Section 7:

In order to convert a proposal into a promise the acceptance must—

(1) be absolute and unqualified;

(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts the acceptance.”

Explained:

Section 7 of the Indian Contract Act, 1872 lays down an important rule regarding valid acceptance of an offer. It provides that an acceptance must be absolute and unqualified to convert a proposal into a promise. The provision is fundamental to the formation of a binding contract because the acceptance must correspond with the terms of the original offer.

Meaning of Section 7

The section contains two important requirements. First, acceptance must be absolute and unconditional. If the person receiving an offer attempts to change its terms, the response generally becomes a counter-offer, rather than an acceptance.

For example, if A offers to sell a property to B for ₹50 lakh and B replies, “I accept, provided the price is ₹45 lakh,” B has not accepted A’s offer. B has made a new proposal.

Second, acceptance must be communicated in the manner prescribed by the proposer. If no particular method is prescribed, acceptance should be communicated in a usual and reasonable manner. Where the proposer specifies a particular mode and the acceptance is made differently, the proposer may insist upon the prescribed method within a reasonable time. If the proposer does not do so, the acceptance may be treated as accepted.

Important Judgments

Hyde v. Wrench (1840)

In this leading English case, an offer to sell property for £1,000 was met with a counter-offer of £950. The original offer was treated as rejected, and the subsequent attempt to accept the £1,000 offer did not create a contract. The decision illustrates the principle of absolute and unqualified acceptance.

Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas

The Supreme Court explained that a contract results from an offer and acceptance and emphasised that acceptance must satisfy the requirements of Section 7. The Court also considered communication of acceptance in contracts made through telephone.

Indian Oil Corporation Ltd. v. Niloufer Siddiqui

The Supreme Court referred specifically to Section 7 and held that where the necessary contractual terms were not properly agreed upon, the alleged arrangement could not be treated as a concluded binding contract.

Conclusion

Section 7 ensures certainty in contractual dealings. An offer cannot ordinarily be accepted with additional conditions, modifications or reservations. The acceptance must substantially correspond with the original proposal, ensuring that there is a clear meeting of minds between the parties.