Communication of Offer, Acceptance and Revocation

When it comes to the field of contract law, efficient communication is a fundamental component that determines the process of forming, accepting, and rescinding offers. In 1872, the Indian Contract Act was created, which offers a thorough foundation for comprehending the dynamics of communication within contractual relationships. To shed light on the intricacies that drive these essential components of contract formation in India, this essay dives into the fundamental concepts that underline the communication of offer, acceptance, and revocation.

A clear and definite offer is required under Section 2(a), which states that “An offer must be able to create a legally enforceable agreement and must be clear and definite. Uncertainty and the possibility of disagreements might result from terminology that is ambiguous or vague.”

Geeky Takeaways:

• When contracting parties are face to face and negotiate in person, there is an instantaneous communication of offer and acceptance which gives rise to a valid contract.
• A valid contract comes into existence when the moment the offeree gives his absolute and unqualified acceptance to the proposal made by the offeror.
• The question of revocation does not arise in cases where an offer is made and accepted instantly at the same time.
• Thus, communication plays an important role in the Indian Contract Act, 1872.

Communication of an Offer

The process of initiating a contractual connection is referred to as an offer, and it is of the utmost importance that the offer be successfully conveyed to the person who is being offered. Under the provisions of Section 2(a) of the Indian Contract Act, ‘An offer is defined as a proposition to do or refrain from performing a certain action, to secure the mutual consent of the other party.’

When an offer is made to establish legal connections and by the time it is brought to the attention of the individual to whom it is made, the communication of the offer is considered to be complete. The offer may be conveyed via a variety of channels, including verbal or written communication, communication through marketing, or even by behavior.

Legal Rules for Communication under the Act

1. Intention of the Offeror to establish Legal Ties [Section 2(b)]: For an offer to be considered legitimate, the offeror must have the intention of establishing legal ties. It is common for social or domestic agreements to lack this aim, and as a result, they are not legally enforceable.

2. Communication of Acceptance and the Mode of Communication (Section 7): The offeree is required to convey acceptance to the offeror in a way that is either explicitly stated in the offer or inferred by the offer. Except in situations in which there is a process of dealing, or where silence is the typical way between the parties, silence does not generally signify acceptance.

3. Exemption for Unilateral Contracts (Section 5): In the event of unilateral contracts, where acceptance is conducted by performance, the offeror is not permitted to withdraw after performance has been commenced, provided that the offeree is actively carrying out the act.

4. Instant Methods of Communication [Section 4(3)]: In transactions in which the parties are located in separate locations and communication is instantaneous, for example, by phone or email, the withdrawal of the offer does not take effect until the offeree receives it.

5. Electronic Communication and the Formation of Contracts: Recognise the legality of contracts that are made by electronic communication, as the Indian Contract Act recognizes the use of electronic methods for offer, acceptance, and revocation of contracts.

Communication of an Acceptance

A clear and unmistakable indication of agreement with the parameters of the offer is what we mean when we talk about Acceptance. By the provisions of Section 2(b), the offeror must be informed of the acceptance before a contract may be established. The ‘postal rule’ does not apply under Indian contract law, which means that acceptance must be received by the offeror for it to be considered valid.

It is possible to convey acceptance through verbal communication, written communication, or behavior; nevertheless, the most important thing is that it must be unambiguous and explicit. It is commonly accepted that silence does not represent acceptance unless the conditions that are present suggest otherwise.

Communication of Revocation

The term Revocation refers to the act of withdrawing or canceling an offer before the acceptance of the offer. Following Section 5 of the Indian Contract Act, the offeror has the absolute right to withdraw the offer at any moment before its acceptance. On the other hand, for the revocation to be considered legal, it must be informed to the offeree.

It is required that the revocation be notified in the same way as the offer, making sure that it reaches the offeree before or at the same point in time as the offer itself.

It is essential to keep in mind that there are some circumstances in which an offer cannot be canceled, which is mentioned as follows:

• If the offer is made for a certain period, it is not possible to withdraw it before the deadline for that period. If the offer is accepted by the person who is being offered within the allotted amount of time, the offer will become irreversible.
• The offeror is unable to withdraw the offer if the offeree changes their stance after relying on the offer and changing their position.

Time during which an Offer or Acceptance can be Revoked

By the Indian Contract Act 1872, the criteria that are defined in Sections 5 and Section 6 are responsible for determining the period within which an offer or acceptance may be overturned. When it comes to the revocation of an offer or acceptance, the following are the most important points:

1. Revocation of Offer (Section 5): The offeror has the right to withdraw the offer at any time before the completion of the message of acceptance as against the offeror. This indicates that the offeror can withdraw the offer as long as the offeree has not acknowledged their acceptance of the invitation.

2. Revocation by Notice: The offeree must be informed of the revocation of an offer before it may be considered effective. Whenever it gets to the awareness of the person who is being offered, it becomes effective. The communication of the revocation needs to be carried out in the same way as the communication of the offer, or in a manner that may be reasonably anticipated to reach the offeree.

3. Time of Lapse: If the offer does not include a period that is stated for acceptance, the offeror has the right to withdraw the offer at any time before the acceptance is conveyed. If, on the other hand, the offer specifies a certain time, then the offer will continue to be valid until the specified period has passed.

4. Exception of Unilateral Contract: In the event of a unilateral contract, in which acceptance is achieved by performance, the offeror is not permitted to retract the offer after the offeree has begun the performance. This is an exception to the general rule. Up until the point when the performance is over, the offer will stay available.

5. Communication of Revocation to Third Parties: If the offeror has made the offer to a specific individual and that individual is unaware of the revocation, a third party may legitimately accept the offer until the offeror communicates the revocation to the individual to whom the offer was created.

It is essential to remember that for a contract to be established, acceptance must be conveyed to the person who made the offer; i.e., the offeror. As a result, the revocation of acceptance becomes effective once it reaches the offeror. To prevent misunderstandings and disagreements in the context of contractual relationships, the parties involved should keep these rules in mind.

Effect of Delay or Loss of Letter of Acceptance in Postal Transit

There is a provision in the Indian Contract Act that handles the circumstance in which a letter of acceptance is either lost or delayed in the mail system. The acceptance is regarded to be completed the moment it has been posted, not when it is received by the offeror, as stated in the act. This is the general norm that applies under Section 4 of the Indian Contract Act, which indicates that this concept is established. The following mentioned points are important to note:

• Acceptance by Post: In the case of acceptance by mail, the acceptance is normally regarded to be finalized as soon as it is sent, and the postal rule is applicable.
• Risk of Delay or Loss: In most cases, the offeror is the one who is responsible for bearing the risk of delay or loss in the postal transit system. The acceptance is always deemed to be finalized, regardless of whether the letter is delayed or lost.
• Exception: If the acceptance of the offer is sent via mail and does not reach the offeror within a reasonable amount of time, the offer is considered to have declined and expired.

The parties who engage in postal communications must be aware of these principles and, if required, clearly declare any differing conditions about the period of acceptance or the risk of delay or loss in their contract. These principles must be understood.

Accidental Formation of a Contract

• This situation arises when both the letter of acceptance and the telegram of revocation of acceptance are delivered to the offeror at the same time. In such situations, the formation of a contract will depend on the matter of chance. If the offeror first reads the letter of acceptance, and then the telegram, a binding contract will arise.
• But, in cases if the offeror reads the telegram of revocation of acceptance first, and then the letter of acceptance, there will be no binding contract because the communication of revocation comes to the offeror’s notice first than the communication of acceptance. Formation of a Contract in such situations depends on a matter of chance and therefore, such contracts are called Accidental Form of Contracts.
• In situations like these, the party that has been negatively impacted may pursue legal remedies such as rescission, which entails terminating the contract and putting the parties back in the positions they were in before the contract was signed. The Indian Contract Act includes provisions, such as those on errors and voidability, that handle instances in which a contract is made under circumstances that are either unintentional or erroneous.

Contracts over the Telephone

Contracts that are made via telephone calls are eligible for recognition under the Indian Contract Act, which treats them in the same manner as contracts that are formed through other modes of communication. The following is a list of important information about contracts over the telephone that are governed by the Indian Contract Act:

1. Transactions over Telephone: Transactions that are made over the telephone are subject to the principles of offer and acceptance, which are relevant to such transactions. It is possible to vocally accept an offer that was offered during a phone discussion while the call is still in progress.

2. Communication and Acceptance: The communication of acceptance is considered to be complete following Section 4 of the Indian Contract Act when it is placed in a channel of transmission and is brought to the notice of the offeror. Because of this, a vocal assent during a chat over the phone is often adequate; since the rule is applied to contracts made over the telephone as well.

3. Revocation: As is the case with other modes of communication, the person who made the offer can withdraw it at any point before the acceptance is finalized. Revocation of the offer is regarded to have occurred if the communication of the revocation occurs before the acceptance of the offer.

4. Instant Communication: Conversations that take place over the telephone are regarded to be instantaneous communication. In situations when instantaneous communication takes place, the revocation or acceptance of the agreement is considered to have taken effect once it has been received by the other party, as stipulated by Section 4(3) of the Act.

5. Record of Communication: Keeping a record of telephone calls may serve as proof if, there are disagreements over the terms and conditions that were agreed upon. It is important to note that the Indian Contract Act does not expressly dictate that a written record of the contract must be submitted.

6. Enforceability: Contracts that are made using the telephone have legal force and are enforceable, provided that they satisfy the key components needed by the Indian Contract Act. These elements include an offer, an acceptance, a legitimate purpose, and compensation.

Because the majority of telephone transactions do not constitute a written record, the parties are strongly recommended to reaffirm the conditions of the contract in writing to prevent any possible misunderstandings or disagreements from occurring.

In the case of Kanhialal vs Dinesh Chandra, it has been held that where a contract is effected by telephonic conversation, the contract is not complete till acceptance of the offer by the offeree is heard and understood by the offeror.

Conclusion

It is vital to have a thorough understanding of the complexities of communication in the context of offers, acceptances, and revocations to successfully navigate the challenges of contract law in India. The Indian Contract Act requires the parties to be precise in their communication techniques, making certain that their intentions are unmistakable and that their actions are by the standards that are established in the act. The contract acts as a shield for workers where employers fail to abide by the terms and conditions of the contract by making false promises to the employees and misguiding them. Because of the constant evolution of the business environment, the legal framework is also constantly evolving.

Frequently Asked Questions (FAQs)

1. According to the Indian Contract Act, what are the characteristics of a legal offer?

Answer:

An offer must be unambiguous, and capable of establishing a legally enforceable agreement. It should reflect the intention of the offeror to be bound by the conditions if the offer is accepted.

2. Based on the Indian Contract Act, how is acceptance notified to the parties involved?

Answer:

Either vocally or via actions that clearly indicate acceptance, the offeree is required to convey their approval to the offeror for the offer to be considered accepted. Generally speaking, silence does not indicate acceptance unless the circumstances imply otherwise.

3. Is the acceptance legitimate even if it wasn’t sent to the person who made the offer?

Answer:

The answer is no; since acceptance is not genuine until it is conveyed to the person who made the offer. To comply with the terms of the offer or the nature of the transaction, the communication must be carried out in the way specified above.

4. When an offer is revoked, how is the information communicated?

Answer:

The offeree must be informed of the revocation of an offer in the same way as the offer was conveyed to them. Whenever it gets to the awareness of the person who is being offered, it becomes effective.

5. When there is a delay in the transmission of acceptance or revocation, what are the consequences?

Answer:

The timeliness of communication is of the utmost importance. When it comes to the knowledge of the offeree, acceptance is effective when it is conveyed, and revocation is effective when it comes to offering something. As a result of the delay in notification, the contract may be revoked or its legality may be affected.

7. Is it possible to enter into contracts via the use of electronic means or over the telephone?

Answer:

Yes, contracts may be made in a variety of ways, including discussions over the phone and Internet communication, as long as the fundamental components of an offer, acceptance, and the purpose of establishing legally binding relationships are present.