Acceptance under Indian Contract Act 1872

Felthouse v Bindley

Paul Felthouse, the complainant, discussed buying a horse from his nephew, John Felthouse. After their conversation, Paul wrote a letter to his nephew stating that if he did not hear anything further regarding the horse, he would consider the purchase agreed upon and would own the horse. John did not reply to this letter and was busy with auctions. The defendant, Mr. Bindley, was running the auctions, and John instructed him not to sell the horse. However, Mr. Bindley accidentally sold the horse to someone else.

Issues: Paul Felthouse sued Mr. Bindley for the tort of conversion, which required him to prove that the horse was his property and that a valid contract existed. The central issue was whether silence or failure to reject an offer could constitute acceptance.

Decision / Outcome: The court held that there was no contract for the horse between Paul Felthouse and his nephew. The court ruled that silence did not amount to acceptance, and an obligation cannot be imposed on someone by another person. Acceptance of an offer must be clearly communicated. Despite the nephew's intention to sell the horse to Paul and the nephew's interest in the sale, there was no binding contract because the nephew did not explicitly accept the offer. Therefore, the nephew's failure to respond did not constitute acceptance of the offer.

Case Study: Mr. Powell's Appointment as Headmaster

Facts: Mr. Powell, the plaintiff, was a candidate for the position of headmaster at a school. The manager referred his candidature to the appointing authority, which subsequently passed a resolution to appoint him to the position. However, no formal acceptance was communicated directly to Powell; these were internal discussions only. A board member overheard the discussion where other members talked about appointing Powell as the headmaster and informed Powell of this. Powell was pleased with the news, but later, the board members decided to cancel the resolution appointing him. Consequently, Powell filed a suit against the managers for breach of contract.

Issues: The primary issue before the court was whether there was an actual breach of contract as claimed by the plaintiff.

Judgement: The court ruled that there was no breach of contract because the acceptance of Powell's appointment was never formally conveyed to him. The court noted that for a valid acceptance to constitute a contract, it must be communicated by an authorized person to the plaintiff. In the absence of such communication, a valid contract could not be formed. Thus, the court held that a contract was never established in this case.

In this case, Mr. Grant applied for a fire insurance policy from the Household Fire and Carriage Accident Insurance Company. The company sent him a policy document, which he received on November 23, 1877. The document stated that the policy would be effective only upon payment of the first premium. Mr. Grant did not pay the premium but instead sent a letter on December 23, 1877, accepting the policy.

The company argued that Mr. Grant's acceptance was invalid as it was not communicated in the specified manner (i.e., by paying the premium). They claimed the policy document was an offer, and Mr. Grant's letter was a counter-offer, which had not been accepted.

Judgement: The court held that Mr. Grant's letter constituted a valid acceptance, effective upon posting, per the postal rule. The court determined that acceptance by post is effective as soon as it is posted, regardless of when it is received, or even if it is lost. This case established the postal rule principle, emphasizing the importance of clear communication and the specified manner of acceptance.

In this case, Lindsell offered to sell a quantity of wool to Adams, with the offer made on September 2nd. Due to an addressing error, the offer reached Adams on September 5th, who accepted it on the same day by post. However, due to postal delays, Lindsell received the acceptance on September 9th, after selling the wool to someone else.

Decision: Adams sued for breach of contract, but Lindsell argued that no contract was formed since the acceptance arrived after the offer had been revoked. The court ruled that the contract was formed when the acceptance was posted, not when it was received. This case reinforced the postal rule, establishing that acceptance is effective upon posting when using a reasonable means of communication like the postal service.

Case Example: Bhagwan Das v Girdgari Lal

In this case, the plaintiff offered to sell a house to the defendant, who accepted the offer by telephone. Later, the defendant refused to complete the transaction, arguing the acceptance was invalid as it was not in writing. The court held that telephone acceptance was valid, noting that the essential requirement for acceptance was communication to the offeror. The absence of a written confirmation did not invalidate the acceptance, as the defendant had not requested it.