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Unit 2: Offer and Acceptance

Acceptance of an offer “subject to a contract” or “Subject to a formal contract”, or ‘Subject to a Notes

contract to be approved by solicitors” – The significance of these words is that the parties do not
intend to be bound and are not bound until a formal contract is prepared and signed by them.
The acceptor may agree to all the terms of the offer and yet decline to be bound until formal
agreement is drawn up.

Example: (i) C accepted E’s offer to sell four items of antique furniture for ` 44,000 subject
to a proper contract to be prepared by the vendor’s solicitors. A contract was prepared by C’s
solicitors and approved by E’s solicitors but E refused to sign it. Held, there was no contract as
the agreement was only conditional [Chillingworth v. Esche (1924) 1 Ch.97].
(ii) E bought a flat from a real estate company “subject to a contract”. The terms of the formal

contract were agreed and each party signed his part. E posted his part but the company did not
post its part as it changed its mind in the meantime. Held, that there was no binding contract
between the parties [Eccles v. Bryant (1948) Ch. 93].
A mere mental acceptance is no acceptance. Acceptance must be communicated to the offeror.
The communication of acceptance may be express or implied. A mere mental acceptance is no
acceptance. A mere mental acceptance means that the offeree is assenting to an offer in his mind
only and therefore there is no communication of acceptance to the offeror.

Example: A, a supplier, sent a draft agreement relating to the supply of coal and coke to
the manager of a railway company for his acceptance. The manager wrote the word ‘approved’
on the same and put the draft in the drawer of his table intending to send it to the company’s
solicitors for a formal contract to be drawn up. By an oversight, the draft agreement remained in
the drawer. Held, there was no contract as the manager had not communicated his acceptance to
the proposer.
Effect of silence of the offeree or his failure to reply. The acceptance of an offer cannot be implied
from the silence of the offeree or his failure to reply.

Example: A offered by a letter to buy his nephew’s T.V. set for ` 3,000, saying, “If I hear no
more from you, I shall consider the T.V. set is mine at ` 3,000”. The nephew did not reply at all,
but he told an auctioneer who was selling his T.V. set, not to sell that particular T.V. set as he had
sold it to his uncle. By mistake, the auctioneer sold the set. A sued the auctioneer for conversion.
Held, A could not succeed as his nephew had not communicated acceptance and therefore there
was no contract. However, if the offeree has by his previous conduct indicated that his silence
means that he accepts then the acceptance of the offer can be implied from the silence of the
offeree. Further, in the case of a general offer it is not necessary to communicate the acceptance if
it is made by acting upon the terms of the offer [Carlill v. Carbolic Smoke Ball Co., Supra].
An agreement to agree in the future (futuristic agreements). Law does not allow making of an
agreement to agree in the future. The parties must agree on terms of the agreement. The terms

of the agreement must be either definite or capable of being made definite without further

agreement of the parties.
2.7 Completion of Communication of Offer and Acceptance [S.4]

It is necessary to communicate offer to the offeree and the acceptance to the offeror. When is it that
the communication is considered to be completed? The communication of an offer is complete
when it comes to the knowledge of the person to whom it is made. Where A proposes by a letter
to sell his car to B at a certain price, the communication of the offer is complete when B receives
the letter. The completion of communication of acceptance has two aspects, viz. (i) As against the
offeror and (ii) As against the acceptor.

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