unqualified

Section 7 of the Act provides that ‘In order to convert a proposal into a promise, the acceptance must be absolute and unqualified. An acceptance with variation is no acceptance, but simply a counter-proposal that has to be accepted by the original promisor before a contract is made.

Partial acceptance of an offer is only a counter-proposal. An offeree cannot simply accept the terms which are favorable to him and reject the rest unless the offeror agrees to qualified acceptance.

3. Acceptance must be communicated

Acceptance is only complete when it is communicated to the proposer. Even if a person has decided to accept, and the proposer is aware of the decision, there is no valid acceptance unless it is communicated. Communication of acceptance as per section 3 of the act is made any act or omission of the party accepting by which he intends to communicate such acceptance, or which has the effect of communicating it.

4. It must be in the prescribed mode

An acceptance can get communicated in writing, or by words spoken or signalled, or by any act or by conduct; it may be made in electronic form. What is necessary is that there should be some external manifestation of acceptance. A mere mental determination to accept unaccompanied by any external indication will not be sufficient as observed in Cotton Corpn of India Ltd v Bombay Dyeing & Mfg Co Ltd, (2006) 5 Bom CR 105.

SILENCE AS ACCEPTANCE

A contract being the result of a proposal made by one party and, acceptance of that very proposal by the other, acceptance of proposal and intimation of acceptance by some external manifestation that the law regards as sufficient is necessary. As a general rule, an offeree who does nothing in response to the proposal is not bound by its terms.

Law does not cast a duty on the person to whom a proposal is made to reply to that proposal, and hence acceptance cannot be inferred from the silence of the offeree and as a general rule, a proposal is not accepted by mere silence on the part of the offeree.

Silence is not an effective expression of intention, nor is inaction. The reason is that silence and inaction are by their nature equivocal, as there can be more than one reason for a person to be silent and inactive. Apart from not wanting to accept, an offeree may simply be forgetful or slow in responding to the proposal.

Where the offeree does not wish to accept the proposal, it is undesirable to put him to the trouble and expense of refusing the proposal. Moreover, lack of any outward expression of assent would effectively enable the offeree to deny or assert the fact of acceptance to suit his own convenience.18 Since it is the proposer who takes the initiative by proposing for the conclusion of the contract, the offeree is free to accept or not to accept, but also to simply ignore it. A proposer cannot bind the offeree against the latter’s will by expressly stipulating that, if the offeree does nothing, he will be bound to a contract,19 or to a variation20 of an existing contract.

In, Felthouse v. Bindley (1862) 11 Cb (NS) 869 an uncle offered to buy a horse from his nephew for a price, and said, If I hear no more about him I shall consider the horse is mine? at the price quoted. The nephew did not answer but instructed his auctioneer not to sell that particular horse. The auctioneer sold the horse by mistake. It was held that the nephew’s acceptance was not communicated to the uncle, the nephew had no obligation to reply, and his silence did not constitute an acceptance. Hence, the uncle’s action for conversion failed. The general rule laid down in the case, however, has been well accepted.

Acceptance can, however, be inferred from silence only under exceptional circumstances.

1. First, where the offeree makes up his mind to accept a proposal continuing such a stipulation and complies with the proposal by remaining silent, namely, where an option-holder has agreed that his silence shall be acceptance, or where the mode of acceptance has been specified by the offeree or the proposal been made on the form provided by the offeree, and he stipulates that his silence shall constitute acceptance.
2. Secondly, silence taken together with certain facts, may constitute acceptance and in such case, the conduct of the offeree may raise estoppel. Where the proposal is ambiguous, and the offeree communicates with the proposer indicating that he understood the proposal in a particular sense, the silence of the proposer may constitute acceptance. If there is a course of dealings between the parties, the proposer may suppose that the silence amounts to acceptance, namely, previous offers to buy goods have been accepted as a matter of course by the dispatch of the goods.
3. Thirdly, if silence is reinforced by conduct, it may constitute acceptance. Where a tenant was offered a renewal of the tenancy at a higher rent, his continuing to stay constituted acceptance. In Hyderabad Municipal Corporation v. M. Krishnaswami Mudaliar [AIR 1985 SC 607] a contractor consented, subject to payment at enhanced rates, to the proposal to spread the contract work over two years instead of the agreed one year. On completing the work, he was entitled to payment at enhanced rates even though the employer remained silent.
4. Fourthly, silence may constitute acceptance by custom of trade or business in question.

Thus applying the above considerations in the proposition at hand where, A’ offers to purchase B’s car for Rs. 7,000/- and adds that if the offer is not rejected, it will become a binding contract. And ‘B’ keeps silence. Here, ‘B’ is not bound to sell the car to A, as he has not given his assent to A in any way, and his case also doesn’t fall under any of the aforesaid 4 exceptions. Here, silence of B will not amount to acceptance.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X