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What is Acceptance in Contract Law? Rules, Types & Examples

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26th Jun, 2023
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What is Acceptance in Contract Law? Rules, Types & Examples

Acceptance Definition

A legally enforceable agreement between two or more parties is referred to as a contract. A contract may be expressed either orally or in writing that includes an offer, acceptance, consideration, etc. According to contract law, acceptance is the act of approving or consenting to the conditions of an offer. It can be expressed either orally or in writing.

It is generally denoted as communication between two different parties. Offers can be accepted only if they are specific and transparent in their terms. If the offer contains some conditions or additional terms, then the conditions must be satisfied before it is accepted. I

Acceptance in Contract Law

Acceptance is an important theory in contract law. It is a legally binding agreement between two or more parties that entails responsibilities, benefits, or other considerations.  In order for acceptance to be  valid some requirements must be satisfied including capacity, mutual consent, legality, sufficient consideration in a contract, etc. In legal terminologies when someone agrees with an offer then they have to obey the terms made in the offer.

According to the Indian Contract Act, 1872, Section 2(b), acceptance is expressed as “When the person to whom the proposal has been made signifies his assent thereto, the offer is said to be accepted. Thus, the proposal when accepted becomes a promise.” In accordance with the definition, acceptance occurs when the offeree, to whom the proposal is made, accepts it unconditionally. This is like a promise once the offer is accepted. 

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For example, ‘X’ accepts Y’s offer to buy his car for five lac rupees. Once the offer is accepted it becomes irrevocable and becomes a promise. An offer does not constitute a promise but once it is accepted, a promise is made. This promise binds two different parties to legal obligations. Before acceptance, an offer may be withdrawn but once the acceptance is communicated it cannot be canceled.  Some situations which represent the term acceptance are presented below.

  1. According to insurance law, when an insurer accepts a person’s insurance application and subsequently issues them a policy to cover specific risks.
  2. When a bank pays for a check that was issued to a client who holds a checking account with the bank.

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Contract Offer and Acceptance Contract Law

Offer: Offer is defined as an expression of willingness to enter into a contract with the other party on specific terms with the intention of creating a legally binding agreement. The indication of your willingness may be a letter, email, or even your actions. Here the intentions of a person are not important. If it can be reasonably demonstrated that he intended to create a legally binding contract based on the case, that is sufficient. The other party can accept or reject an offer.

Acceptance: If the person agrees to all the terms of the offer made to him without adding any counter conditions then the offer is referred to as an acceptance. Sometimes, the offeree’s action may be considered an expression of acceptance. While determining if the acceptance has taken place or not, the court generally considers the correspondence between the parties.  It is important to notice whether the offeree accepts the proposal without conditions.

Rules regarding Valid Acceptance

There are some essential elements of a valid contract and acceptance that needs to be followed:

Acceptance can only be given to whom the offer was made

A specific offer or proposal can only be accepted by the person to whom it was made in the first place. The meaning of self-acceptance is that only the offeree’s acceptance is taken into consideration. No third party can accept the offer without the referee’s knowledge. If the offeree has designated a representative to accept on his behalf then also the acceptance is considered as a valid one.

Example: Sam sold his company to Jack, but he did not inform all of his creditors. Sam’s creditor Jone gave him an order. The goods were accepted and provided by Jack. Jone refused to pay because he still owed Sam’s money. According to the rule, Jack cannot accept the offer because it was never made to him, so there is no contract.

It has to be absolute and unqualified

Acceptance must be unconditional and pure. Conditional acceptance is not permitted because that would be a counteroffer, and the counteroffer cancels the original offer. 

Example: If Y is offered 5000 in exchange for X’s motorcycle. Y declares that he will agree if X will sell it for 3000. This will be considered as a counteroffer rather than the offer being accepted. 

Acceptance must be communicated

A proposal must be acknowledged by the offeror in order for it to be accepted and turned into a contract. Every offer must be acknowledged by the offeror in order to become a legally binding agreement.  The offeree must be aware that an offer has been made to him before he decides whether to accept it or not. It’s impossible to communicate acceptance without being aware of the offer. The communications must take place in any form that would normally be used in business.

Example: Y receives an offer letter from X to purchase his car for three lakhs. Y signs the contract but neglects to reply to the letter. In this case, acceptance has not been communicated and it becomes invalid.

It must be in the prescribed mode

The offer must be accepted in the manner that is specified by the offeror. If the method is not specified then it must be in a practical way that would be used in daily operations. However, if the offeror does not object after the offer has been accepted in a different way then it will be assumed that he has approved of that acceptance. 

Example: X makes Y an offer to buy his car for five lakhs. He requests that Y reply via postal mail. Y sends a mail approving his offer. If X does not ask Y to resend the response in a designated manner that means X has accepted B’s response.

Implied Acceptance

According to Section 8 of the Indian Contract Act of 1872, Acceptance by the promisee’s actions is acceptable. Therefore, implied acceptance is acceptable if a person takes certain actions that indicate that he has accepted the offer.

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Types of Acceptance

There are various types of acceptance in contract law as mentioned below:

Expressed Acceptance

A written or verbal acceptance made by the offeree is regarded as an expressed acceptance of the offer. If some drawers accept the transaction, but not all of them do, this is referred to as acceptance by some. The agreement must make the condition of acceptance crystal clear and easy to understand. When the drawee consents to pay the bill in installments, then the bill is accepted for installment payments. 

Example: X verbally and in person offers to buy Y’s car for five lakhs. X Sends the offer in an email and Y accepts the offer. This represents an open acceptance.

Implied Acceptance

It is referred to as an implied acceptance if the offeree’s conduct, mannerism, or any type of behavior convey the acceptance.

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Example: X has implicitly agreed to pay the amount that the grocery store is demanding in exchange for the goods.

Conditional Acceptance

Acceptance with conditions is also referred to as qualified acceptance. In this case, the offeree consents to accept the offer only if certain modifications are made to its terms and conditions. This offer is now a counteroffer.

Example: If the work is finished by the deadline, X agrees to pay Y for the renovation of his home.

Conclusion

According to contract law, acceptance is the act of approving or consenting to the conditions of an offer. It can be expressed either orally or in writing. The difference between an offer and acceptance in contract law is clearly expressed here. After that various rules regarding essentials of valid contract are described.  Next, types of acceptance are classified to present a clear idea about acceptance in contract law.

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Frequently Asked Questions (FAQs)

1What is a contract

A legally enforceable agreement between two or more parties is referred to as a contract. A contract may be expressed either orally or in writing that includes an offer, acceptance, consideration, etc.

2What is acceptance?

According to the Indian Contract Act, 1872, Section 2(b), acceptance is expressed as “When the person to whom the proposal has been made signifies his assent thereto, the offer is said to be accepted. Thus, the proposal when accepted becomes a promise.”

3What is an offer?

Offer is defined as an expression of willingness to enter into a contract with the other party on specific terms with the intention of creating a legally binding agreement. The indication of your willingness may be a letter, email, or even your actions.

4What is the difference between offer and acceptance?

If the person agrees to all the terms of the offer made to him without adding any counter conditions then the offer is referred to as an acceptance.

5What is expressed acceptance?

A written or verbal acceptance made by the offeree is regarded as an expressed acceptance of the offer.

6What is implied acceptance?

It is referred to as an implied acceptance if the offeree’s conduct, mannerism, or any type of behavior convey the acceptance.

7What do you mean by conditional acceptance?

Acceptance with conditions is also referred to as qualified acceptance.

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