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acceptance. Until acceptance, it may be withdrawn, after acceptance its character is changed.20 An
offer by one person made to another imposes no obligation on the former, until it is accepted by the
latter according to the terms in which the offer is made.21 Thus, a mere offer to give first opportunity
to purchase, not perfected by acceptance, is not binding.22 Mere making of an offer does not form
part of the cause of action for damages for breach of contract which has resulted from the
acceptance of the offer. Ordinarily, it is the acceptance of the offer and intimation of that acceptance
which results in a contract.23 So, a mere proposal in writing by a tenant to take a lease on certain
terms,24 or a doul darkhast, i.e., a mere proposal by a tenant to pay a certain rent for a certain
land,25 does not amount to a lease. Further, if a party to an agreement embodied in a document is told
that a stipulation in the agreement would not be enforced, he cannot be held to have assented to it.
The document does not amount to the real agreement between the parties and the other party cannot
sue upon it. Oral evidence is admissible to show that the document was never intended to operate as
an agreement.26
(b) Communication of acceptance
An offer is accepted when the acceptance is communicated. The communication must be made to the
offeror and a communication of acceptance made to a third person creates no contract,27 when it is in
a mode not indicated by the offeror, e.g., when the offeree sends the letter of acceptance to his own
agent for transmission to the offeror.28 If a mode is indicated by the offeror and the offeree departs
from this, the offeror may refuse to be bound by the acceptance.29 In India, the rule is a little different
from that of English law. In India, if the acceptance is not made within the prescribed manner, it is the
duty of the offerer to reject it within a reasonable time. If he does not reject it within a reasonable
time, it will be presumed that he has, accepted it. This provision is contained in section 7(2) of the
Contract Act. But when a proposal is made through an agent and the acceptance is communicated to
him, the contract is complete and binding as if acceptance had been communicated to the proposer
himself.30 On the other hand, a communication has no legal effect if it is not authorized by the
offeree.31 An order to be effective must be made by a competent authority but must be communicated
to the person in whose favour or against whom it has been made. Until that is done, it is not a
completed order.32 The means of communication which a man has prescribed or authorized are
generally taken as against him to be sufficient, otherwise an unexecuted intention to communicate
something or even an unsuccessful attempt, cannot be treated as amounting to a communication,
much less can a mere mental act of assent have such an effect in any case.33
(c) Omission to communicate: acceptance by conduct
But the communication of acceptance need not be always express in the sense of notification of the
acceptance to the offeror. Under this section, the conduct of the acceptor or an omission on his part
to communicate may under certain circumstances amount to an acceptance.34 Mere silence cannot
amount to any assent. It does not even amount to any representation on which, any plea of estoppel
may be founded, unless there is a duty to make some statement or do some act. It is only when there
is a duty to disclose some fact, or to do some act, the deliberate silence may become significant and
amount to a representation.35 But though acceptance of a proposal may be made without express
communication by the conduct of the acceptor, a person making a proposal cannot impose on the
party to whom it is addressed, the obligation to refuse it under the penalty of implied assent, or attach
to his silence, the legal result that he must be deemed to have accepted it.36 Neglect to answer a
business offer is certainly not as a rule, prudent or laudable, still there is no legal duty to answer it.37
So the mere sending of a notice by a Bank to one of its customers that the interest charged on
overdrafts against security held by the Bank had been raised is not of itself sufficient to render the
customer liable to pay the enhanced rate. But where on receiving the notice, the customer borrows
more money from the Bank, it is justified in charging him interest at the enhanced rate.38 In case of
counter-proposal, a mere failure to reply to it would not per se amount to an acceptance of it. To
imply an acceptance, the counter-proposal must have conveyed at least an intimation that silence
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by any person who fulfils the condition.51 With regard to offer of reward for supplying a particular piece
of information the person who gives the information first is entitled to the reward.52
Though an offer may be made to the whole world, a contract can arise only by acceptance of the
offer. Hence, knowledge of the terms of the offer is essential for acceptance. Thus, where a person
sent his servant in search of his missing boy and subsequently offered a reward to any one who would
find the boy, the servant, on finding the boy, could not claim the reward, as his search for the boy
could not be regarded as a consideration for the promise of reward.53 The reason is that there can be
no consent or assent to that of which the party has never heard.54 But, if there is knowledge of the
offer, the motive of compliance with the terms of the offer is immaterial.55
6. Proposal and acceptance of purchase of shares
An agreement to purchase shares is not different from an agreement in relation to other matters and
the principles of the law of contract as regards proposal and acceptance before an agreement can be
concluded,56 and an allotment of shares on an application by one of the members of the public must be
communicated to the applicant.57 So in the case of an ordinary member of the public, a contract to
take shares is completed when an application for shares has been submitted, an allotment on the foot
of that application has been made, and notice of that allotment has been communicated to the
applicant.58 The provisions of section 30 of the Indian Companies Act need also to be considered and a
mere agreement to take shares is not of itself sufficient, for under the section, the placing of the name
of a share-holder on the register is a condition precedent to membership.59
Where, however, the proposal comes from the company and is accepted by a person the question of
notice of allotment becomes immaterial. Thus, where the proposal came from the companys agent
which was accepted by a person by signing an application for shares, and the persons name was
accordingly entered in the register of members as a shareholder, there was a completed contract
though no notice of allotment was received by the shareholder.10 Again, a company may be under an
obligation to allot shares to its directors. In such cases, it often happens that the company is regarded
as making an offer to the directors to take shares, the directors subsequent application for shares is
an acceptance of the offer, and when the application is made, the bargain is completed.61
A person who agrees to be a member of a company on some condition does not become a member if
the condition precedent is not fulfilled,62 even though shares have been allotted to him and his name
has been placed on the register.63 But a condition subsequent will not have the same effect.64
The register of members is prima facie evidence of membership and the burden of proving allegations as
to conditions and failure to send notice of allotment is on the person so alleging.65
7. Contract of Insurance
In cases of insurance, the acceptance of the premium by the insurance company does not of itself
show that they have accepted the offer. It is essential further that the premium should have been
fixed as until it is fixed, it is impossible to hold that there is a completed contract.66 On the other
hand, it is impossible to assent to the doctrine that without a delivered policy, there is no insurance. If
the premium is fixed, the insurance would have been effected, although no policy was delivered.67
Life insurance company issued a letter of acceptance mentioning that the risk will commence from the
date of issue of first premium receipt under the policy. At a later date, the interim policy receipt was
issued bearing an endorsement to the effect that the receipt is issued subject to personal statement
duly completed by debtor. It was held that the acceptance of the proposal was completed since it was
communicated to the plaintiff and it did not matter if the policy had not actually been issued.68
8. Acceptance by Court
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An offer may be accepted by the Court and it may inure to the benefit of a party.69
9. Plea of ignorance of conditions
Questions often arise with regard to the liability arising out of acceptance of a document confining
various terms or a document in which all the terms do not appear on the face of it. As Anson says:
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1. Noorbhai v. Karuppan, 1925 PC 232: 23 MLW 182.
2 Pothie r, Pt. 1, C h. 1, se ction 1, Art. 1, S. 2, pp. 4, 5.
3 Anson, p. 18, 17th e dn.
4 Sri Narayan Gosain v. C olle ctor C uttack , AIR 1986 O ri 46.
5 AIR 1970 SC 504: (1969) 2 SC C 343.
6 (1979) 4 SC C 602: AIR 1980 SC 17.
7 AIR 1980 MP 80; se e AIR 1966 SC 543 and (1974) 1 All ER 1015 (PC ).
8 AIR 1966 SC 543: (1966) 1 SC R 656.
9 AIR 1962 SC 378.
10 Tayle r v. Laird, 25 LJ Ex . 329.
11 EBI & R .P. C o. v. Ve layam m al, AIR 1937 Mad 571: ILR 1937 Mad 990.
12 Hindustan C o-op. Insurance Socie ty v. Sham Sunde r, AIR 1952 C al 691: 56 C W N 418.
13 SM Bholat v. Yak ohatm m a Spe cic Batik , AIR 1941 R angoon 270: 197 IC 890.
14 C e ntral Bank v. Bapuji, AIR 1949 Nag 286: ILR 1949 Nag 106.
15 Ex e cutive Engine e r Sunde rgarh v. Mohan Prasad, AIR 1990 O rissa 26.
16 Balfour v. Balfour, (1919) 2 KB 571.
17 C arlill v. C arbolic Sm ok e Ball C o., (1893) 1 Q B 256.
18 R ose & Frank C o. v. C rom pton Brothe rs, (1923) 2 KB 261.
19 State of Gujarat v. Varie ty Body Builde rs, AIR 1976 SC 2108, 2110: (1976) 3 SC C 500.
20 Anson, pp. 4, 5, 17th e dn.
21 Be ngal C oal C o. v. Hom e e W adia & C o., 27 Bom 97, 102.
22 Govindaswam i v. Doraiswam i, 1926 Mad 120: 91 IC 181.
23 Bhagwan Das Gove rdhandas v. Girdhari Lal Parshottam das & C o., AIR 1966 SC 543: (1966) 1 SC R 656.
24 Sye d Sufdar v. Am zad Ali, 7 C al 703 (FB).
25 Lall Jha v. Ne groo, 7 C al 717.
26 Tyagaraja v. Ve dathanni, 59 Mad 446: 1936 PC 70: 160 IC 384: 40 C W N 353 PC .
27 Fe lthouse v. Binde ly, 11 C BNS 869; Gopi v. R aghu, AIR 1949 Pat 552.
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Where a railway ticket for an excursion train is issued at half fare subject to the conditions and
regulations in the companys time tables and notices and excursion and other bills, the railway
company is to be treated as having made an offer to intending passengers that if they will accept the
conditions contained in the ticket, they will be taken at suitable times and fares. When the ticket is
taken, the person who takes it becomes bound by the conditions whether he took the trouble to
search out the conditions or understand then or not. The mere fact that the passenger has to make a
considerable search before he finds out the conditions does not make it insufficient notice, nor the fact
that the passenger cannot read would make any difference.76
Similarly, it is not necessary to prove that an insurance companys prospectus containing conditions of
insurance and referred to in the policy had been read by or specially brought to the notice of the
assured, apart from the reference made to it in the policy (which was expressed to be issued subject
to the regulations and conditions comprised in the prospectus). As regards the effect to be given to
the prospectus as a part of the contract of insurance, it would have effect as if it had been
reproduced in the policy itself.78 When there is no ground for supposing that the document was signed
under any misrepresentation that it was other than what it really was, so as to bring the case in the
class of those cases where the parties cannot be said to have agreed upon the same thing in the same
sense, acceptance of the document without protest amounts to a tacit acceptance of the conditions,
assuming them to relate to the matters of contract and to be of a more or less usual kind.79
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70 1894 AC 217.
71 C f. Hande rson v. Ste ve nson, LR 2 HL Sc App 470, condition for non-liability for loss or injury to a passe nge r or
his luggage printe d on the tick e t with no indication of its e x iste nce on the face of tick e t.
72 Park e r v. S.E. R y. C o., 2 C PD 426 (C A), conditions lim iting liability printe d on the back of a tick e t we re indicate d
by the words Se e back on the face of the tick e t ......Anson, p. 21, 17th e dn.
74 Madras R ailway C o. v. Govinda, 21 Mad 172.
75 Mack illican v. C om pagnic de s Me ssage rie s Maritim e s de France , 6 C al 227; the tick e t on its face state d that it
was issue d subje ct to ce rtain conditions on its back .
76 G.I.P. R y. v. C hak aravarti Sons, 32 C W N 53: AIR 1928 C al 170: 106 IC 247.
77 Thom pson v. London, Midland and Scottish R y. C o., (1930) 1 KB 41; condition ne gativing liability for accide nts.
78 O rie ntal Govt. S.L.A. C o. v. Narasim ha, 25 Mad 183, 205.
79 Standard O il C o. v. Haridas, 79 IC 456: 1921 Sind 121.
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