Indian Legal System > Civil Laws > Indian Contract Act, 1872 > Communication of Offer
A proposal is main ingredient of a valid contract. The term “proposal” of the Indian Contract Act is synonymous to the term “Offer” in English law. Section 2(a)of the Indian Contract Act, 1872 defines proposal as “when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal”. The person making proposal/offer is called the proposer/offeror and the person to which the proposal is made is called propose or offeree. In this article, we shall discuss types of offer. Section 9 talks of an express offer, express acceptance, implied offer, and implied acceptance. in this article, we shall study communication of offer.
Communication means imparting or exchanging information by speaking, writing, or using some other medium. Chapter I of the Act deals with the communication, acceptance, and revocation of Proposal. An offer and its acceptance, to be valid must be communicated to the other party. Similarly, the revocation offer should be communicated to the offeree by the offeror.
Section 3:Communication, acceptance and revocation of proposals:
The communication of proposals the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.
Section 4: Communication when complete:
The communication of a proposal is 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, so as to be out of the power of the acceptor;
as against the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is complete,—
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;
as against the person to whom it is made, when it comes to his knowledge.
Illustrations
a) A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter.
(b) B accepts A‟s proposal by a letter sent by post. The communication of the acceptance is complete, as against A when the letter is post; as against B, when the letter is received by A.
(c) 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. B revokes his acceptance by telegram. B‟s revocation is complete as against B when the telegram is dispatched, and as against A when it reaches him.
Communication of Offer:
Section 3 of the Act, lays down that the communication of proposal, acceptance, and revocation is must. It may be expressed or implied. The express communication can be written, through emails, telegraphic, telephonic, minutes of a meeting, words of mouth or conduct. Thus proposal may be communicated in any way which has the effect of laying before the offeree the willingness to do or abstain.
Section 4 para 1 of the Act lays down that the communication of an offer is complete when it comes to the knowledge of the person to whom it is made. When an offer is made by post, its communication will be complete when the offeree receives the letter. In face to face or telephonic conversation, the instant the offeree listens to the offer by the offeror, the communication is complete.
Thus 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.
Understanding the TimeLine of Communication of Proposal:
- A and B are sitting together on a coffee table. A offers his Car for ₹ 2,00,000 to B. The offer reaches the ears of B, the offer of A is complete.
- A calls B on a telephone and offers his Car for ₹ 2,00,000 to B. The offer reaches the ears of B, the offer of A is complete.
- A of Agra by a letter to B of Bhatinda offers his car for ₹ 2,00,000 through by a letter dated on 15th August 2017. B receives the offer letter on 17th August 2017. Now the communication of offer is complete on 17th August 2017 for B (Offeree) and on 15th August 2017 for A (Offeror).
Case Laws:
In Ram Krishan Singhal v. Executive Engineer, ILR v(1991) 1 Del 275 case, the Court held that a contract can come into existence between the parties by the exchange of letters.
In SBI v. Aditya Finance & Leasing Co. Pvt. Ltd. AIR 1999 Del 18 the Court inferred a lease contract from the correspondence and minutes of the meeting between the parties.
In P. Syamala v. R. Gopinathan (2004) 1 CTC 117 case, there was an oral agreement of sale of property and seller received cheques for the price and encashed them. Court held that in this case, the oral agreement is valid because there was the conclusion of the oral contract and subsequent sale of the property by the seller to subsequent buyer is invalid.
In T. Jayram Naidu v. Yashodha, AIR 2008 NOC 972 (Mad) case, the Court held that an oral agreement for sale is valid and enforceable, proving such agreement may be difficult, but when proved, valid.
In Lalman Shukla v. Gauri Datt (1913) All LJ 489 case A’s nephew has absconded from his home. He sent his servant to trace his missing
nephew. When the servant had left, A then announced that anybody who has discovered the missing boy would be given the reward of Rs.500. The servant discovered the missing boy without knowing the reward. When the servant came to know about the reward, he asked for the same from A. A refused to give the reward. The servant brought an action against A in the court of law to recover the same. But the court held that when the servant discovered the boy, he was not aware of the reward. Thus the offer was not communicated to him. Hence he is not liable to get the reward from A.
In Taylor v. Laird, 25 L.J. Ex. 329 case, the plaintiff was employed as the captain of a ship which was owned by the defendant. Whilst in a foreign port during the course of the voyage, he voluntarily gave up his position as a captain and worked as an ordinary crew member during his passage back to Britain. The defendant was not made aware of this change of position. Upon his return, he sought to claim wages from the defendant for his work as a crew member during this journey. The court held that the plaintiff has not communicated his offer to work as a crew to the defendant and hence he had not entered into any contractual agreement with the defendant for the performance of his work as an ordinary crew member. hence the plaintiff is not entitled to wages for the return journey.
In Felthouse v Bindley, (1862) EWHC CP J35 case, the complainant, Paul Felthouse, had a conversation with his nephew, John Felthouse, about buying his horse. After their discussion, the uncle replied by letter stating that if he didn’t hear anymore from his nephew concerning the horse, he would consider acceptance of the order done and he would own the horse. His nephew did not reply to this letter and was busy at auctions. The defendant, Mr Bindley, ran the auctions and the nephew advised him not to sell the horse. However, by accident he ended up selling the horse to someone else. The Court held that there was no contract for the horse between the complainant and his nephew. There had not been an acceptance of the offer; silence did not amount to acceptance and an obligation cannot be imposed by another. Any acceptance of an offer must be communicated clearly. Although the nephew had intended to sell the horse to the complainant and showed this interest, there was no contract of sale. Thus, the nephew’s failure to respond to the complainant did not amount to an acceptance of his offer.
Postal Acceptance Rule:
Adams v Lindsell, decided two centuries ago, is well-known as a source of what we now call the ‘postal acceptance rule’: the rule that a contract entered through postal correspondence is concluded when the offeree posts his letter of acceptance, rather than when the offeror receives the letter. This rule is often thought to be an exception to the more general principle that a contractual agreement is concluded when the offeree’s acceptance is communicated to the offeror.
In Adams v. Lindsell, 106 ER 250 (KB) case, on September 2, 1817, Lindsell (defendant), a dealer in wool, sent a letter to Adams (plaintiff), a manufacturer of wool, offering to sell Adams a certain amount of wool. The offer provided for acceptance by written notice sent through regular mail (“in course of post”). Based on the timing of sending the letter, Lindsell expected to receive a response from Adams by September 7th. However, Lindsell sent the letter to the wrong address, and Adams did not receive the letter until September 5th. That evening, Adams wrote an acceptance of the offer and mailed it back to Lindsell. Lindsell received Adams’s acceptance on September 9th. However, because Lindsell had not received a response from Adams as expected on September 7th, Lindsell sold the wool it had originally offered to Adams to a third party on September 8th. Adams brought suit against Lindsell for breach of contract. The trial court held that Adams’s acceptance was valid when placed by Adams in the mail, and that any delay in receiving the acceptance was caused by Lindsell’s failure to send the initial offer to the correct address. The trial court entered judgment for Adams, and Lindsell moved for a new trial.
Instant Communication:
In Entores Ltd v Miles Far East Corporation, [1955] 2 QB 327 case, the Plaintiffs (Entores) were an English Company and the Defendants (Miles Far East Co) were an American corporation with agents in various locations, including Amsterdam. An offer and acceptance in relation to a contract for Japanese cathodes was made between the companies in London and Amsterdam. Specifically:
- the Plaintiffs (in London) sent an offer by telex to the Defendants (in Amsterdam).
- the Defendants (in Amsterdam) sent an acceptance by telex to the Plaintiffs (in London)
The issue was when the contract entered into force, as this would determine whether Dutch or English law would apply to the contract. Specifically, the Court was required to determine whether the postal rule (providing that acceptance occurs when and where the letter is sent) applied to telex communications.
The court held that the contract and damages were to be decided by English law. It was stated that the postal rule did not apply for instantaneous communications. Since Telex was a form of instant messaging, the normal postal rule of acceptance would not apply and instead, acceptance would be when the message by Telex was received. Thus, the contract was created in London. This general principle on acceptance was held to apply to all forms of instantaneous communication methods. Acceptance via these forms of communication had to be clear before any contract is created.
Conclusion:
Communication means imparting or exchanging information by speaking, writing, or using some other medium. A communication is the building block of any contract, without this there cannot be a contract. An offer and its acceptance, to be valid must be communicated to the other party. Similarly, the revocation offer should be communicated to the offeree by the offeror.
Effective communication of the offer and a clear understanding of it is important to avoid misunderstanding between all the parties. When the parties are talking face-to-face the communication takes place in real-time and on spot. Hence there is almost no confusion. For other forms of communication, the communication should be clear and unambiguous. At the same time, the timeline of communication is important.