A offered to buy nephew F's horse for Rs. 10,000 adding "If I hear no more, I shall consider horse mine at Rs. 10,000". No answer returned but F told auctioneer to keep horse out of sale. Auctioneer sold by mistake. A sues F. Decide

This is the classic problem of Felthouse v Bindley (1862) 11 CBNS 869 — one of the most foundational cases in the law of contract — and it speaks directly to the principle that silence cannot constitute acceptance. The answer, on settled law, is that A will fail in his suit against F.

The Facts, Restated in Legal Terms

A made a proposal to F — his nephew — offering to purchase F's horse for Rs. 10,000, and crucially added: "If I hear no more, I shall consider the horse mine at Rs. 10,000." F returned no answer to this letter. However, F's internal intention was to accept — he communicated this to his auctioneer by instructing him to keep the horse out of the sale, as it was to be reserved for his uncle. The auctioneer, by mistake, sold the horse anyway. A now sues F, claiming that the horse had become his property under a concluded contract.

The central legal question is simple but profound: Was a valid contract ever formed between A and F?

The Governing Principle: Acceptance Must Be Communicated

Under Section 2(b) of the Indian Contract Act, 1872, a proposal is said to be accepted when the person to whom it is made signifies his assent thereto. The word signifies is crucial — it demands an external manifestation of that assent. A mere mental resolve, however sincere, is not enough. As the Supreme Court observed in Bhagwandas Goverdhandas Kedia v Girdharilal Parshottamdas & Co. (AIR 1966 SC 543), an agreement cannot result from a mere state of mind. There must be some external indication of intention, communicated to the proposer.

Section 4 of the Act makes this even clearer: the communication of an acceptance is complete as against the proposer only when it is put in a course of transmission to him, so as to be out of the power of the acceptor. No such act was done by F. He simply remained silent, and that silence — however well-intentioned — cannot constitute the "signification of assent" that the law requires.

Why Silence Does Not Constitute Acceptance

The foundational authority here is Felthouse v Bindley (1862) 11 CBNS 869, the very case on which this problem is modelled. In that case, the uncle wrote to his nephew offering to buy a horse for £30 15s., adding that if he heard nothing more, he would consider the horse his at that price. The nephew wrote to the auctioneer asking him to keep the horse out of the sale. The auctioneer mistakenly sold it. The uncle sued the auctioneer for conversion, which required him to prove that the horse had become his property — that is, that a binding contract existed.

The Court held that no contract had come into existence. Willes J said plainly: it is clear that the uncle had no right to impose upon the nephew a sale of his horse unless the nephew chose to comply with the condition of writing to repudiate the offer. An offeror cannot prescribe the terms of refusal — he cannot tell the offeree that silence will be treated as acceptance and thereby bind an unwilling party.

This principle has been unambiguously accepted in Indian law. Mulla's commentary on the Indian Contract Act explicitly notes this case as authority for the proposition that acceptance cannot be inferred from the silence of the offeree. The Calcutta High Court in Hulas Kunwar v Allahabad Bank Ltd. (AIR 1958 Cal 644) and the Madhya Pradesh High Court in similar cases have firmly held that silence and inaction are by nature equivocal — an offeree may be silent for any number of reasons, and to hold silence as acceptance would enable the offeree to deny or assert acceptance at will, creating dangerous uncertainty.

The life of this principle was reaffirmed in the context of insurance law by the Supreme Court in Life Insurance Corporation of India v Raja Vasireddy Komalavalli Kamba (AIR 1984 SC 1014), where it was held that silence does not denote consent and no binding contract arises until acceptance is duly communicated and received.

The Significance of F's Instructions to the Auctioneer

One might argue that F's instruction to the auctioneer — "keep the horse out of the sale, it is reserved for my uncle" — amounts to some form of conduct indicating acceptance. This argument, though attractive, must fail. The communication of acceptance must reach the proposer himself, not a third party. F's instruction was to his own auctioneer, not to A. As the court noted in Felthouse v Bindley itself, the nephew in his own mind intended the uncle to have the horse, but he had not communicated his intention to the uncle. Similarly, the principle was reinforced in Powel v Lee (1908 24 TLR 606), where the court held that information by an unauthorised third person — even one who reveals the fact of acceptance — is as insufficient as if no communication had been made.

Therefore, F's instruction to the auctioneer, while evidence of an inward intention to sell, did not constitute a communicated acceptance to A. The horse was never contractually transferred.

Consequence: A Cannot Sue F for Conversion

For A to succeed in a suit against F — or indeed against the auctioneer B — he must first establish that the property in the horse had passed to him, which in turn requires a concluded contract. Since no acceptance was communicated to A, no contract was formed. F remained the owner of the horse at the time of the auction sale. The auctioneer's act of selling the horse, though done by mistake, was not a conversion of A's property because A had no property to convert. A's suit must therefore fail.

It is worth pausing to acknowledge that the decision in Felthouse v Bindley is "hard to support" in one respect: the nephew clearly intended to sell, and the uncle had waived the communication of acceptance. Had the nephew sued the uncle to hold him to the contract, the result might arguably have been different, since an offeror may waive his right to receive communication of acceptance. But the case as it stands involved A suing F — the offeree — and on that question the law is settled: the offeree is never bound by silence, even if the offeror says he will treat silence as acceptance. The offeror may waive communication for his own benefit, but he cannot use silence as a mechanism to impose contractual liability upon an unwilling or merely passive offeree. As Willes J put it, the uncle had no right to impose a sale of the horse upon the nephew unless the nephew chose to comply.

Decision

A will not succeed in his suit against F. No valid contract was ever concluded between the two parties. F's silence, even coupled with his private instruction to the auctioneer, does not amount to a communicated acceptance under Section 2(b) read with Section 4 of the Indian Contract Act, 1872. The principle drawn from Felthouse v Bindley — that an offeror cannot stipulate that silence shall constitute acceptance so as to bind the offeree — remains good law in India, and it governs this case completely. Without a concluded contract, the property in the horse never passed from F to A, and F bears no contractual liability for the auctioneer's mistaken sale.