Palak Jain, a 1st-year student of Law College Rajasthan University has written this Article “Communication Revocation and Acceptance of Proposal”.
In our daily life, we make so many agreements, but not all of them are enforceable by law, so they don’t convert into a Contract. As we all know that an agreement becomes a contract when all its essential elements are fulfilled, hence it becomes enforceable by law.
SECTION 2 (H) OF THE INDIAN CONTRACT ACT, 1872 defines the ‘Contract’. According to it “an agreement enforceable by law is a contract”
We all know that to create a legally enforceable contract there must be a proposal that has to be accepted by the other party. Once a proposal is accepted by another party and it is properly communicated to the party who made the proposal. It becomes a binding contract, provided the object and consideration are not illegal. Moreover, the parties do have the intention to create a legal relationship. Once it becomes a binding contract the parties cannot go back on their respective commitments. But here, it is important that not only the acceptance and offer are required for the creation of a contract or agreement, but are also required to be communicated to each other. Hence, it is necessary that the acceptor should have knowledge of the proposal and the proposer of acceptance.
Now, let us discuss one by one how the communication of proposal and acceptance is being made. Furthermore, what are the modes of it, and how and when it can be revoked?
Communication of Proposal
SECTION 3 OF THE INDIAN CONTRACT ACT, 1872 provides the provision for the communication of the proposal. According to it- The communication of a proposal is deemed to be made by any act or omission of the party proposing. Moreover, by which he intends to communicate such a proposal or which has the effect of communicating it. This means that Communication of a Proposal can be made by the Act or Omission or Conduct of the Proposer. It is called communication in an expressed or implied way. The communication can be in either writing or speaking.
Illustration:- ‘A’ sends some goods to ‘B’ at a specific rate for buying from him. ‘B’ keeps that good and sends to ‘A’ the price of it. This is communication by the conduct of the offer.
In this respect, there is a good case of ‘LILY WHITE VS. MUTHU SWAMI (AIR 1996, MADRAS 13). – In this case, a Laundry owner gives a receipt for washing to a customer. The receipt contained the related conditions for washing on its back. The Hon’ble court considered it as a communication of conditions in a proper way to the customer. Moreover, considered that the customer has accepted those conditions impliedly.
In the case of HAJI MOHD ISHAQ V. MOHD IQBAL SCC 1978, THE DEFENDANTS accepted the goods supplied by the plaintiff through a go-between man and also paid part of the price. It was held that the defendants were liable to pay the remaining balance. It is because the proposal and its acceptance were signified by their actions.
When is the Communication for Proposal Complete
When the offeror and acceptor are in one place i.e., in front of each other then the communication of offer and acceptance is completed at that moment. But when they are at different places then the communication shall be completed in accordance to the rules mentioned in Section 4 of the act.
According to section 4, “communication of a proposal is complete when it comes to the knowledge of the party to whom the proposal is made.”
This shows that the completion of communication of a proposal requires that the offer should come in the knowledge or notice of the person to whom it is made. If the offer is made by post, it’s considered complete when received by the person who reads it and accepts it. Here it is important that merely receiving the letter is not sufficient, the letter is also required to be read.
For Example, if A sends a proposal in the mail to B and the mail is lost, it can be held that the communication of the proposal is not complete.
In the case of LALMAN SHUKLA VS GAURI DUTT.1 It was held that the reward for the missing child cannot be claimed by a person who traced the child without any knowledge of the announcement. There was no contract between the two in the first place. It is because the proposal never came to the knowledge of the person who found the child and thus he could never accept it.
Revocation of Proposal
SECTION 5 OF THE INDIAN CONTRACT ACT, 1872 provides provisions for the revocation of a proposal. It says that “a proposal may be revoked at any time before the communication of its acceptance is completed against the proposal but not afterward.”
In simpler words, an offer can be revoked any time before the completion of communication of acceptance against the proposal. If the offeror and acceptor are in front of each other then as soon as the acceptor speaks the words for acceptance the communication of acceptance is complete against the proposal. Moreover, if the communication of acceptance is given by post. It shall be completed against the proposal when he puts the letter in the course of transmission. An offeror can revoke his offer at any time before the letter of acceptance is put in the course of transmission.
Illustration -: A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance. However, he cannot revoke such a proposal after the post of his letter of acceptance.
RAJENDRA KUMAR VERMA V. STATE OF MADHYA PRADESH2 . – In this case, it has been held that a person who makes an offer is entitled to withdraw his offer or tender before its acceptance is intimated to him. The government by merely providing a clause to the contrary in the tender notice could not take away the legal rights of a person.
PAYNE V CAVE3 -: In case of an auction it has been held, that the bidder is entitled to revoke his bid at any time before the fall of the hammer. Moreover, before the property is finally knocked down.
Methods of Revocation
- BY COMMUNICATION OF REVOCATION -: As we have seen above that an offeror can revoke his offer at any time before the completion of communication of acceptance against the proposal. Moreover, such revocation shall be effective only when its communication comes into the knowledge of the acceptor. Thus it is a general way of revocation.
In the case of J.K ENTERPRISES STATE OF M.P.,4 It was held that “if the communication of revocation is sent by fax, but the fax is made on a wrong number then it shall not be a valid revocation.
- ON LAPSE OF TIME -: if any time is prescribed by the offeror and the acceptance is not given in that period of time then, the offer shall itself be revoked. If no such time is prescribed or fixed, then acceptance should be made within a reasonable time.
- ON FAILURE TO FULFILL A CONDITION PRECEDENT -: Where an acceptance of an offer requires fulfillment of a condition, then there on the failure of it leads to the revocation of the offer.
ILLUSTRATION – ‘A’ offers to ‘B’ to sell his vehicle on the condition that ‘B’ shall pay an advance amount to him. In such a situation, if ‘B’ fails to make payment of advance, then the offer shall be revoked.
- ON THE DEATH OF THE OFFEROR -: The offer shall be revoked on the death of the offeror or insanity or on his becoming mad or unsound.
Communication of Acceptance
After an offer has been made the next important step is its acceptance. Mere accepting doesn’t form a contract. The communication by the acceptor or its agent to the offeror or its agent is also important. The communication of acceptance by a stranger will not be a valid communication.
SECTION 3 OF THE INDIAN CONTRACT ACT, 1872 provides that “an act or omission by the acceptor with the intention of communicating the acceptance to the proposer, is called communication of acceptance.”
From the above definition, we can say that the communication of acceptance can be made by an act or omission or conduct of the acceptor. It is called communication in the expressed way or the implied way.
Acceptance When Complete
According to Section 4 of the act, “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 the acceptor, as against the acceptor, it is complete when it comes to the knowledge of the proposer.”
Thus, the communication of acceptance is completed in respect of two persons-
- In respect of the proposer .- The communication of acceptance is completed against the proposer when it is put into a course of transmission to him. Until the communication is not put into the course of transmission, the proposer can revoke his proposal.
- In respect of acceptor .– The communication of acceptance is completed against the acceptor when it comes to the knowledge of the proposer. Until it does not come to the knowledge of the proposer, the acceptor can revoke his acceptance.
Acceptance Must be Absolute and Unqualified:
SECTION 7 OF THE I.C.A SAYS THAT “in order to convert a proposal into a promise the acceptance must be absolute and unqualified.” It is also mentioned in this section that, acceptance should be given in the prescribed manner. Moreover, if the manner is not prescribed then it should be in some usual and reasonable manner.
In the case of HYDE V WRENCH 1840, an offer was made to sell a farm for Rs.1000. It was rejected by the plaintiff, who counter-offered Rs.950 for it. This was rejected by the defendant, upon which the plaintiff agreed to pay Rs.1000. However, it was held that the defendant was not bound by any such second acceptance.
Revocation of Acceptance
SECTION 5 OF THE ACT also provides the provisions for revocation of Acceptance. According to it “an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterward.”
The communication rules for revocation of an offer will be applicable to revocation of acceptance as well. The communication is complete against the proposer when it comes to his knowledge.
For example, ‘P’ makes an offer to ‘A’ by a letter sent through post for the sale of his car. ‘A’ accepts that offer by a letter sent through the post. ‘P’ can revoke his offer any time before the letter of offer is put into the post, but not afterward. Similarly, ‘A’ can revoke his acceptance before the letter of acceptance reaches ‘P’, but not afterward.
From the above discussion, we can say that, to form a contract two most important things are Proposal and Acceptance. But here it is also important that proper communication has been done regarding this. The communication becomes more important when the parties are in distant places. To understand whether they are on the same page or not. If not then, before their proposal or acceptance reaches to each other they can revoke it. But once it reaches to each other then they cannot back out from the contract. It becomes an obligation to perform the contract for both parties.
Also Read: Consideration in Indian Contract Act 1872, Click Here!
- BOOK- CONTRACT-I BY DR. S.K. KAPOOR, Communication Revocation and Acceptance of Proposal
- BARE ACT OF INDIAN CONTRACT ACT, 1872
- (1913) 11 ALJ 489
- AIR 1972 MP 131
- (1789) 3 T.R. 148
- AIR 1997 MP 68, 70