MBA II Semester III Legal Aspects of Business (LAB)

Prepared By : Vishal Goel (099240 46460)

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ACCEPTANCE

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GTU MBA Sem 3 Batch 10-12 Legal Aspects of Business ( LAB )

ACCEPTANCE
It is the act of assenting by the offeree to an offer. It is the manifestation by the offeree of his willingness to be bound by the terms of the offer. An offer when accepted becomes a promise. When the person to whom a proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise. The person making the proposal is called the Promisor and the person accepting the proposal is called the Promisee. [Sec.2(c) ]
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Mode of acceptance
Express or Implied: When communicated by words, spoken or written. Implied means when it is gathered from surrounding circumstances or conduct of the parties.
EX-1 X says to Y, Will you purchase my car for Rs. 1,00,000? Then Y says, I am ready to purchase your car for Rs. 1,00,000. Ex-2 At an auction sale, S is the highest bidder. The auctioneer accepts the offfer by striking the hammer on the table. This is an implied acceptance. Ex-3 A widow promised to settle some immovable property on her niece if stayed with her residence. The niece stayed with her in her residence till her death. Held, the niece was entitled to the property. Ex-4 A transport company runs buses on different routes to carry passengers. X, a passenger board the bus. Xs act is an implied acceptance by X and he is bound to pay the fare.
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Who can Accept

In case of Specific Offer: Only by definite person or a particular group of person to whom it is made.
Ex-1: X sold his business to Y but this fact was not known to an old customer Z. Z placed an order for certain goods to X by name. Y supplied those goods to Z.Is there any contract between Y and Z? Ans: There was no contract between y and Z because Z never made any offer to Y. [ Boulton v. Jones]

In case of General offer: By any person having knowledge of the offer by fulfilling the terms of the offer. Ex-1: A Company advertised that it would pay $ 100 to anyone who
contracts influenza after using the smoke balls of the company according to the printed directions. Mrs. Carlil used the smoke balls according to the printed directions bur subsequently she contracted influenza. She filed a suit for the reward. Was she entitle to recover the reward? Ans: It was held that she was entitled to recover the reward because she had accepted the offer by complying with the terms of the offer. [ Carlil v. Carbolic Smoke Ball Company] 3 Batch 10-12 Legal GTU MBA Sem
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LEGAL RULES AS TO ACCEPTANCE

It must be absolute and unqualified. It must be communicated to the offeror. It must be according to the mode prescribed or usual and reasonable mode. It must be given within a reasonable time. It cannot precede an offer. Intention on the parts of acceptor to fulfill the promise. It can not be implied from silence.
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It must be absolute and unqualified.

Sec-7(1) In order to convert a proposal into promise, the acceptance must be absolute and unqualified. An offer must be accepted without any reservation, variation or condition Ex-1: M offered to sell a piece of land to n at $ 280. N accepted and enclosed $ 80 with a promise to pay by monthly installment of $ 50 each. Is there any contract between them? Ex-2: X offered to sell two plots of land to Y at a certain price. Y accepted the offer for one plot. Was his acceptance valid? Ex-3: A says to B, I offer to sell my car Rs. 50,000. B replies, I will purchase it for Rs. 45,000. Is there any acceptance on the part of B?
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It must be communicated to the offeror.

The acceptance must be signified. ( Mere resolve or Mental determination by offeree is not sufficient ) It is complete when communicated to the offeror. Ex- X offered to supply coal to a railway Company. The manager of the company accepted the offer and put in the drawer of his table and forgot all about it. Is there any contract? Ex-2: A tells b that he intends to marry C, but tells C nothing of his intention. There is no contract, even if C is willing to marry A. Ex-3: F offered to buy his nephew horse for $150 saying: If I hear no more about it I shall consider the horse is mine at $ 150. The nephew did not write to F at all, but he told his auctioneer who was selling his horses not to that particular horse because it had been sold to his uncle. The auctioneer inadvertently sold horse. Has F right of action against the auctioneer ?
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It must be according to the mode prescribed or usual and reasonable mode. Ex-1 X of Agra send a letter by post to Y of Delhi offering to sell his car for Rs. 1,00,00 and also writes send your acceptance by telegram. y sends his acceptance by an ordinary letter. Is it a valid acceptance? Ans: X can reject such acceptance on the ground that it was not accepted in the prescribed manner. But if he does not inform y within reasonable time, he shall be deemed to have accepted such acceptance and a valid contract will be formed between X and Y.
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It must be given within a reasonable time.

If any time limit is prescribed, acceptance must be given within than time. If no time limit is there, acceptance must be within a reasonable time- depends upon facts and circumstances of the case. Ex-1: An offer to buy shares of a company was made in June but the acceptance was communicated in November, it was held that the offeror was not bound by the acceptance because the acceptance was not given within a reasonable time.
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It cannot precede an offer.

If the acceptance precedes an offer, it is not a valid acceptance and does not result in a contract

In a company shares were allotted to a person who had not applied for them. Subsequently when he applied for shares, he was unaware of the previous allotment. The allotment of shares previous to the applicant is invalid
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 Intention on the parts of acceptor to fulfill the promise.

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It can not be implied from silence.

The acceptance can not be implied from the silence of the Offeree or his failure to answer. Unless the Offeree has his previous conduct indicated that his silence means that he accepts. Ex-1 A wrote to B, I offer you my car for Rs. 10,000. If I dont hear from you in seven days, I shall assume that you accept. b did not reply at all. There is no contract.

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By Whom
Acceptance must be communicated by the Offeree himself or by the person who has authority to accept. Ex: P applied for the post of a headmaster in a school. The managing committee passed a resolution approving P to the post but this decision was not communicated to P. But one member of the committee in his individual capacity and without any authority informed P about the decision. Subsequently, the managing committee cancelled its resolution and appointed someone else. P filed a suite for breach of contract. Was P liable to maintain his suite?

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To Whom
Acceptance must be communicated to the offerer himself. Ex: F offered by a letter to buy his nephew horse for
$150 saying: If I hear no more about it I shall consider the horse is mine at $ 150. The nephew did not write to F at all, but he told his auctioneer who was selling his horses not to that particular horse because it had been sold to his uncle. The auctioneer inadvertently sold horse. [ Felthouse v. Bindley] Has F any right of action against thehis nephew?
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Before Lapse of Offer

Acceptance must be given before the offers lapses or withdrawn. Ex: X offered by a letter to sell his car for Rs.
1,00,000.Subsequently X,withdrew his offer by a telegram which was duly received by Y. After the receipt of telegram, Y sent his acceptance to X. In this case, the acceptance is valid or not. Ans: Acceptance is not valid because it was made after the effective offer has been withdrew.
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Communication of Offer, Acceptance And Revocation

1. Mode of Communication ( Sec. 3 ) 2. When is communication complete ( Sec. 4 ) 3. Time for revocation of offer and acceptance ( sec. 5) 4. Loss of letter of acceptance on postal transit 5. Contracts over telephone or telex or oral communication

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Communication of offer
X of Agra send offered to buy his nephew horse for $150 saying: If I hear no more about it I shall consider the horse is mine at $ 150. The nephew did not write to F at all, but he told his auctioneer who was selling his horses not to that particular horse because it had been sold to his uncle. The auctioneer inadvertently sold horse. Has F right of action against the auctioneer ?

A proposes by a letter to sell a house to B at a certain price.the letter is posted on 10th July. It reaches B on 12th July. The communication of offer is complete when B receives the letter i.e. 12th July.
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Communication of Acceptances
As against the proposer- when it is put into 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 proposer. In previous example by a letter sent by post on 13th july instant. The letter reaches A on 15th July. The communication of the acceptance is complete as against A when letter is posted ( 13th, as against B when the letter is received by A on 15th
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 A letter by post to Y of Delhi offering to sell his car for Rs. 2,00,000. The letter is posted on 1st January and the letter reaches Y on 7th January. Y sends his acceptance by post on 10th January but X receives this letter of acceptance on 15th January. In this case the legal position relating to the communication of offer and acceptance is.?

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When does an offer come to an end ?

1. 2. 3. Revocation or lapse of offer. By communication of notice of revocation By lapse of time. [Sec. 6 (2) ] By non-fulfillment by the Offeree of a condition precedent to acceptance [ Sec. 6(3) ] 4. If a counter-offer is made. 5. If offer is not accepted according to the mode prescribed. 6. If the law is changed.
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By death or insanity of the offerer.

An offer lapses by the death or insanity of the offerer If the fact of his death or insanity comes to the knowledge of the acceptor before he makes his acceptance

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By Failure to accept Condition Precedent ( Standard) Ex-: X offered to sell his car to Y for Rs. 1,00,000 subject to the condition that Y should pay an advance of Rs. 20,000 before a certain date. Y accepted the offer but did not send an advance of Rs. 20,000. Is this a valid Acceptance by Y? Ans: An offer has lapsed because the advance was not paid.
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Time limit within which offer can be revoked

Sec-5: A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. Ex: X of Agra offers by a letter dated 1st January sent by post to sell his car to y of Delhi for Rs. 1 lakhs. Y accepts the offer on 7th January at 1 P.M by letter sent by post.\ X may revoke his offer at any time before 1 p.m. on 7th January. But not afterwards.

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Time limit within which Acceptance can be revoked

Sec-5: A acceptance may be revoked at any time before the communication of its acceptance is complete as against the acceptor, but not afterwards. Ex: X of Agra offers by a letter dated 1st January sent by post to sell
his car to y of Delhi for Rs. 1 lakh. Y accepts the offer on 7th January at 1 P.M by letter sent by post. X may revoke his offer at any time before 1 p.m. on 7th January. But not afterwards

X receives the letter of acceptance on 15th January at 3 p.m. Y may revoke his acceptance at any time before 3 p.m on 15th January.
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 By Subsequently illegally or Destruction of Subject Matter of the Offer:

Ex-1: X of Delhi offered supply of 100 tons of sugar to Y at Mumbai on a certain date. Before this offer is accepted by Y, the central Government issued an order prohibiting the inter-state movement of sugar. Here, Xs offer has come to an end. Ex-2: X of Delhi offered to sell his car to Y of Agra for Rs. 1,00,000. Before the offer is accepted by Y, the car is destroyed by fire. Here Xs offer has come to an end.
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Limitations of offer revoked

At any time before its acceptance is complete. Revocation takes effect only when communicated to the offeree. If offer is open for a certain period, offeror can revoke it before the expiration of that period- if the offer has in the meantime not been accepted. -if there is no consideration for keeping the offer open.
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Practical Question and Answers

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 Q-1: X made an offer to buy shares of Y Ltd. On 10th Jan. 1997 but the allotment was made on 10th July 1997. Is X bound by the acceptance?

Q-2: X offered to sell two plots of land to Y at a certain price. Y accepted the offer for one plot. Is there a valid contract?

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 Q-3: X of Aligarh sends a letter by post to Y of Haryana to sell his car for Rs.1,00,000. This letter is posted on 1st Jan. and reaches Y on 7th Jan.. Y sends his acceptance by post on 10th Jan. but X receives this letter of acceptance on 15th Jan. Answer each of the following questions.

a. When the communication of acceptance of the offer complete? b. When is the communication of acceptance complete as against the offerer? c. When is the communication of acceptance complete as against the acceptor? d. If Y sends a telegram on 8th Jan. revoking his offer, and this telegram reaches Y before the letter of acceptance is posted. Is revocation of offer is valid? e. If Y sends a telegram on 14th Jan. revoking his acceptance and this telegram reaches X before the letter of acceptance is received by X. Is revocation of acceptance is valid?
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