Acceptance

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Acceptance

  1. 1. Sujith
  2. 2. Acceptance “Acceptance to offer is what a lighted Match to a train of Gunpowder”- Anson’s Law of Contract
  3. 3. Acceptance Defined  A manifestation of willingness to be bound by the terms of an offer made in a manner invited or required by the offer.  An acceptance of an offer must be absolute and unconditional.  In order for the acceptance to be effective all of the terms of the offer must be accepted without change or condition.
  4. 4.  Sec 2(b) of Indian Contract Act 1872  “When a 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.”
  5. 5.  Acceptance results in the formation of a contract: both parties are bound and neither can withdraw from the bargain without incurring liability to the other.  Ordinarily, acceptance must be expressed or communicated by the offeree to the offeror, in order to manifest mutual assent.
  6. 6.  The manner in which acceptance is to be communicated may be specified in the offer, in which case that becomes the exclusive means of acceptance.  But if the offer prescribes no means any reasonable and usual mode may be adopted.
  7. 7.  Silence Not Ordinarily Acceptance Since acceptance must be communicated, ordinarily silence cannot constitute an acceptance to enter into a bilateral contract.
  8. 8. Mirror Image Rule  At common law, an acceptance which added qualifications or conditions or which in any way varied from the terms of the original offer was treated as a rejection and counter offer. This was true no matter how trivial the qualification or condition.  This was known as the "Mirror Image Rule." The underlying rationale is that the making of a counteroffer communicates to the offeror that the offeree does not wish to accept the offer.
  9. 9.  ACCEPTANCE MUST BE ABSOLUTE - In order to convert a proposal into a promise, the acceptance must –  (1) be absolute and unqualified;  (2) be expressed in some usual and reasonable manner, unless the proposal prescribed the manner in which it is to be accepted.  If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such a manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance. [section 7].
  10. 10. Manner of Acceptance  Traditional Approach  Traditionally, the nature of the contract dictated whether the offer could be accepted by a return promise or by actual performance of the promised act.  Acceptance by Performance; Unilateral Contracts  In a unilateral contract, the offer empowers the offeree to only accept by complete performance of the promise. The offeree's failure to perform does not constitute a breach since no contract is formed until the offeree renders full performance.
  11. 11.  Acceptance by Return Promise; Bilateral Contracts  In a bilateral contract, the offers empower the offeree to only accept by return promise. Bilateral contracts are formed upon the giving of the promise to perform an obligation in the future, and failure to fulfill such promise results in breach.  Modern Approach  Under the modern approach, an offer invites acceptance by any means reasonable under the circumstances, unless otherwise indicated by language or circumstances.
  12. 12.  This approach reflects the fact that many offers do not specify whether acceptance is to be by full performance or promise. A contract may be formed even if an offer clearly indicates that acceptance is to be by promise if:  the offeree begins to perform, in lieu of making the required promise; and  the offeror learns of the commencement of performance and acquiesces to such manner of acceptance.
  13. 13.  Acts Inconsistent with Offeror's Ownership or Receipt of Benefits  The common law holds that one who receives goods with knowledge or reason to know that they are being offered for a price is bound by the terms of the offer if he exercises dominion or control over such goods or engages in any other act inconsistent with the offeror's ownership.
  14. 14.  If the act wrongs the offeror, it is deemed a valid acceptance only if ratified by the offeror.  Similarly, one who receives benefits from services that he knows or has reason to know are being offered with the expectation of compensation, and where he has a reasonable opportunity to reject them, is liable for the reasonable value or stated value of such services.
  15. 15.  Acceptance by silence  Silence may not constitute an acceptance except where:  based on prior dealings between the parties, it is reasonable that the offeree should notify the offeror if he does not intend to accept; or  "where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer." 
  16. 16.  Medium of Acceptance  Unless the offeror indicates otherwise, the offeree may use any medium that is reasonable under the circumstances or, in non-goods contracts, the same medium as was used to communicate the offer or any other medium "customary in similar transactions at the time and place the offer is received."
  17. 17.  Notice of Acceptance  The offeror is entitled to notice of the acceptance. Thus, even if the offeree effectively accepts an offer and a contract is formed, failure by the offeree to notify the offeror of the acceptance within a reasonable time may preclude the offerer from enforcing the contract.
  18. 18.  Notice of Acceptance by Performance  Under common law, where an offer invites acceptance by performance, no notice is required to make the acceptance effective, unless the offeror so specifies. However, if the offeree has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the offeror's contractual duty will be discharged unless:  the offeree exercises reasonable diligence to notify the offeror of acceptance; or  the offeror learns of the performance within a reasonable time; or  the offer indicates that notification of the acceptance is not necessary.
  19. 19.  When an Acceptance Becomes Effective  An acceptance becomes effective according to the following rules:  The offeror may specify when the acceptance will be effective.  Absent such specification, an acceptance is effective when sent, if sent by reasonable means, e.g., by an authorized medium and with proper postage and correct address.
  20. 20.  If an acceptance is sent by means that are not appropriate or reasonable under the circumstances or if it is improperly dispatched, the acceptance will be effective upon receipt.  However, if the acceptance is reasonably but improperly dispatched, it will still be deemed effective when sent if it is received within the time in which a properly dispatched acceptance would have been received.
  21. 21.  Partial Acceptance  Acceptance must be of the whole of the offer.  Can not accept a part which is favorable and reject the remaining.  It is treated as counter offer unless the offeror agrees for the qualified acceptance.
  22. 22.  Inquiry into the terms of the proposal- not a counter proposal.  Where all the proposed terms are accepted and the counter proposal related only to the technical details of the proposal, the acceptance is binding.  Acceptance by a person to whom the proposal was not addressed is no acceptance.
  23. 23.  when the contract is concluded:  Sec 4. Communication when complete: communication of an acceptance is complete as against the proposor, when it is put in a course of transmission to him, so as to be out of the power of the acceptor ; as against the acceptor, when it comes to the knowledge of the proposor.
  24. 24. Adams v Lindsell rule  Adams v Lindsell 106 Eng.Rep. 250 (Court of King’s Bench, 1818).  The Defendants, wool dealers, sent a letter to Plaintiffs, wool manufactures, offering to sell them fleeces, upon receipt of their acceptance in the course of post.  Defendants mailed their offer to sell on the 2nd of September, 1817.  The Defendants’ letter was misdirected and did not reach the plaintiffs until 7:00 p.m., Friday the 5th.
  25. 25.  That night, Plaintiffs accepted Defendant’s offer, and mailed it directly back in a timely manner.  It was received by Defendant on the 9th, but they expected to receive it on the 7th and, in the meanwhile, had offered and sold their wool to another person.  Plaintiffs brought suit for the losses they sustained by not receiving the fleeces.
  26. 26.  The question was whether a valid contract had been formed prior to the wool being sold. The court concluded that it had as soon as the acceptance letter was posted and the defendants had therefore breached the contract by selling the wool to a third party.  The justification often given for the postal rule is if an offeror decides to conduct negotiations by post, they should accept the risks of delay. They can avoid this by stating in the offer letter a contract will only be formed once they receive an acceptance, so excluding the postal rule.
  27. 27.  In 1955, the courts decided the postal rule would not apply for telex, which was “instantaneous”, and acceptance would be on the basis of receipt by the offeror.  This decision was followed in 1983, but the courts recognised a telex may not reach the recipient immediately, for example if the message is received out of hours. Lord Wilberforce concluded: “No universal rule can cover all such cases: they must be resolved by reference to the intentions of the parties, sound business practice and in some cases by a judgment where the risks should lie.”
  28. 28.  The recent case of Thomas v BPE Solicitors concluded acceptance by email should be treated in the same way as other forms of instantaneous communication. The court recognised the difficulties that can arise and Lord Wilberforce’s comments when determining such cases.

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