Indian Institute of Management, Kashipur

Master of Business Administration (MBA)

LEGAL ASPECTS OF BUSINESS (LAB)
Term II, 2020-22 | SESSION 2-3

THE INDIAN CONTRACT ACT,

1872
Prof Baharul Islam
IIM Kashipur 1
 • Section 2 (h) defines a contract as “ an
agreement enforceable by law” thus to
make a contract there must be :
1. An agreement
2. The agreement shall be enforceable by law.
3. All agreements are not enforceable by law
and therefore, all agreements are not
contracts.
2
Agreement

• According to Section 2(e) an agreement is defined as “ every

promise and every set of promises forming the
consideration for each other”.
• A promise is defined as an accepted proposal as Section 2(b)
says “a proposal when accepted becomes a promise “
Therefore it can be said that an agreement is an accepted
proposal.
• In an agreement there is a promise from both the sides. For
example, A promises to deliver his radio to B and in
return B promises to pay a sum of Rs. 500 to A , there is
said to be an agreement between A and B
3
Enforcement by Law

• An agreement is regarded as a contract when it is

enforceable by law.
• In other words, an agreement that the law will
enforce is a contract.
• The conditions of enforceability are stated in
Section 10. According to this section “all
agreements are contracts if they are made by the
free consent of parties competent to contract, for
a lawful consideration and with a lawful object,
and are not hereby expressly declared to be void.”
4
CASE: OFFER AND ACCEPTANCE

Som enters a shop to buy a DVD player. Different communications which

could take place between him and the shopkeeper, Arvind.

Situation 1: Som says, “I want a Philips DVD player. The price quoted in
the company’s advertisements is Rs. 4,000. Will you sell me
one for this price?” Arvind replies, “Yes sir, I will.”

Situation 2: Som says, “I want to buy a Philips DVD player.” Arvind

replies, “It will be Rs. 4,000, sir.” Som says, “Fine. Give me
one.”

Situation 3: Arvind says, “Philips is a good make. I recommend it to you.

It is priced at Rs. 4,200.” Som offers, “I can pay Rs. 3,500.”
Arvind responds, “We do not bargain.” Som says, “But still,
give me some discount.” Arvind says, “I will give it to you for
Rs. 4,000.” Som replies, “All right. I will buy one.”
5
VALID OFFER
▪ An offer must be firm, unambiguous and clear.
▪ Offer-maker should intend to get bound by certain rights and
obligations.
▪ The offer and acceptance can be express (spoken or written in
words) or implied in gestures, body language, actions, commissions
and omissions.
▪ Non-written contracts are as valid as written contracts.
▪ An agreement is formed on the acceptance of an offer.
▪ Communications preceding an offer can be aimed at soliciting
offers. For this reason, these are called ‘invitations to offer’.
▪ In understanding any communication, one is not to explore what
the person actually meant (subjective intention). Instead, one takes
the objective viewpoint as to what it would mean to an external,
reasonable person. 6
ESSENTIALS OF A
VALID CONTRACT

1. The agreement should be between two parties. An

agreement is the result of a proposal or offer by one party
followed by its acceptance by the other.
2. The agreement should be between the parties who are
competent to contract.
3. There should be a lawful consideration and lawful object in
respect of that agreement.
4. There should be free consent of the parties, when they
enter into the agreement.
5. The agreement must not be one, which has been declared
to be void.
7
Proposal of offer

The term proposal has been defined in section 2(a) as

follows:
• “When one person signifies to another his
willingness to do or abstain from doing anything
with a view to obtaining the assent of that other to
such act or abstinence, he is said to make a
proposal.”

8
TO DO OR ABSTAIN ?

The willingness to do or abstain from

doing something, i.e. the proposal or
offer must be made with a view to
obtain the assent of the other party
thereto. For example, A’s willingness
to sell his radio set to B for Rs. 500 if
B accepts to purchase the same,
amounts to proposal by A for the sale
of the radio set. But if a statement is
made without any intention to obtain
the assent of the other party thereto
that cannot be termed as proposal. 9
OFFER Vs
INVITATION TO TREAT

• A proposal or an offer has is different from

an invitation to treat.
• Sometimes a person may make some
statements or give some information with a
view to invite others to make offers on that
basis.
• For example, a bookseller’s catalogue is not
an offer to sell those books at prices
indicated against those books. This is an
‘Invitation to treat.’
• Similarly, inviting persons to an auction
where goods- The intending buyers, who
make the bid make an offer. Such an offer,
when accepted, by the fall of hammer or in
some other customary way, will result in a
contract. 10
Intention to create
Legal Relationship

• In order that an offer, after acceptance, can result in a

valid contract it is necessary that the offer should be made
with an intention to create legal relationship.
• Promise in the case of a social engagements is generally
without an intention to create legal relationship
• Sometimes the party may expressly mention that it is not a
formal or legal agreement, whereas in some other cases
such an intention could be presumed from their
agreement.
• The test to know the intention of the parties is objective
and not subjective. Merely because the promisor
contends that there was no intention to create obligation
would not exempt him from liability.
11
CASE

• In Rose and Frank Co. Vs. Crompton & Brothers Ltd. the
agreement between the parties provided –
• “This arrangement is not entered into ………. as a formal or
legal jurisdiction in the Law Courts……. that it (the
agreement) will be carried through by parties with mutual
loyalty and friendly co-operation.”
• One of the parties made a breach of this agreement. In an
action by the other party to enforce the agreement, it was
held that since the agreement had provided that it was not
a formal or legal agreement the same was not
enforceable..
12
CASE

• In the case of Meritt Vs. Meritt, (1970) the

husband and wife were the joint owners of a
building which was subject to a mortgage to a
building society. The husband left the
matrimonial home to live with another
woman. At that time, at the insistence of the
wife, the husband signed a note saying that
the wife will pay all outstanding amounts in
respect of the house and in return “I will
agree to transfer the property into your
sole ownership”.
• It was held that in this case it was clear that
the parties intended to create legal
relationship and, therefore, the husband was
bound by the contract 13
COMMUNICATION OF
OFFER

• An offer when accepted results in a contract.

An offer can be accepted only after the same
has come to the knowledge of the offeree. It
means that the offer has to be
communicated to the offeree in order that
the offeree can accept it.
• According to section 4, “ the communication
of a proposal is complete when it comes to
the knowledge of the person to whom it is
made.”
14
CASE
• If an offer has not yet been communicated, even if somebody acts according
to the terms of the offer, he cannot be deemed to be the acceptor of the
offer. Acting in ignorance of an offer does not amount to the acceptance of
the same. This point may be explained by referring to the case of Lalman
Shukla Vs. Gauri Dutt. (1913)
• In this case the defendant’s nephew absconded from home. The plaintiff,
who was defendant’s servant, was sent to search the missing boy. After the
plaintiff had left in search of the boy, the defendant issued handbills
announcing a reward of Rs. 501 /- to anyone who might find the boy. The
plaintiff who was ignorant of this reward, was successful in searching the
boy. When he came to know of the reward, which had been announced in
his absence, he brought an action against the defendant to claim this
reward.
• It was held that since the plaintiff was ignorant of the offer of reward, his act
of bringing the lost boy did not amount to the acceptance of the offer, and
therefore, he was not entitled to claim the reward. 15
CASE
•In Williams Vs. Carwardine (1833) the plaintiff who knew that the
reward had been announced to be given to anyone who gave
information leading to the conviction of an assailant for
murder, gave the necessary information. While giving the
information the plaintiff mentioned that she had given the
information ‘to ease her conscience’.
•At that time she did not intend to claim the reward. It was held
that since the offer had been accepted with its knowledge, there
was a valid contract and, therefore, she was entitled to claim
the reward.
•If the plaintiff has the knowledge of the offer, his acting in
accordance with the terms thereof amounts to the acceptance
of the same. In such a case it is immaterial that at the time of
accepting the offer the acceptor does not intend to claim the
reward mentioned in the offer.
16
Cross Offers

• When the offers made by two persons to each other containing

similar terms of bargain cross each other in post they are
known as cross offers. For example, on 1st January A offers to
sell his radio set to B for Rs. 500/- through a letter sent by
post. On the same date B also writes to A making an offer to
purchase A’s radio set for Rs. 500 /- When A or B send their
letters they do not know about the offer which is being made
by the other side.
• In these cross offers, even though both the parties intend the
same bargain, there arises no contract. A contract could arise
only if either A or B , after having the knowledge of the offer,
had accepted the same.

17
CASE

• In (Tinn Vs. Hoffmann 1873), A wrote to B

indicating his willingness to sell 800 tons of iron at 69
s. per ton. On the same day B also wrote to A
offering to buy 800 tons of iron at the same rate of 69
s. per ton. The two letters crossed each other in post.
B brought an action against A for the supply of iron
contending that a valid contract had been created
between the two parties.
• It was held that in this case there were only two cross
offers and the offer of neither of the parties having
been accepted by the other, there was no contract
which could be enforced 18
 SPECIFIC AND
GENERAL OFFERS
• When the offer is made to a specific or an ascertained person it is
known as a specific offer, but when the same is not made to any
particular person but to the public at large it is known as general
offer.
• For instance, an offer to give reward to anybody who finds a lost
dog is a general offer This general agreement will be deemed to
be accepted by anyone who actually finds the lost dog. The
person, who accepts this offer, generally by performing the
condition of the proposal, can bind the person making the offer.
• According to Section 8, “Performance of the conditions of a
proposal ….. is an acceptance of the proposal.” Thus although a
general offer is made to the public at large, the contract is
conclud4d only with that person who acts upon the terms of the
offer.
19
 CASE
• The case of Carlil Vs. Carbonic Smoke Ball Co. (1893) is an
illustration of a contract arising out of a general offer. The facts of the
case are : The defendants advertised their product “Carbonic Smoke
Ball”, a preventive remedy against influenza. In the advertisement
they offered to pay a sum of 100 pounds as reward to any one who
contracted influenza, colds or any disease caused by taking cold, after
having used the Smoke Ball three times a day for two weeks, in
accordance with the printed directions. They also announced that a
sum of 1000 pounds had been deposited with the Alliance Bank to show
sincerity in the matter. The plaintiff ( Mrs. Carlil ) relying on the
advertisement purchased a Smoke Ball from a chemist, used the same in
accordance with the directions of the defendants, but still caught
influenza. She sued the defendants to claim the reward of 100 pounds
advertised by them.
• It was held that this being a general offer addressed to all the world had
ripened into a contract with the plaintiff by her act of performance of
the required conditions and thus accepting the offer. She was therefore,
entitled to claim the reward.
20
 Revocation Of Offer
• It is only after the acceptance of an offer that there arises a
contract and then both the parties becomes bound by their
respective promises. Before the offer has been accepted it can
be revoked. After the offer has been accepted it ripens into a
contract and then it cannot be revoked.
• According to Section 5 :“ A proposal may be revoked at any
time before the communication of its acceptance is complete as
against the proposer, but not afterwards.”
• In case of sale by auction the bids made at the auction are offers,
and the highest offer may be accepted by the auctioneer. In
such a case the sale is complete when the auctioneer announces
its completion by the fall of the hammer or in any other
customary manner ; and , until such announcement is made, any
bidder may retract his bid.
21
 CASE

• In Rajendra Kumar Verma Vs. State of Madhya Pradesh AIR 1972 the respondents
advertised for receiving tenders for sale of Tendu Patta (leaves). The petitioner submitted
his tender. Before the date of the opening of the tenders the petitioner made an
application withdrawing his tender and also requesting that his tender be not opened.
One of the conditions in the tender notice was that a tenderer may withdraw his tender
before the tender are open provided that there should be at least one other valid tender
when the tenders are opened. Petitioner’s tender was the only tender submitted. In spite
of his request to withdraw the tender the Government accepted his tender. Since the
petitioner did not execute the purchaser’s agreement , Tendu leaves were sold to
somebody else at a lower rate, and then an action was brought against the petitioner to
claim compensation for the loss suffered by the Government.
• The contention of the petitioner was that since he had withdrawn his tender before
the same had been opened and accepted, there was no offer in existence which could
be accepted. The respondents, however, contended that the offer could not be
withdrawn in accordance with the tender notice and, therefore, the petitioner’s offer
was still alive and had ripened into contract by acceptance.
22
CASE

• It was held that in spite of the clause in the tender notice

against the withdrawal of the offer, the petitioner had a
right to withdraw his offer before the same was accepted.
In this case there was no offer which could be accepted,
there had arisen no contract between the petitioner and the
respondents and, as such, the respondents had no right to
claim any compensation.
• Submission of a tender to supply or purchase goods at a
stated price is making an offer. Person submitting the
tender may withdraw his tender before the same has been
approved. Even after the tender has been approved that
remains only a standing offer, which is capable of being
revoked before a contract arises by placing of orders.

23
 SESSION 3
Indian Contract Act, 1872
PART II

…to be continued ….

24
Revocation in contracts by post
We have already seen earlier that as per Section
5, a proposal may be revoked at any time before
the communication of its acceptance is complete
as against the proposer, but not afterwards. In
contracts by post it has to be seen, as to what
time the communication of acceptance is
complete against the offeror, because no
revocation is possible after such communication
has been completed.
25
When is the communication of acceptance complete
against the offeror (proposer) ?
• According to section 4 : “The communication of an acceptance is
complete as against the proposer, when it is put in the course of
transmission to him, so as to be out of the power of the acceptor.”
• For instance in response to my offer sent by post to you, you post
the letter of acceptance to me. As soon you have posted the
letter my power to revoke comes to an end. This may be made
further clear by referring to the following illustration ;
• A proposes, by a letter sent by post, to sell his house to B . B
accepts the proposal by a letter sent by post. A may revoke his
proposal at any time before or at the moment when B posts his
letter of acceptance, but not afterwards.
26
Revocation

Section 6, mentions the various modes of revocation:

A proposal is revoked –
1. by the communication of notice of revocation by the proposer to
the other party ;
2. by the lapse of time prescribed in such proposal for its
acceptance or, if no time is so prescribed, by the lapse of a
reasonable time, without communication of the acceptance :
3. by the failure of the acceptor to fulfil a condition precedent to
acceptance :
4. by the death or insanity of the proposer, if the fact of his death
or insanity comes to the knowledge of the acceptor before
acceptance:
27
Notice of revocation

1. By Notice: An offer ripens into a contract after it is

accepted. Before it has been accepted it creates no
legal obligation and, therefore, it may be revoked at
any time before it is accepted.
2.To be effective the notice of revocation has to be
communicated by the proposer and not by anybody
else.
3.By lapse of time: A proposal is revoked by the lapse of
time prescribed in such proposal for its acceptance, or,
if no time is so prescribed, by the lapse of a reasonable
time, without communication of the acceptance.
28
• By the failure to fulfil a condition precedent
• When the offer is subject to some condition
precedent, such a condition has got to be fulfilled
before the acceptance is made. If there is failure of
the acceptor to fulfil a condition precedent to
acceptance, the offer stands revoked.
• For example, if the offer requires the deposit of some
earnest money, or the execution of some document
etc. these conditions must be fulfilled. Failure to fulfil
these conditions may make an offer to lapse.

29
By the death or insanity of the offeror
• An offer is revoked by the death or insanity of the proposer, if the
fact of death or insanity comes to the knowledge of the acceptor
before acceptance. In India the death or insanity of the offeror
does not automatically make the offer to lapse. The offer stands
revoked if the fact of death or insanity comes to the knowledge
of the acceptor before acceptance. It means that if the fact of
death or insanity has not come to the knowledge of the offeree
while he accepts the offer, it is valid acceptance giving rise to a
contractual obligation.
• In England the position is different. There, after the offeree
knows about the offeror’s death, the offer lapses and cannot be
accepted. 30
 Standing, Open or continuing offer
• An offer which is allowed to remain open for acceptance over a
period of time is known as a sanding, open or a continuing offer.
• For example, an offer to supply 1,000 bags of wheat from 1st January
to 31st December, in accordance with the orders which may be
placed from time to time to time, is a standing offer. As and when
the orders are placed that amounts to acceptance of the offer to that
extent. In the above stated illustration if an order for the supply of
100 bags of wheat is placed on 15th January, there is acceptance of
the offer to that extent and the offeror becomes bound to supply
those 100 bags of wheat. So far as the remaining quantity is
concerned this offer can be revoked just like any other offer.
• Tender for supply of goods is a kind of standing offer. An
advertisement inviting tenders is merely invitation for quotations.
When the tender is approved it becomes a standing offer. 31
 CASE

• In Bengal Coal Co. Vs. Homie Wadia & Co., the defendants
(Bengal Coal Co.) agreed to supply coal to the plaintiff (Homie
Wadia & Co. ) up to a certain quantity at an agreed price for a
period of 12 months, as may be required by the plaintiffs from
time to time. The plaintiffs placed orders for the supply of coal
and the same were complied with. Before the expiry of 12
months, the defendants withdrew their offer to supply further
coal, and refused to comply with the orders to supply further coal,
and refused to comply with the orders placed thereafter. They
were sued for breach of contract.
• There was simply a continuing offer to supply coal. They were
bound to supply coal only as regards orders which had already
been placed, but were free to revoke their offer for supply of coal
thereafter. 32
ACCEPTANCE

• A proposal when accepted, results in an agreement. It is

only after the acceptance of the proposal that a contract
between the two parties can arise.
• According to Section 2 (b) : “ when the person to whom the
proposal is made signifies his assent thereto, the proposal is
said to be accepted. A proposal, when accepted, becomes a
promise “
• The person making the proposal does not become bound
thereby until acceptance. As soon as his proposal is accepted
that is known as promise whereby both the parties become
bound.

33
 Effect of Acceptance

• A contract is created only after an offer is accepted.

Before the acceptance is made neither party is bound
thereby. At that stage the offeror is free to revoke or
withdraw his offer, and the offeree is free not to accept
the offer or reject the same. After the offer has been
accepted it becomes a promise which, if other
conditions of a valid contract is satisfied, binds both the
parties to the promise.
• After acceptance each party becomes legally bound by
the promise made by him through the medium of offer
or acceptance of it.
34
Essentials of a Valid Acceptance
In order that acceptance of an offer can result in a contract
the acceptance must satisfy the following requirements.
1. Acceptance should be communicated by the offeree to the
offeror.
2. Acceptance must be made in the prescribed manner, and
if no manner is prescribed, in some usual and reasonable
manner.
3. Acceptance should be absolute and unqualified.
4. Acceptance should be made while the offer is still
subsisting.
35
Acceptance should be
Communicated

• We have seen above that when the person to whom the

proposal is made signifies his assent thereto, the proposal is
said to be accepted. It means that the offeree must signify
his assent, or communicate the acceptance.
• When the parties are face to face, communication could be
oral. When they are at a distant place communication could
be made by post, by telegram, by a message on phone,
through a messenger, or in any other reasonable manner.
Sometimes the conduct of a person might indicate his assent.
For example, when a passenger boards a bus and travels
thereby, he impliedly assents to pay the necessary fare.

36
 Communication must be made
by the offeree or his authorised agent

• In order that the acceptance can be treated as valid it is necessary that the same
must be communicated to the offeror either by the offeree, or by some duly
authorised person on his behalf. If the communication is made by an
unauthorised person it does not result in a contract. In Powell Vs. Lee, (1908)
Powell was one of the candidates for the post of head master of a school. The
Board of managers passed a resolution selecting him for the post. No
communication about this decision was made to Powell by the Board. one of the
members of the Board who had not been authorised to communicate this
decision, acting in his individual capacity, informed Powell about his selection for
the post. Subsequently, the Board of managers met again and decided to cancel
the appointment of Powell and appoint another candidate, Parker, in Powell’s
place. Powell sued Lee, the chairman of the Board of managers for the breach of
contract.
• It was held that since the resolution passed by the Board was not communicated
to Powell by the Board, or any authorised person on its behalf, it could not give
rise to a contract. Powell’s action therefore failed.
37
When is communication
of acceptance complete ?
• As soon as the communication of acceptance is
complete that results in a contract whereby both
the parties become bound. In case the parties to
the contract are present at the same place, one
making the offer and the other communicating the
acceptance, both parties become bound
immediately.
• The problem arises when the parties are at a distant
place and the contract is concluded through post

38
Acceptance by post

Section 4 of the Act mentions the following rules when the

communication of acceptance is made by post :
1. The communication of acceptance is complete as against the
proposer, when it is put in the course of transmission to him, so
as to be out of the power of the acceptor.
2. The communication of acceptance is complete as against the
acceptor, when it comes to the knowledge of the proposer.

Illustration
B accepts A’s proposal by a letter sent by post. The
communication of the acceptance is complete, --
As against A , when the letter is posted ;
As against B, when the letter is received by A.

39
Offeror bound when
Letter of acceptance posted to him

It has been noted that the communication of

acceptance is complete as against the proposer when
the letter of acceptance is posted to him. Once the
letter of acceptance is posted the offeror becomes
bound.
He becomes bound immediately on the posting of the
letter to him and it makes no difference that the
receipt of the letter is delayed in transit, or even if
the letter is lost in the post and the offeror never
receives it.
40
 CASE

• In Dunlop Vs. Higgins (1848), Dunlop & Co. offered to sell 200
tons of pig iron at 65 sh. Per ton to Higgins & Co. through their
letters dated 22nd and 28th January, Higgins & Co. received the
letters on 28th and 30th January and replied on the same
indicating their acceptance to purchase the pig iron in accordance
with the offer. Due to frosty weather there was disruption in the
train services and the letter of acceptance instead of reaching on
31st January reached Dunlop & Co. on 1st February. Dunlop &
Co. refused to supply pig iron on the ground that the receipt of
the letter of acceptance by them had been delayed.
• Does Dunlop & Co. become bound by the contract as soon as the
letter of acceptance was posted to them ?
41
Communication of acceptance to a wrong person
• It has already been seen that the offeror becomes bound as soon as the letter of
acceptance is posted to him. If the letter of acceptance is posted at the wrong address or
to a wrong person, that will not bind the offeror. In this connection reference may be
made to the decision of the court in the case of Karan Singh Vs. The Collector,
Chhatarpur to explain the point. In that case in an auction of the quarry lease the
petitioner’s bid of Rs. 1,800 was the highest bid. In accordance with the auction
conditions the petitioner deposited the security deposit and earnest money of Rs. 540.
The bid was not accepted at the auction. The bid was subsequently accepted by the
collector, but instead of sending the communication of acceptance to the petitioner the
same was wrongly sent to somebody else. The officer concerned realised the mistake
after the expiry of the period of lease. Then a demand notice was sent to the petitioner
asking him to pay the lease money. The petitioner, on the other hand, demanded the
refund of the security deposit of Rs. 540.
• It was held that the petitioner’s bid, which was an offer, although accepted on file, did not
result in a contract as no intimation was sent to the petitioner which was received by him.
The demand notice for recovering the lease money was quashed and the respondents
were directed to refund the security deposit.
42
Acceptor Bound when his letter reaches the
offeror

It has been noted above that though the offeror

becomes bound when the letter of acceptance is
posted to him, the acceptor himself does not
become bound thereby. Acceptor becomes bound
by his acceptance when his letter of acceptance
comes to the knowledge of the offeror.

43
 Revocation of acceptance (India)
• In India, since the acceptor does not become bound immediately on
posting his letter of acceptance, he is free to revoke the acceptance
by adopting speedier mode of communication, whereby his
communication of revocation of acceptance may reach earlier than
his letter of acceptance. Section 5 expressly permits the revocation
of acceptance through the following provision :
• “An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the
acceptor, but not afterwards.”
• Illustration
• A proposes, by a letter sent by post, to sell his house to B. B accepts
the proposal by a letter sent by post. B may revoke his acceptance
at any time before or at the moment when the letter communicating
it reaches A, but not afterwards.
44
Revocation of acceptance (England)

Under the English law, once the letter of acceptance

is posted it binds both the parties and there appears
to be no scope of revocation of acceptance by
sending a telegram or through a phone call.
Although there are no English cases on the subject
are of the view that the posting of the letter of
acceptance once posted cannot be revoked.

45
Acceptance by Telephone or Telex
• Section 4 and 5, which makes provisions about the communication of
offer and acceptance and revocation thereof, do not make a mention
whether these provisions relate to communications through letters
and telegrams only or they also include communication made with
the help of telephone and telex also.
• In Bhagwandas Vs. Girdhari Lal & Co. (1966) the Supreme Court
has held that in case of telephonic conversation the position is the
same as in the case where the parties are in the presence of each
other, and the rule of contract through post does not apply to such
contracts. In case of acceptance sent by post the contract is
concluded when the letter of acceptance is posted, whereas in the
case of acceptance by phone, the contract is deemed to be complete
when the offeror hears the acceptance at his end rather than when
the acceptor speaks the words of acceptance.
46
Communication of acceptance Not needed
in acceptance by conduct
• It has been noted above that as a general rule no contract
can arise unless and until the acceptance has been
communicated to the offeror. In exceptional cases the
terms of the offer may be such which waive the necessity of
communication of acceptance, or a certain kind of conduct
on the part of the offeree may be treated sufficient to create
a contract. If that is so, the contract could be created even
without communication of acceptance.
• According to Section 8, “Performance of the conditions of
the proposal……………. Is an acceptance of the proposal.”
(Case of Mrs. Carlil Vs. Carbonic Smoke Ball Co.)
47
Acceptance should be in the prescribed manner
• If the proposal prescribes any manner of acceptance, the acceptance
must be made in that manner. When the manner of acceptance has not
been prescribed, it must be made in some usual and reasonable manner.
• Acceptance by post, telegram, telephone or through personal messenger
may be considered to be a usual manner of acceptance. If no manner of
acceptance is prescribed, acceptance in some usual and reasonable
manner will suffice. If, however, the proposal prescribes any particular
manner of acceptance, the acceptance must be made in that manner.
• If the proposal prescribes a manner in which it is to be accepted, and the
acceptance is not made in such manner, then, according to Section 7 (2),
of the Indian Contract Act, “the proposer may, within a reasonable time
after acceptance is communicated to him, insist that his proposal shall be
accepted in prescribed manner, and not otherwise ; but if he fails to do
so, he accepts the acceptance.” 48
Acceptance should be absolute and unqualified -
• Another essential of valid acceptance, which can convert a
proposal into a contract, is that the acceptance must be
absolute and unqualified.
• Conditional or qualified acceptance is no acceptance which
could result in a contract. By such an acceptance the offer is
deemed to be rejected. By such an acceptance the offer is
deemed to be rejected.
• The effect of such a counter-offer in the eyes of law is to
destroy the original offer. And an offer once refused is dead and
cannot be accepted unless renewed.
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Acceptance should be made while the offer is still subsisting

• We have seen earlier that the offeror is free to withdraw the

offer, or the offer is revoked under various circumstances
mentioned in section 6.
• After the offer has been withdrawn or has lapsed there is
nothing which can be accepted.
• It is, therefore, necessary that the acceptance should be made
while the offer is still alive and subsisting. Acceptance after the
lapse of the offer cannot give rise to a contract. Similarly, the
offer is deemed to have ended by rejection of the original offer
or a counter offer.

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Thank You !!

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