The document discusses rules related to acceptance and communication of offers and acceptances under contract law. It states that for a valid acceptance, acceptance must be absolute and unqualified, expressed in a usual manner, communicated to the offeror, and given within a reasonable time period. It also outlines rules for when an offer or acceptance is considered communicated if sent by post versus communicated in person. Acceptances sent by post bind the offeror once posted, but the acceptor is not bound until the acceptance is received. If an acceptance and revocation are received at the same time, contract formation depends on which is read first. Contracts formed over telephone follow rules for oral contracts, with acceptance needing to be received to form a binding agreement.

1. Business Law & Legal Environ.
Lecture 5
(O2/03/2015)
Presenter:
ISMATULLAHBUTT
PhD(S)
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2. Contract Act-1872
Acceptance
 When the person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted {Sec. 2(b)}.
 Following Legal rules apply to a valid “Acceptance”:
1. Acceptance must be given by the person to whom the offer is made.
2. The acceptance must be absolute and unqualified {Sec 7 (1)}.
3. Acceptance must be expressed in some usual and reasonable
manner, unless the proposal prescribes the manner in which it is to
be accepted {Sec. 7(2)}.
4. Acceptance must be communicated by the acceptor.
5. Acceptance must be given within a reasonable time before the offer
lapses and/or revoked.
6. Acceptance must succeed the offer.
7. Rejected offers can be accepted only, if renewed.
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3. Communication, Acceptance and Revocation of Offer
 When parties are face to face, communication and acceptance are
instantaneous and a valid contract comes into existence.
 If postal services used, it is hard to ascertain the exact time at
which an offer or/ and an acceptance is made or revoked.
 Sec. 4 &5 lay down following rules in such cases.
(1) The communication of an offer is complete when it comes to the
knowledge of the person to whom it is made.
(2) The communication of an acceptance has two aspects i.e. against
the proposer and against the acceptor.
a) As against the proposer, when it is put in a course of transmission
to him so as to be out of power of the acceptor.
b) As against the acceptor, when it comes in the knowledge of the
proposer i.e. when letter of acceptance is received by the proposer.
Contract Act-1872
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4. Contract Act-1872
(3) Communication of a Revocation is complete:
 As against the person who makes it, when it is put into a course of
transmission to the person to whom its is made, so as to be out of
the power of the person revoking.
a) As against the person to whom it is made, when it comes to his
knowledge i.e. when the letter of revocation is received by him.
Time during which an offeroracceptance can be revoked:
In this context, Sec. 5 of the act provides as under:
“A proposal may be revoked at any time before the communication
of its acceptance is complete as against the proposer, but not
afterwards. An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the
acceptor but not afterwards.”444
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5. Contract Act-1872
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Effect of delay orloss of letterof acceptance in transit:
 An offeror is bound by the acceptance the moment the letter of
acceptance is posted despite the letter is delayed or lost in transit
and it never reaches the offeror.
 However, the letter must be correctly addressed, properly stamped
and actually posted.
 If the acceptance letter is misdirected due to wrong address, in law
no communication of acceptance occurs but if the offeror himself
furnished wrong address, he will be bound.
 Acceptor not bound by the acceptance letter till it reaches the
offeror and the contract remains voidable at the instance of the
acceptor till that time.
 The acceptor is at an advantage if letter of acceptance is delayed or
lost in transit.

6. Contract Act-1872
Accidental formation of Contract:
 What happens if both the “letter of acceptance” and the “ telegram
of revocation of acceptance” are delivered to the offeror at the
same time?
 Here the formation of contract will depend on a matter of chance.
 Offeror is bound if he reads letter of acceptance before telegram of
revocation of acceptance.
 If offeror reads the telegram of revocation of acceptance first, no
binding contract arises.
 In such cases, the formation of contract depends on a matter of
chance, therefore such contracts are called “ accidental for of
contracts”.
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7. Contract Act-1872
Contracts overTelephone
 There is instantaneous communication of offer and acceptance,
rejection and counter offer on telephone, the rule applicable to
contracts negotiated orally by the parties in the physical presence
of each other applies.
 The above referred rule is “contract is complete only when the
acceptance is received by the offeror”.
 If telephone suddenly goes ‘dead’, there will be no contract.
 The offeree must ensure that his acceptance is received (heard and
understood) by the offeror, otherwise binding contract will not arise.
 Quoting the words of Sir Anson;
“Acceptance is to an offer what a lighted match is to a train of
gunpowder”.
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