Quick answer
Contents
- Meaning and legal effect
- Essentials of valid acceptance
- Absolute and unqualified assent
- Communication under Section 4
- Postal and instantaneous rules
- Conduct and silence
- Electronic acceptance
- Revocation of acceptance
- Tenders and auctions
- Worked problems
- Landmark cases
- Exam answer structure
- Frequently asked questions
- Sources and related notes
Meaning and legal effect of acceptance
Section 2(b) states that when the person to whom a proposal is made signifies assent to it, the proposal is accepted. An accepted proposal becomes a promise.
Acceptance is therefore more than agreement in the mind. The offeree must objectively signify assent through words, writing or conduct recognised by the offer and the Act. The precise act of acceptance matters because it identifies whether and when the parties crossed from negotiation into a binding promise.
Valid offer plus valid acceptance creates a promise. The promise becomes an enforceable contract only when consideration, capacity, free consent, lawful object and the other requirements of Section 10 are also satisfied.
Acceptance must be a response to the offer. A person who does not know of an offer cannot accept it, and an act performed for an unrelated reason cannot ordinarily be reclassified later as acceptance of a reward.
Essentials of valid acceptance
By the proper person
A specific offer can normally be accepted only by the person addressed. A general offer may be accepted by a person who knows of it and performs its terms.
Absolute and unqualified
Section 7 requires assent to the offer as made. A material change produces a counter-offer rather than acceptance.
Proper manner
Acceptance must follow a prescribed manner, or a usual and reasonable manner when none is prescribed.
Communicated or performed
Assent must be outwardly signified unless the offer invites complete performance as the mode of acceptance.
While the offer remains open
Acceptance must occur before revocation, rejection, lapse, failure of a condition or another terminating event.
With knowledge of the offer
Assent must relate to the proposal. Unknown reward terms cannot be accepted through accidental performance.
Acceptance must match the offer
Section 7 requires acceptance to be absolute and unqualified. The parties must assent to the same essential terms. A response changing price, quantity, delivery, liability or another material term is a counter-offer. It rejects the original offer and puts a new proposal before the original offeror.
A request for information is different. Asking whether delivery can be earlier may leave the offer open if the reply does not make earlier delivery a condition of assent. Courts read the whole communication to distinguish an inquiry from a conditional acceptance.
| Reply | Classification | Effect |
|---|---|---|
| "I accept your offer of Rs 50,000." | Acceptance | Assent matches the offer, subject to communication and other rules. |
| "I accept if you reduce the price to Rs 45,000." | Counter-offer | No acceptance of the original terms. |
| "Would you consider delivery on Monday?" | Possible inquiry | The original offer may remain open, depending on context. |
| "Agreed, subject to approval by my board." | Conditional response | Usually no final acceptance until the stated approval occurs and is effective. |
Communication of acceptance under Section 4
Section 3 recognises communication through an act or omission intended to communicate acceptance, or having that effect. Section 4 then supplies two different completion points.
| Acceptance is complete | Statutory point | Consequence |
|---|---|---|
| Against the proposer | When put into a course of transmission to the proposer so as to be beyond the acceptor's power. | The proposer becomes bound at the dispatch stage where the rule applies. |
| Against the acceptor | When the acceptance comes to the proposer's knowledge. | The acceptor becomes finally bound at receipt or knowledge. |
Students should always state against whom communication is complete. Writing only that acceptance is complete on posting is incomplete because Section 4 deliberately separates the proposer and acceptor.
Postal and instantaneous communication
Postal acceptance
Where post is an authorised or reasonable method, Section 4 applies its dispatch-and-receipt structure. Against the proposer, acceptance is complete when the properly addressed communication is placed in transmission beyond the acceptor's power. Against the acceptor, it is complete only when received by the proposer.
The rule should not be applied mechanically. The offer may require actual receipt, post may be unreasonable in the circumstances, or the communication may not have been properly placed in transmission. The offer's terms and the chosen method remain relevant.
Telephone and other substantially instantaneous methods
For telephone and similar real-time exchanges, acceptance ordinarily takes effect when it is received or heard by the proposer. If a call drops before the words are heard, the offeree should repeat the acceptance. The rule reflects the ability of both parties to discover the communication failure immediately.
Email, messaging platforms and automated systems do not always fit neatly into either category. Courts examine transmission, receipt, business practice, the parties' terms and whether the message was accessible in the designated system.
Acceptance by conduct and the rule on silence
Section 8 recognises acceptance by performing the conditions of a proposal or accepting consideration offered with it. A public reward can therefore be accepted by a person who knows of the offer and completes the stated act. A separate advance notice of acceptance may be unnecessary where the offer itself invites performance.
Section 9 recognises express and implied promises. Conduct may show assent when it is referable to the offer, such as ordering and receiving supplies under an agreed commercial arrangement. The court looks for objective conduct, not an undisclosed intention to agree.
An offeror cannot ordinarily say, "If you do not reply, I will treat that as acceptance." The offeree has no general duty to reject. A course of dealing or clear conduct may support an inference of assent, but silence alone is not acceptance merely because the offeror declared it so.
Electronic acceptance and formal contracts
Contracts can be formed through email, messaging or a digital platform when the exchange identifies the offer, shows unconditional acceptance and settles the essential terms. A typed name, click or other electronic action can signify assent depending on the transaction and applicable law.
The fact that parties expect a detailed document later does not always prevent immediate formation. The decisive question is whether they intended the signed document to be a condition of being bound, or merely a formal record of an agreement already reached.
In Trimex International FZE Ltd. v Vedanta Aluminium Ltd., the Supreme Court found a concluded contract from the email exchange where the commercial offer was accepted and essential terms were settled. The absence of a later signed formal contract did not undo the agreement on those facts.
Revocation of acceptance
Section 5 permits acceptance to be revoked at any time before its communication is complete against the acceptor, but not afterwards. Read with Section 4, this creates a period during which dispatched acceptance may bind the proposer but can still be withdrawn by the acceptor if the revocation reaches the proposer first.
B posts acceptance to A and then sends a faster revocation that reaches A before the letter. The acceptance may be revoked under Section 5 because its communication was not yet complete against B when the revocation reached A.
This statutory result must be kept separate from revocation of the offer. The proposer may revoke the proposal only before acceptance becomes complete as against the proposer.
Acceptance in tenders and auctions
In a tender process, the submitted bid is ordinarily the offer. Acceptance may create a contract for a fixed supply or a standing offer under which each later order creates a separate contract. A letter marked as acceptance must still be checked for conditions, approvals and the authority of the person issuing it.
In an auction, each bid is ordinarily an offer. Acceptance usually occurs at the announced completion event, but public auctions often require confirmation by a competent authority. A provisional acceptance subject to confirmation does not itself create a concluded contract.
These problems are solved by separating every communication: invitation, bid, provisional response, approval, final acceptance and communication of that acceptance.
Worked problems
Conditional reply
A offers to sell 100 units at Rs 500 each. B replies, "Accepted at Rs 450 each." B has made a counter-offer. There is no acceptance of A's terms.
Acceptance during a failed call
B says "I accept" by telephone, but the line fails and A hears nothing. For substantially instantaneous communication, receipt is required. B should repeat the acceptance.
Silence imposed by the offeror
A writes, "If you do not reply by Friday, I will assume you agree." B does nothing. A cannot create acceptance merely by imposing a duty to reject.
Email deal followed by a draft
The parties settle price, quantity and delivery by email and write that the deal is confirmed. A later document is described only as a formal record. The earlier correspondence may already contain a concluded contract.
Posted acceptance overtaken by revocation
B posts acceptance and sends a faster withdrawal that reaches A first. Apply Sections 4 and 5 separately against A and B. The revocation can be effective before acceptance is complete against B.
Landmark cases on acceptance
Bhagwandas Goverdhandas Kedia v Girdharilal Parshottamdas
AIR 1966 SC 543
Rule: In a telephone transaction, the contract was complete where the acceptance was heard by the proposer. The case establishes the receipt approach for substantially instantaneous communication and helps determine the place of contract.
Read Supreme Court judgmentTrimex International FZE Ltd. v Vedanta Aluminium Ltd.
(2010) 3 SCC 1
Rule: A binding commercial contract arose through emails that recorded the offer, acceptance and essential terms. A later formal agreement was not a condition precedent to formation on the facts.
Read Supreme Court judgmentLIC of India v Raja Vasireddy Komalavalli Kamba
(1984) 2 SCC 719
Rule: Mere receipt or retention of premium and preparation of a policy did not establish acceptance of the insurance proposal. The competent insurer had to signify unconditional acceptance through a definite act.
Read Supreme Court judgmentFelthouse v Bindley
(1862) 11 CB (NS) 869; 142 ER 1037
Rule: The offeror could not impose a sale by stating that silence would be treated as assent. An uncommunicated intention to accept did not create the contract claimed by the offeror.
Carlill v Carbolic Smoke Ball Co.
[1892] EWCA Civ 1; [1893] 1 QB 256
Rule: A general offer may invite acceptance through complete performance of its condition. Separate advance notification is unnecessary where the offer objectively dispenses with it.
Read judgmentHaridwar Singh v Bagun Sumbrui
AIR 1972 SC 1242; (1973) 3 SCC 889
Rule: Provisional acceptance of an auction bid subject to government confirmation did not create a concluded contract without the required confirmation and effective communication.
Read judgmentExam answer structure
- Define acceptance under Section 2(b).
- Identify the offer and the person entitled to accept it.
- Apply Section 7 to test whether assent is absolute and properly made.
- Identify the mode of communication and apply Section 4 against each party.
- Consider Sections 8 and 9 where assent is based on performance or conduct.
- Apply Section 5 if acceptance or the offer was revoked.
- Use the case matching the communication method and conclude directly.
Frequently asked questions
What is acceptance under the Indian Contract Act, 1872?
Under Section 2(b), a proposal is accepted when the person to whom it is made signifies assent to it. Once accepted, the proposal becomes a promise.
What are the essentials of valid acceptance?
Acceptance must respond to a valid offer, be made by the proper person, be absolute and unqualified, follow the prescribed or reasonable manner, be communicated or validly performed, and occur before the offer ends.
Can silence amount to acceptance?
An offeror cannot ordinarily impose acceptance by declaring that silence will count as consent. Assent may still be inferred from conduct or a course of dealing where the facts objectively justify that inference.
When is postal acceptance complete?
Under Section 4, it is complete against the proposer when placed in transmission beyond the acceptor's power, and against the acceptor when it comes to the proposer's knowledge.
Can acceptance be revoked?
Yes. Section 5 allows the acceptor to revoke acceptance before its communication is complete against the acceptor, but not afterwards.
Can emails create a binding contract?
Yes. If the correspondence shows a definite offer, unconditional acceptance and agreement on essential terms, a later formal document may not be necessary unless the parties intended not to be bound before signing it.