Contract Law · Formation of Contract

Acceptance

Study valid acceptance, communication and revocation, including postal and instantaneous communications, tenders and auctions.

12 min readReviewed by Advocate Aditya Sharma
Section 2(b)Sections 3 to 9

In one line

Acceptance is a final and unqualified assent to the terms of an offer, communicated or performed in a legally recognized manner.

After this note, you should be able to

  • Test whether acceptance is absolute, timely and made in the proper manner.
  • Apply the different timing rules for postal and instantaneous communication.
  • Solve acceptance problems involving silence, conduct, tenders and auctions.

Essentials of valid acceptance

Acceptance must correspond with the offer. A response that changes the terms is a counter-offer, not acceptance.

Absolute and unqualified
Section 7 requires acceptance of the offer as made. Adding a new condition prevents consensus on the same terms.
Prescribed or reasonable manner
If the proposer prescribes a manner, it should be followed. Otherwise, acceptance must use a usual and reasonable manner.
By the proper person
A specific offer must be accepted by the person addressed. A general offer may be accepted by a person who knows of it and performs its condition.
Before termination
Acceptance must occur before revocation, lapse, rejection or another event that terminates the offer.

Communication and timing

Section 4 treats the proposer and acceptor differently, so always state against whom communication is complete.

Against the proposer
Acceptance is complete when it is put into a course of transmission to the proposer so that it is beyond the acceptor's power.
Against the acceptor
Acceptance is complete when it comes to the proposer's knowledge.
Instantaneous communication
For telephone and similar real-time communication, acceptance ordinarily must be received or heard where the proposer is located.
Revocation of acceptance
The acceptor may revoke acceptance before its communication becomes complete against the acceptor.

Silence and conduct

The proposer cannot impose a contract by saying that silence will count as acceptance.

Acceptance normally requires communication, but Section 8 recognizes acceptance by performing the conditions of a proposal or receiving consideration offered with it. Conduct can therefore communicate assent where the offer invites that mode.

The key question is whether the offeree objectively acted in response to the offer. Mere inaction, without more, does not ordinarily show assent.

Tenders and auctions

These transactions involve more than one communication, so separate the invitation, bid, acceptance and later orders.

Tender
A tender notice usually invites offers. A submitted tender is the offer. Acceptance may create one contract or a standing offer under which each order forms a contract.
Auction
The request for bids usually invites offers. Each bid is an offer and acceptance ordinarily occurs when the auctioneer completes the sale, subject to the governing terms and law.

Work through the facts

Illustration

Facts

A offers by telephone to sell goods to B. B says, "I accept," but the line drops and A does not hear the words. B assumes that a contract has formed.

Likely result

For instantaneous communication, the safer legal analysis is that acceptance must be received. If A did not hear it, B should repeat the acceptance.

What to learn

Do not mechanically apply the postal rule to telephone, video call, live chat or other substantially instantaneous communication.

Cases with a purpose

Landmark judgments

Learn the rule and where to use it. A case name without its legal function adds very little to an answer.

Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co.

Core case

AIR 1966 SC 543

Principle: In a telephone contract, the contract was treated as complete where acceptance was heard by the proposer, reflecting the receipt rule for instantaneous communication.

Use in an answer: Use it for telephone acceptance, place of contract and jurisdiction problems.

Read primary judgment

Felthouse v. Bindley

Core case

(1862) 11 CB (NS) 869

Principle: An offeror cannot impose acceptance by stating that the offeree's silence will be treated as consent.

Use in an answer: Use it whenever a question says, "If I hear nothing, I will assume you agree."

Carlill v. Carbolic Smoke Ball Co.

Core case

(1893) 1 QB 256

Principle: A general offer can invite acceptance by complete performance of its stated condition without a separate prior notice of acceptance.

Use in an answer: Use it for Section 8 and unilateral offers.

For a 10-mark answer

Answer structure

  1. Begin with Section 2(b), then state Sections 7 and 8.
  2. Check whether the response exactly matches the offer.
  3. Identify the mode of communication and apply the correct Section 4 timing rule.
  4. Consider revocation under Section 5 if competing messages cross.
  5. Use Bhagwandas for instantaneous communication and Felthouse for silence.

Common mistakes

  • Calling a conditional response an acceptance instead of a counter-offer.
  • Applying the postal rule to every electronic or instantaneous message.
  • Saying silence always amounts to acceptance.
  • Forgetting to state whether communication is complete against the proposer or against the acceptor.

Before you close the tab

Quick revision

  • Section 2(b) defines acceptance.
  • Section 7 requires absolute and unqualified acceptance.
  • Section 8 recognizes acceptance by performance or receipt of consideration.
  • Postal timing and instantaneous timing are not identical.
  • Silence cannot normally be imposed as acceptance.

Test yourself

  1. When is posted acceptance complete against the proposer?
  2. Why is a telephone acceptance complete on receipt?
  3. Can performance itself communicate acceptance?

Short answers

Frequently asked questions

Can silence amount to acceptance?

Ordinarily no. The proposer cannot force the offeree to reject. Acceptance may, however, be inferred from clear conduct in an appropriate factual setting.

When does acceptance by telephone become complete?

It ordinarily becomes complete when the acceptance is received or heard by the proposer.

Primary sources

This is an educational study note. Always read the bare provision and the full judgment before relying on a proposition in research or practice.