Communication, Acceptance and Revocation of Proposal under the Indian Contract Act, 1872

Section 3 of Indian Contract Act defines that communication may be conducted through an act or omission, by which party’s intention is communicated, or which has the effect of communicating for proposals, acceptance of proposals, and revocation of proposal and acceptance. “communication of proposals, acceptance of proposals, and revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revokes, by means of which it intends to communicate this proposal, acceptance or revocation, or which has the effect of communicating it.”

Two methods of communication:

  • Any act: It includes any conduct, words, written (e.g. email, letters, telegrams, advertisement, etc.)  or oral ( e.g. telephone massage).
  • Omission: It includes such conduct or forbearance (voluntarily refraining from doing something) on one’s part that another party takes it as willingness or consent. It includes silence as well.

Felthouse v. Bindley[1]

In this case, Felthouse made a proposal to buy nephew’s horse and added that “if I hear no more from him I’ll consider the horse mine”.  After that, his nephew was busy in an auction and didn’t communicate to him but nephew told Bindley (auctioneer) to not present the horse for auction sale as he intended to keep it for his uncle. Bindley sold the house by mistake. Felthouse sue Bindley for recovery of horse. Court held that the nephew’s acceptance was not communicated to Felthouse. So there is no contract regarding this.

When we do call that communication is completed?

 Section 4 states that:

The communication of a proposal is complete when it comes to the knowledge of the person to whom it made.

There are two steps of valid communication of a proposal-

 (a) The communication of the proposal .

(b) Acceptance or revocation by the person to whom it made.

  • The communication of an acceptance is complete,-

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

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

  • The communication of a revocation is complete:

   On the side of the proposer (who makes the proposal), when it is put into a course of transmission of the person to whom it is made, so as to be out of the power of the proposer.

       On the side of person to whom it is made, when it comes to his knowledge.

Illustration:

 (a)  A proposes, by email  , to sell a car to B at 98,000. The communication of proposal is complete when B receives the letter.

(b)  B accepts A’s proposal by revert the email. The communication of the acceptance is complete,-

As against A, when the email is sent;

As against B, when the email is received by A.

(c)A revoke his proposal by email. The revocation is complete  as against A  when it sent. It complete against B when B receives it .

B revokes his acceptance by email. B’s revocation is complete as against B when the email is sent, and as against A when it reaches him.

Section 5 when we do we say that proposal and acceptance is revoked?

(1) A proposal or acceptance may be revoked at any time before the communication or at the moment when communication happens, but not afterwards.

 (2) A proposal may revoked at any time before the communication of acceptance is completed as against the proposer, but not afterwards.

(3) An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

Illustration:

X proposes B, by a letter sent by post, to sell his property to B.

B accepts the proposal by letter sent by post.

X may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

B may revoke his acceptance at any time or at the moment when the letter communicating it reaches A, but not afterwards.

There are two contradictory judgement regarding the same:

  • In Re Landon and Northern Bank[2] (1900) 1 Ch 220

Court held that an offer is revoked because offer to purchase share was revoked by letter posted on 26th October and it reached the acceptor on next day at 8:30a.m. After the 8:30 a.m., acceptor posted letter of acceptance .

  • In Sandhoo Lal Motilal v. State of Madhya Pradesh[3]

Whereas in this case, court held that contract was completed as soon the letter of acceptance was posted and the revocation was therefore ineffective.

Section 6 procedure of revocation

A proposal is said to be revoked when:

Advertisement
  • By the communication of notice of revocation by the proposer to the other party; or
  • By the expiry of the prescribed time  for  acceptance of proposal, or if there is no prescribed time, by the expiry of reasonable time, without communication of the acceptance; or
  • By the failure of the acceptor to fulfill a condition precedent to acceptance;
  • By death or insanity of the proposer , if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

 This section states modes in which a proposal can be revoked or shall stand revoked.

Section 7 when do we call acceptance must be absolute?

In sequence to change a proposal into a promise, the acceptance must:

  • Be absolute and unqualified;
  • Be expressed in some common and reasonable manner, until the proposal prescribes the   manner in which it is to be accepted.  If proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposal 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.

L.I.C of India v. Rajavasireddy

The Supreme court of India observed that “Contract of insurance will be concluded only when a party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer. Though in certain human relationships, silence to a proposal might convey acceptance but in the case of insurance proposal, silence does not denote consent and contract arises when the person to whom the offer is made says or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as acceptance as prima facie, acceptance must be communicated to the offeror. Similarly, the mere receipt and retention of premium until after the death of the applicant or the mere preparation of the policy document is not acceptable.”

Section 8 Acceptance by performing conditions, or receiving consideration

This section prescribes one of such methods in form  of an implied contract.

It provides two mode of accepting the proposal:

  • Acceptance by performance:   The term “acceptance  by performance” is very wide. It means acceptor must be acting as requested by the proposer as consideration for the promise.

Carlill v. Catholic Smoke Ball co.[4]

The Defendant, the Carbolic Smoke Ball Company of London (Defendant), placed an advertisement in several newspapers on November 13, 1891, stating that its product, “The Carbolic Smoke Ball”, when used three times daily, for two weeks, would prevent colds and influenza.  The makers of the smoke ball additionally offered a 100£ reward to anyone who caught influenza using their product, guaranteeing this reward by stating in their advertisement that they had deposited 1000£ in the bank as a show of their sincerity.  The Plaintiff, Lilli Carlill (Plaintiff), bought a smoke ball and used it as directed.  Several weeks after she began using the smoke ball, Plaintiff caught the flu. Court held that Defendant’s Appeal was dismissed, Plaintiff was entitled to recover 100£.
The Court acknowledges that in the case of vague advertisements, language regarding payment of a reward is generally a puff, which carries no enforceability.  In this case, however, Defendant noted the deposit of £1000 in their advertisement, as a show of their sincerity.  Because Defendant did this, the Court found their offer to reward to be a promise, backed by their own sincerity.

  •  Acceptance by receiving consideration:  It means when offeree makes a promise to offerer in from of consideration.

Section 9 Promise, express and implied:  Insofar as the proposal or acceptance of any promise is made in words, the promise is said to be express. Insofar as such proposal or acceptance is made otherwise than in words, the promise is said to be implied. 

Reference

Indian Contract Act,1872

Mulla, Indian Contact Act. Edition 15th


[1](1862)11CBNS 865

[2] (1900) 1 Ch 220

[3]AIR1984 SC 1014

[4](1893)1QB256

Leave a Reply

Your email address will not be published. Required fields are marked *