What is Acceptance?
According to the Indian Contract Act, 1872, an offer is deemed to be completed only when it is followed by an acceptance from the party/parties to whom the offer has been made. Let’s make it more clear through acceptance meaning, examples, conditions and rules of acceptance.
Acceptance Meaning
As per the Indian Contract Act 1872, Section 2 (b), acceptance is defined 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.”
When an offeree (person to whom the offer is made) gives his unconditional consent to the offer made to him by the offeror, it is considered as an acceptance given by the offeree. Acceptance is important for an offer to be considered complete and to become a promise. Let’s give you an example of the same.
Example
A makes an offer to B for buying his house for 50 lakh. B agrees to this offer. This is called acceptance of the offer.
An offer before acceptance does not create any legal obligations between the parties but once the offer is accepted, it becomes a promise and it is irrevocable. This means that after acceptance is given by the offeree, it creates legal obligations between the concerned parties, with respect to the offer made. Once acceptance is given and communicated, it cannot be withdrawn or revoked. However, the offer can be revoked before acceptance is given.
There are two types of bill acceptances: general acceptance and qualified acceptance. When widespread acceptance is unqualified and unconditional, it is referred to as absolute acceptance.
General acceptance refers to surrender that is granted without qualification. A general acceptance is when someone accepts an order to pay a specific amount in full and without conditions. Unless alternative payment arrangements are made, this is a usual acceptance form.
To be valid as a general rule, an acceptance must be broad. When a person accepts an instrument, they qualify it by putting a condition on it.
Types of Acceptance
Expressed Acceptance
When acceptance is given by the offeree in a written or oral form, it is considered as an expressed acceptance of the offer.
Acceptance by some refers to when some, but not all, of the drawers, agree to the transaction. When the drawee agrees to pay the bill in installments, the bill is accepted for installment payments. This must be stated clearly at the outset of the contract.
The condition of acceptance must be stated very clearly in the agreement and must be understood immediately. Suppose a drawee wants to make a qualification during acceptance. In that case, it must be done such that the instrument holder understands what was accepted and on what qualifications it was accepted.
Example: A makes an offer in person orally to B for buying his house for 50 lakh. B sends an email to A, giving his acceptance to the offer. This is an expressed acceptance.
Implied Acceptance
If the acceptance is conveyed through the conduct/behavior/any other mannerism of the offeree, it is called an implied acceptance.
Example: A buys some products in the supermarket. This is an implied acceptance of A to pay the price that the supermarket is asking for the products.
Conditional Acceptance
Conditional acceptance is also known as qualified acceptance. In this case, the offeree agrees to give his acceptance to the offer only if certain changes are made to the terms and conditions of the offer. This acceptance now becomes a counteroffer which must be then accepted by the offeror for it to become a promise.
Example: A agrees to make the payment to B for the renovation of his house if the work is completed on the due date.
Rules Regarding Valid Acceptance
Acceptance Can Only be Given by the Offeree
Acceptance of an offer can only be given by the person to whom the offer has been made. Self-acceptance meaning states that the acceptance given by the offeree only is considered valid. A third party cannot accept the offer without the knowledge of the offeree. If the offeree has authorized an agent to give the acceptance on his behalf, then the acceptance is considered valid.
Case Law: Powell vs Lee
In this case, the plaintiff had applied for the job as a headmaster and one of the school managers acted without authority, conveying to him that he had been appointed. Later, the managers decided to appoint someone else on the post. The plaintiff sued the school for a breach of contract but the verdict for the case stated that there was no contract as the manager did not have the authority to give acceptance.
Acceptance Must be Communicated
Acceptance must always be communicated to the offeror for the proposal or offer to become a binding contract. Before giving his acceptance, the offeree must be aware of the fact that an offer has been made to him. Acceptance cannot be communicated without the knowledge of the offer. The intent to give acceptance is not considered valid in case it is required for the acceptance to be communicated clearly.
Example: A sends an offer letter to B for buying his house for 50 lakh. B signs the offer but does not send the letter back. In this case, acceptance has not been communicated. Hence, it is not valid.
Acceptance Must be Given in the Prescribed Mode
Acceptance must be given in the prescribed/specified manner that has been stated in the offer. In case a specific mode has not been mentioned, acceptance must be made in a reasonable manner that is used in the normal course of business. In cases where a specified form of giving acceptance is not stated, silence is not considered a form of acceptance.
It must be Unqualified and Absolute
Acceptance must be complete and unconditional. Conditional acceptance is impossible because it would be a counteroffer, nullifying the initial offer. Let's look at an example. B accepts A's offer to buy his cycle for $2,000/-. B says he'll take it if A sells it for 1500/-. This does not imply that the offer has been accepted; instead, it is a counteroffer.
If no such regulated form is specified, it must be expressed ordinarily and reasonably, that is, as it would be in the ordinary course of business. It must also be expressed in a specific way. Implied acceptance can also be demonstrated through behavior, act, or other means.
On the other hand, the law does not recognize silence as a kind of acceptance. As a result, the offeror cannot state that the offer would be considered acceptable if no response is received.
FAQs on Acceptance: Meaning and Legal Implications
1. How does the Indian Contract Act, 1872 define 'acceptance'?
According to Section 2(b) of the Indian Contract Act, 1872, acceptance is defined as when the person to whom a proposal is made signifies their assent to it. Once the proposal is accepted, it becomes a promise, which is a crucial step in forming a legally binding contract.
2. What are the essential elements required for an acceptance to be legally valid?
For an acceptance to be legally valid under Indian contract law, it must meet several conditions:
- Absolute and Unqualified: The acceptance must be unconditional and without any changes to the original offer.
- Communicated to the Offeror: The offeree must communicate the acceptance to the offeror or their authorised agent.
- Prescribed Mode: It must be given in the manner specified by the offeror. If no mode is specified, it must be in a reasonable and usual manner.
- Given by the Offeree: Only the person to whom the offer was made (or their authorised agent) can provide acceptance.
- Within a Reasonable Time: Acceptance must be given within the time limit specified, or if not specified, within a reasonable time.
3. What are the main types of acceptance recognised in contract law?
Acceptance can be classified into several types based on how it is conveyed and the conditions attached:
- Expressed Acceptance: When acceptance is communicated explicitly, either orally or in writing.
- Implied Acceptance: When acceptance is signified through conduct or actions rather than words. For example, a customer taking an item to the billing counter implies acceptance to pay the price.
- Conditional (or Qualified) Acceptance: This occurs when the offeree agrees to the offer but with certain modifications. Legally, this is not a true acceptance but a counteroffer.
4. Why is a conditional acceptance legally considered a counteroffer and not a valid acceptance?
A conditional acceptance is treated as a counteroffer because it fundamentally changes the terms of the original proposal. For a contract to be formed, there must be a 'consensus ad idem' (meeting of the minds) on the exact same terms. By introducing new conditions, the offeree is essentially rejecting the original offer and proposing a new one. This new proposal must then be accepted by the original offeror to create a binding contract.
5. Who has the authority to accept an offer, and what are the legal implications of this?
The authority to accept an offer rests exclusively with the offeree—the person or party to whom the offer was specifically made. Acceptance by an unauthorised third party is not valid. The key legal implication, as established in cases like Powell v. Lee, is that a contract is not formed unless the acceptance is communicated by someone with the proper authority. This rule ensures that contracts are created intentionally between the designated parties.
6. Can silence ever be considered a valid form of acceptance in a contract?
As a general rule, silence is not considered a valid form of acceptance. An offeror cannot impose a contract by stating that the offeree's silence will be taken as consent. Acceptance must be an objective, clear action or communication. However, there can be rare exceptions if prior dealings between the parties have established silence as a form of acceptance.
7. What is the 'postal rule' of acceptance, and how does it impact contract formation?
The 'postal rule' is an exception to the general rule of communication. It states that when acceptance is sent by post (where this method is prescribed or reasonable), the acceptance is considered complete and a contract is formed the moment the letter of acceptance is posted, not when it is received by the offeror. This means a binding contract exists even if the letter is delayed or lost in transit.
8. What are the primary legal consequences that arise immediately after an offer is accepted?
Once an offer is accepted, it transforms into a legally binding promise or agreement. The most significant legal consequence is the creation of contractual obligations for both parties. The offer becomes irrevocable, meaning the offeror can no longer withdraw it. Both the offeror and the offeree are now legally bound to perform their respective duties as per the terms of the agreement, and failure to do so can result in a breach of contract.
9. Under what circumstances is the option to accept an offer terminated?
The power to accept an offer does not last indefinitely and can be terminated in several ways:
- Revocation: The offeror withdraws the offer before it is accepted.
- Lapse of Time: The offer expires because the specified time for acceptance has passed, or a reasonable time has elapsed.
- Rejection: The offeree explicitly rejects the offer.
- Counteroffer: The offeree makes a counteroffer, which automatically terminates the original offer.
- Death or Insanity: The death or insanity of either the offeror or the offeree before acceptance.
