Acceptance under Indian Contract Act, 1872

Section 2(b) of the Act clearly requires that acceptance must be signified to be valid. Further, Section 3 prescribes the mode of communication, requiring an act or omission by which the accepting party intends to communicate their assent, or which carries the effect of doing so. As per Section 9, this mode of acceptance could be express, through spoken or written words, or implied, through conduct. Therefore, as evident from the text of the Act itself, what is required is an external manifestation of the offeree’s intent to enter into a legal relationship with the offeror through some act or omission of an act. According to Cheshire and Fifoot: 

“An invitation to accept or even a mental resolve to accept, does not give rise to a contract. There must be some overt or external manifestation of the intent to accept the proposal in order to form a contract.” 

In the landmark case of Felthouse v. Bindley [5], the plaintiff had proposed to buy the horse of his nephew at a specific price through a letter with the quote “If I hear no more about him, I shall consider the horse mine..” at that price. The nephew did not reply to this letter, however, he asked the defendant (the auctioneer) to not sell the horse. When the defendant sold the horse by mistake, the plaintiff sued him for conversion of property. Adjudicating the dispute, Court observed that no communication of acceptance was made by the nephew to his uncle (the plaintiff) even though he clearly intended to reserve the horse for him. Accordingly, due to lack of communication of acceptance, the Court held that there was no formation of Contract between the plaintiff and his nephew. Therefore, the claim of plaintiff against defendant was dismissed. Here, since the nephew did not communicate his intent to accept to the uncle directly, there was no meeting of the minds between them because minds align to the same understanding when there is communication of a valid proposal and in return a valid acceptance. A mere mental determination to accept cannot bind another person into a contract.

In another case, Karan Singh v The Collector, Chhatarpur [6], the petitioner’s bid to an auction of quarry lease was the highest. And even though the bid was not accepted at the auction, the petitioner had paid security and earnest money for the same. Later on, his bid was accepted by the Collector but instead of sending the communication of acceptance to the petitioner, it was sent to someone else by mistake. The Collector came to realize the mistake only after the expiry of the period of lease. A demand notice was issued to petitioner to pay for the lease, however, the petitioner demanded a refund of the security and earnest money deposited initially. The court held that since the bid was accepted on the file by the Collector but no formal communication was made to the offeror, there was no contract and the respondent was directed to refund the security and earnest money as such. Thus, to constitute a valid acceptance, there must be an overt act or omission that manifests the offeree’s intention to accept or has the objective effect of communicating that assent to the offeror. This communication may be express, conveyed through spoken or written words, or implied, where assent is demonstrated directly through the offeree’s conduct. Common examples of implied acceptance include:

• Acceptance by Conduct: A key ruling that illustrates implied acceptance by conduct is Brogden v. Metropolitan Co. [7] where Brogden had been supplying coal to the Metropolitan Railway Co without a formal written contract. Seeking to formalize the same, the company sent a draft agreement to Brogden which was filled by him with a few blank sections including insertion of an arbitrator etc. in legal other words, these additions turned the draft sent by Brogden into a counter-offer. The Railway Company’s manager simply placed the revised draft into his desk drawer without communicating their formal acceptance to the changes made in the draft. The parties carried on with their business as per the new understanding. When a dispute arose, the Court held that there was binding contract between parties since the parties had, by their subsequent conduct, objectively manifested their assent to the new terms. Although storing the revised draft in a desk drawer was a mere mental acceptance, both parties proceeded to act strictly in accordance with the amended agreement. Brogden supplied coal under the updated terms and price structure, and the Railway Company regularly received those shipments and made payments accordingly. By embarking on a course of dealing referable solely to the terms of the revised draft, the parties’ mutual performance created a binding contract by conduct, rendering Brogden’s counter-offer fully accepted in law.