In a contract, there are two most important aspects of a contract and, they are offer and acceptance of the offer. But in the real world, the communication of the offer, the acceptance, and also timing are very important factors.
There must be effective communication of the offer and a clear understanding of acceptance. It is important to avoid misunderstanding between the parties. In case if parties are talking face to face then the communication happens in real-time and the offer and acceptance will be communicated on the spot, therefore, it creates no confusion but often when communication occurs via letters, mail, fax, etc., in such case, the timeline of communication is important. An offer cannot be revoked after the offeror has communicated it to the offeree. Hence it becomes binding and creates legal relations between the parties.
Section 4 of the Indian contract Act, 1872 talks about communication when complete; it is said to be complete when it comes to the knowledge of the person to whom it is made.
The communication of an acceptance is complete: –
As against the proposer– when it is put in a course of transmission to him, to be out of the power of the acceptor;
As against the acceptor– when it comes to the knowledge of the proposer. As in other words it is said to be completed when the offeree (in case of a specific offer) or any member of the public (in case of a general offer) becomes aware of the offer, the communication of the offer is said to be complete.
A proposes by letter to sell a house to B at a certain price. Here the communication of the proposal is complete when B receives the letter.
A write to B offering his two-room flat for ten thousand rupees. He by post posts the letter on 20th May and the letter reaches B on 30th may, here it is said that the communication is complete on the date of 30th May.
In the case of Republic Medico Surgical Co. vs Union of India A.I.R. 1980 Karn. 168.
Court held that a contract is completed when an offer made is accepted, it is the acceptance that gives rise to the cause of action and not merely the making of an offer.
The communication of revocation is said to be complete-
Against the proposer– when it is put into a course of transmission to the person to whom it is made, to be out of the power of the person who makes it
Against the acceptor– when it comes to his knowledge.
Mode of Acceptance
Acceptance can be done in two ways: –
1.Communication of Acceptance by an Act: Communication which includes communication by words whether oral or written. Hence this will also include communication via telephone calls, letters, e-mails, telegraphs, etc.
2.Communication of Acceptance by Conduct: When the offeree conveys his acceptance of the offer through some action by his conduct. Like when you board a bus you are accepting to pay the bus fare via your conduct.
Timing of Acceptance
Following are two parts of the communication of acceptance they are: –
1.As against the Offeror
The communication of the acceptance is complete when one party puts such acceptance in the course of transmission. After this it is out of his hand to revoke such acceptance, so his communication will be completed then.
For example, (continuation of the same above example); If B accepts the offer of A via a letter. He posts the letter on 1 June and the letter reaches A on 12th June. For A (the proposer) the communication of the acceptance is completed on 1 June itself.
2.As against the Acceptor
The communication in the case of the acceptor is complete when the proposer acquires knowledge of such acceptance.
For example (continuation of the above same example) B’s communication will be completed on 12th June when A learns of the acceptance.
Revocation of Offer (section 5)
Section 5 of the Indian contract Act lays out the rules of the revocation of an offer. It states that the offer may be revoked any time before the communication of the acceptance is complete against the proposer/offeror. Once the acceptance is communicated to the proposer, the revocation of the offer is now not possible.
For example, A revokes his proposal by telegram. The revocation is complete as against A when the telegram is dispatched. It is complete as against B when B receives it. Here B revokes his acceptance by telegram. B’s revocation is complete as against B when the telegram is despatched, and as against A when it reaches him.
(continuation of same above example) B accepts the offer and posts the letter on 1 June. A gets the letter on 12th June. But for A (the proposer) the acceptance has been communicated on 1 June itself. So, the revocation of the offer can only happen before the 1 of June.
Revocation How Made (Section 6)
By the following grounds a proposal can be revoked and they are-
- By notice- by giving them the communication of notice of revocation by the proposer to the other party i.e. acceptor;
- Laps of time- if in the offer there was a lapse of the time prescribed for that offer for its acceptance or if in case no time is prescribed than by the lapse of reasonable time, without communication of the acceptance;
- Failure of the acceptor- if the acceptor fails to fulfil a condition precedent to acceptance;
- Death or insanity- if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.
Also Read: Essentials of Contract