Law of Contract – Communication of Offer, Acceptance & Revocation

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 COMMUNICATION OF OFFER, ACCEPTANCE & REVOCATION

Communication is an indispensable element in concluding a contract. There must be effective communicationof both ‘offer’ and ‘acceptance’ to give rise to a valid contract.

Importance of communication lies in the fact that parties are separated by distance and they employ modes such as post, telegram, fax, email, telephone etc. Effective and proper communication prevents avoidable misunderstanding between parties.

Lawgives a lot of importance to “time” element in deciding when the offer and acceptance is complete, and upto what time offer or acceptance may be revoked.

Communication of offer

Communication of offer is complete when it comes to the knowledge of the person to whom it is made. Knowledge of the offer would materialize when the offer is given in writing or made by word of mouth or by some other conduct. For Example,

  1. ‘A’ writes a letter making a proposal to ‘B’ to sell his house for Rs. 5 lakhs. The letter is posted on 15th Jan and reaches B on 18th Jan, the offer is said to have been communicated on 18th Jan when B received the letter.

  2. In telephonic communications, communication of offer is complete as soon as the voice is heard by the person receiving the offer.

Communication of acceptance

Communication of acceptance may be oral or written, that is by way of letters, telegrams, faxes, emails, telephonic conversion. Communication of acceptance canalso bedone by conduct. For instance, delivery of goods at a price by a seller to a buyer on receipt of tender. The delivery of goods is communication of acceptance byconduct. Similarly, boarding abus or dropping currency in a vending machineis acceptance by conduct.

But a mere mental unilateral assent in one’s own mind would not amount to acceptance. For example, A receives an offer to buy B’s house for certain price. A decides to buy the same but does not say anything to B. There is no acceptance as there is no communication of the same.

As to when the communication is complete, the law is that the communication of acceptance is complete –

  1. As against the proposer, when it is put in course of transmission to him so as to be out of the power of the acceptor to withdraw the same;

  2. As against the acceptor, when it comes to the knowledge of the proposer.

The above rule may appear complicated, but can be understood by simple illustration. If in above example where offer is sent by letter, B writes letter of acceptance andposts iton 20thJan which is received by A on 24thJan.The communication of acceptance is complete as against A (proposer)on 20th Janand against B (acceptor)on 24thJan.

Here, A the proposer will be bound by B’s acceptance, even if the letter of acceptance is delayed in post or lost in transit. The golden rule is proposer becomes bound by the contract, the moment acceptor has posted the letter of acceptance. But it is necessary that the letter is correctly addressed, sufficiently stamped and duly posted. In such an event the loss of letter in transit, wrong delivery, non delivery etc., will not affect the validity of the contract.

However from the view point of acceptor, he will be bound by his acceptance only when the letter of acceptance has reached the proposer. If there is no delivery of the letter, the acceptance could be treated as having been completed from the viewpoint of proposer but not from the viewpoint of acceptor. This will, however,give rise to an awkward situation whereonly one party to the contract being treated as bound by the contract though no one would be sure as to where the letter of acceptance had gone.

 

REVOCATION OFOFFERANDACCEPTANCE

Similar to rules for communication of offer and acceptance, there are rules for communication of revocation of such offer and acceptance.

As far as revocation of proposal is concerned, a proposal may be revoked by

  1. Communication of notice of revocation

  2. Lapse of the time prescribed in such proposal or if no time is so prescribed, by the lapse of a reasonable time.

  3. Failure of the acceptor to fulfil a condition precedent to acceptance. For example, A proposes to sell his car to B for Rs. 2 lakhs provided B sels his motorbike A. If B refuses to sell his bike, the offer of A is revoked automatically.

  4. Death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

A proposal can be revoked at any time before the communication of its acceptance is complete as against the proposer. An acceptance may be revoked at any time before the communication of acceptance is complete as against the acceptor.

This may appear technical. But can be understood from aforesaid example of communications by letter. A may revoke his proposal to B, before B post his letter of acceptance, that is, by 20th Jan and not thereafter. Further, B may revoke his acceptance before the letter of acceptance is received by A, that is, by 24thJan and not thereafter.

As to time, the communication of revocation (of the proposal or its acceptance) is complete –

  1. as against the person who makes it when it is put into a course of transmission to the person to whom it is made so as to be out of the power of the person who makes it, and

  2. as against the person to whom it is made, when it comes to his knowledge.

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