This Case Summary is written by Shivanshi Aggarwal, a student at Maharaja Agrasen Institute of Management Studies, GGSIPU
To make a contract valid and legally bound, offer, acceptance of that offer and consideration are considered to be essential elements. The Indian Contract Act, 1872 defines offer and acceptance as “When one person signifies to another his willingness to do a particular act is said to be maid offer” and “when the other person to whom the offer is made signifies his assent is said to accept that offer”. A contract is made to be complete when an offer is made and that offer is accepted. But to make a certain offer and to accept that offer certain conditions are required. These conditions generally lead to misunderstandings and later disputes. In this case as well there was misunderstanding between the appellant and the party whose property was being subjected regarding whether the offer made was accepted or not. This case provided a slight clear vision towards the correct form of acceptance and how a mere communication does not amount to contract of sale.
Paul Felthouse, a builder residing in London was the complainant. He had communication with his nephew John Felthouse, showing the interest to buy his horse. They both had two letters exchanged as there was some misunderstanding regarding the prices of the horse. Paul sent the final letter to his nephew saying, “If I hear no more about him, I consider the horse to be mine at 30 pounds and 15 cents”. He was ready to pay more to cover up for the misunderstanding. John being busy with his farm’s auction replied nothing but instructed auctioneer Mr. Bindley that the horse should not be auctioned and should be reserved. But the auctioneer forgot this communication and sold the horse to some other party gaining more profit. When John got to know about this he sent a letter to his uncle apologizing for the same. Finally Paul sued Bindley in the tort of conversion which is using someone else’s property inconsistently with their rights.
Legal Issues Raised
Some of the issues raised in front of the court were-
- Whether silence or no reply amount to acceptance
- Whether failure to reject amount to acceptance
- Does principle of acceptance put burden on the offeree to communicate the acceptance or the refusal
Paul argued that since no letter was received from his nephew’s side the horse will considered being his and then Bindley had no right to sell or to take any advantage from the sale of the horse. He walked beyond his rights by selling the property which did not belonged to him.
Bindley put up his point saying that since John never communicated his acceptance, there was no actual contract of sale or any bounding contract between them. He never officially communicated the horse to be his and thus Paul had no right over the horse.
This judgement was given by three judge bench consisting of Willes J, Byles J and Keating J unanimously. Willes J gave the leading judgement stating that there was no formal bargain for that horse and hence there was no space for contract of sale. Being silent or giving no response will not amount to acceptance. Though John showed his interest in selling the horse to Paul and also instructed Bindley not to sell the horse in auction but still showing interest will not legally bound him or Bindley to sell the horse to Paul. The date of sale of horse was 25th of February and by that date no letter of acceptance was being sent. The apology letter was sent on 27th of February which will be considered as the first official letter by the nephew to his uncle but that was after the sale of the horse. Thus at the time of the sale there was no legal contract between any party and Paul did not have the ownership of the horse. Since he had no legal right over the horse he cannot claim anything from Bindley and actions for conversion cannot be taken. The other two judges were of the same opinion and did not consider silence or failure to reject as an acceptance. They further signified that one cannot impose an obligation on another to reject one’s offer.
Offer and acceptance being the major component of binding contract cannot be left as any loophole. There must be clear communication regarding making the offer and simultaneously accepting the offer made. In this case offer has been clearly made by Paul but John did not communicate any clear acceptance. Thus principles of acceptance of offer have been cleared here which clearly shows that silence cannot be considered as an acceptance. The court also considered the case of Dobell v. Hutchinson which tells that acceptance need not to be in written it can be oral as well. But regardless in this case acceptance was not made in any form and only the intention of selling the horse was shown which does not give ownership rights to any person concerned. This case was considered landmark as an important judgement was delivered regarding principles of acceptance.
There is a concept of acceptance by conduct which means that doing ac act in accordance with what was required which shows the approval or acceptance. Since Paul put the letter stating, “If I do not hear”, and got no response there was a chance of acceptance by conduct. John might do not replied because he agreed to the conditions and prices. This case was also later reconsidered delivering that fact that there were chances of acceptance by conduct. Though the judges were right in saying that clear communication should be made for a contract of sale to become valid and legally bound but in my opinion this case should have been come under acceptance by conduct. The conduct of John, not replying or not giving any response will create a picture in someone’s mind that he accepted the offer and now horse belongs to him. Also the auctioneer was also instructed not to sell the horse and he also failed to work in accordance to what was required by his client. His negligence harmed Paul and Paul should be given the ownership of the horse. As can be seen in the case of Rust v. Abbey Life Asurance Co. Ltd., failure to reject was considered as acceptance.