Communication of Offer and Acceptance: Introduction
Communication of offer and acceptance and revocation of proposal and acceptance has been provided under sections 3 to 9 which is specified in Chapter I of the Indian Contract Act, 1872. As we know, the most essential elements of the contract are offer and acceptance. For valid offers and acceptance, communication is a must between the parties. The way of communication of offer and acceptance is an important factor.
In this article, we will talk about the communication of proposal and acceptance and revocation of proposal and acceptance.
Communication of Proposal and Acceptance
According to section 3, the communication of acceptance of proposals is deemed to be made by an act or omission of the party proposing, accepting, or revoking by which he intends to communicate such acceptance or revocation or which has the effect of communicating it.
So, when is the communication of the offer is complete? when the offer comes to the knowledge of the person to whom it is made.
And, the communication of acceptance is completed when the acceptance to the offer is communicated and comes to the knowledge of a person who makes the proposal. This is the communication of acceptance in the Indian Contract Act.
Example: A makes an offer to B to sell his house through a letter when the letter of an offer is received by B and B reads it. Then the communication offer is said to be completed. And, when B accepts the offer and post a letter of his acceptance to the offer and it is received by the offeror and A read it. Then the communication of acceptance to the offer is said to be completed.
In the case of Powell v/s Lee, 1908. Plaintiff made an application to be appointed as headmaster. Appointing authority passed one resolution appointing the plaintiff but this was not communicated with the plaintiff. Later, the appointing authority cancelled the resolution and it came to the knowledge of the plaintiff. The plaintiff filed a suit for breach of contract.
Here, the court observed that plaintiff did not give his acceptance by communicating with the appointing authority. Therefore, where there is no valid acceptance there is no valid contract.
In Carlill v/s Carbolic Smoke Ball Co., 1893, it was held that in the case of general offer the communication of acceptance is not needed, and it can be made in the way of conduct of the parties.
Communication When Complete
The communication of acceptance is completed when the acceptance of the offer is communicated and comes to the knowledge of a person who makes the proposal. This means, the offeror must be communicated properly and has knowledge that the offeree has been accepted the offer made by the offeror.
General rules regarding completion of communication of offer and acceptance;
- Communication by phone
When the offeror makes an offer through the phone call to the person who he wants to enter into the contract. If the offeree gets knowledge of the offer prescribed by the offeror then it is said to be the communication of offer is completed.
Whereas, when the offer is accepted and communicated through the phone call to the offeror and it comes to knowledge of the offeror, then it is said to be the communication of acceptance to the offer is completed.
Example: A make a phone call to B and make an offer to sell his bike for Rs. 50,000/-. Now, B has an idea about the offer, here the communication of the offer is completed. Later, B also gives acceptance to the offer that B make a phone call and accept to purchase the bike for Rs. 50,000/-. Here, the communication of acceptance is complete.
- Communication by post/letter
When the offeror makes an offer through the letter to the person who he wants to enter into the contract. Then, when the posted letter is received by the offeree and if the offeree gets knowledge of the offer prescribed by the offeror then it is said to be the communication of offer is completed.
Whereas, when the offer is accepted and communicated through posting a letter to the offeror. Then, when the letter is received by the offeror and it comes to knowledge of the offeror it is said to be the communication of acceptance to the offer is completed.
Revocation of Proposal and Acceptance
According to section 5, the proposal may be revoked before the communication of acceptance is complete as against the proposer. A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. So, section 5 of the Indian Contract Act, will be discussed in two sub-points i.e. revocation of proposal and revocation of acceptance.
Revocation of Proposal/Offer
The revocation of an offer by the offeror is made before the communication of a proposal is completed and it comes to the knowledge of the offeree. But, afterwards, the offer cannot be revoked.
Example: A posts a letter to B, in letter A, makes an offer to sell his house for Rs. 10 Lacs, and B received a letter. Before B, gives acceptance A puts a notice of revocation of an offer to B. And, B has not given the acceptance yet and he received the notice of revocation of the offer. And, the offer is cancelled.
Revocation of Acceptance
The revocation of acceptance by the offeree is made before the communication of acceptance against the offeror is completed and it comes to the knowledge of the offeror. But, afterwards, the acceptance to offer cannot be revoked.
Example: A makes an offer to sell his house to B, and B accepts it and sends a letter of acceptance to A. But, if B wants to cancel the acceptance, B has to communicate with A about the revocation of his acceptance before the letter of acceptance is received by A.
Modes of Revocation
Section 6, prescribes the modes of Revocation of offer and acceptance in the contract law. This section provides 4 ways for the revocation of the offer.
As per this section, there are 4 modes of revocation of the offer.
- By communication of notice,
- By the lapse of time,
- By the failure of the condition precedent,
- By insanity or death of the proposer.
1. By Communication of Notice
When the offer is made to the offeree and the offeror wants to cancel (revoke) the formation of a contract with the other party, the offeror can communicate with the offeree through the notice of revocation of an offer. But, such communication of revocation of an offer shall be made before the offeree gives its acceptance to the offer.
And, if the offeror failed to communicate with the offeree and the offeree gives acceptance to the offer then the offer cannot be revoked.
Example: A posts a letter to B, in letter A, makes an offer to sell his house for Rs. 10 Lacs, and B received a letter. Before B, gives acceptance A puts a notice of revocation of an offer to B. And, B has not given the acceptance yet and he received the notice of revocation of the offer. And, the offer is cancelled.
2. By Lapse of Time
When the offer is made to the offeree and if there is prescribed time for accepting the offer imposed by the offeror to the offeree. Then the acceptance to that offer must be given within the prescribed time only after that the offer is automatically be terminated.
If in the offer, there is no time prescribed for the acceptance to offer by the offeror. Then the acceptance of the offer should be given within a reasonable time.
Example: A makes an offer to B to sell A's car for Rs. 1,00,000/- and in the offer, A asked B, if you want to buy a car then reply within a week. But, B has not replied. Then offer is cancelled after a period of a week.
3. By Failure of the Condition Precedent
When the offer is made with certain conditions then the offeree should fulfil all the conditions which are prescribed by the offeror in his offer. If the acceptor failed to fulfil the conditions then the offer will automatically be terminated.
Example: A makes an offer with B to sell a motorcycle for Rs. 50,000/- with a condition that the payment should be made through UPI. But, B wanted to buy a motorcycle but could not pay the amount through UPI instead he wants to pay it in cash. Then B failed to fulfil the condition of the offer. And, the offer is cancelled.
4. By Insanity or Death of Proposer
When the offer is made to the offeree, if the offeror died or becomes insolvent (not capable to enter into a contract) and it comes to knowledge of the offeree before completion of communication of acceptance to the offer then the offer is automatically be terminated.
Example: A makes an offer to B to sell his house. But, before accepting the offer, A dies. Then the offer is cancelled.
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