Communication and Revocation of offer and acceptance

Two very important aspects of a contract are the offer and the acceptance of the offer. However, in the practical world of business and economics, the communication of the offer and the acceptance and the timings of these are also very important factors.

Communication of Offer and Acceptance

Now we have seen previously that an offer cannot be revoked after the offeror has communicated it to the offeree. Then the offer becomes binding, it creates legal relations between the two parties.

Effective communication of the offer and a clear understanding of it is important to avoid misunderstanding between all the parties.

If the parties are talking face-to-face this is not a problem. The communication happens in real time and the offer and acceptance will be communicated on the spot, creating no confusion.

But often times in business the communication occurs via letters and emails etc. So, in this case, the timeline of communication is important.

Communication of Offer

Section 4 of the Indian Contract Act 1872 says that the communication of the offer is complete when it comes to the knowledge of the person it has been made to. So, 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.

Communication when complete

The communication of a proposal is complete when it becomes 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 at 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.

So, when two people are talking, face-to-face or via telephone, etc the communication will be complete as soon as the offer is made. Example if A tells B he will fix his roof for five thousand rupees, the communication is complete as soon as the words are spoken.

Communication of Acceptance

Mode of Acceptance

In this case of communication of acceptance, there are two factors to consider, the mode of acceptance and then the timing of it.

• Communication of Acceptance by an Act: This would include communication via words, whether oral or written. So, this will include communication via telephone calls, letters, e-mails, telegraphs, etc.
• Communication of Acceptance by Conduct: The offeree can also convey his acceptance of the offer through some action of his, or by his conduct. So, say when you board a bus, you are accepting to pay the bus fare via your conduct.

Timing of Acceptance

The communication of acceptance has two parts.

• As against the Offeror: For the proposer, the communication of the acceptance is complete when he 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. So, for example, A accepts the offer of B via a letter. He posts the letter on 10th July and the letter reaches B on 14th For B (the proposer) the communication of the acceptance is completed on 10th July itself.
• As against the Acceptor: The communication in case of the acceptor is complete when the proposer acquires knowledge of such acceptance. So in the above example, A’s communication will be complete on 14th July, when B learns of the acceptance.

Revocation of Offer

Revocation means an offer is withdrawn by the offeror. The general rule was established in Payne v Cave that an offer can be revoked at any time before acceptance takes place. However, the revocation must be communicated effectively directly or indirectly to the offeree before acceptance.

The Indian Contract Act lays out the rules of revocation of an offer in Section 5. It says 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, revocation of the offer is now not possible.

Revocation of Acceptance

Section 5 also states that acceptance can be revoked until the communication of the acceptance is completed against the acceptor. No revocation of acceptance can happen after such date.