This article has been written by Ashmeet Kaur Arora pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution at LawSikho, and has been edited by Shashwat Kaushik. This article gives you an insight into communication and the revocation of offer and acceptance.
It has been published by Rachit Garg.
Table of Contents
Introduction
An agreement that is legally enforceable is referred to as a contract according to Section 2(h) of the Indian Contract Act, 1872. It can either be a written or oral agreement/ contract. For a contract to be enforceable by law, there should be a legal object that legally binds the parties to the contract. A lease deed, an employment agreement, a loan agreement, a sale deed, an insurance policy, etc. are some types of valid contracts.
Further, a contract is considered valid when it fulfils the three most important elements, namely, offer, acceptance, and consideration.
What is an offer
An offer is described in Section 2(a) of the Indian Contract Act, 1872. A proposal is said to be made when a person indicates to another his willingness to act or refrain from acting to gain the other person’s consent to act or refrain.
The person who is offering the proposal/promise for the contract is called the offeror/promisor, and the person to whom the proposal/promise is made or the person who accepts the same is called the offeree/promisee.
Thus, in layman’s terms, an offer is a proposal made by the offeror/promisor to the offeree/promisee to perform its obligation in order to initiate a valid contract between the parties. For example, if X offers Y to sell his car for Rs. 5,00,000/-, such a proposal is called an offer.
Types of offers
An offer can be of four types:
Expressed offer
When an offer made in written form has been expressed orally, then such an offer is an expressed offer.
Implied offer
When an offer is neither given in written nor oral form, but the conduct of the offeror/promisor depicts that he is willing to perform the obligation, then such an offer is called an implied offer.
Specific offer
An offer made to a specific person or to a specific public at large is called a specific offer.
General offer
An offer is referred to as a general offer when it is made to the general public. A general offer is made to the public, but only the person/party who accepts the offer forms a contract, not the whole public.
What is meant by acceptance
The definition of acceptance is given under Section 2(b) of the Indian Contract Act, 1872. The proposal is considered accepted when the person to whom it is made expresses his consent to it. Once a proposal is accepted, it turns into a promise.
In layman’s terms, when the offeree/promisee gives his consent to accept the offer/proposal made by the offeror/promisor. For example, if Y accepts the offer of X to purchase the car for Rs. 5,00,000/-, then such consent is termed acceptance. Thus, by accepting X’s proposal, both X and Y are executing a valid contract.
Acceptance can either be given by expressing the same in written form or orally; in such a case, it would be called expressed acceptance, or if the conduct of the offeree depicts that he is willing to accept the offer, such acceptance is called implied acceptance. For example, X has offered to sell his book to Y for Rs. 200. Y may accept the same offer by giving his acceptance in writing through a letter or orally by stating that he is interested in purchasing the book. If Y would not have given his expressed acceptance but his actions would have indicated that he is interested in buying the book, then such acceptance would have been implied acceptance.
Elements of a valid acceptance
The following are the most important elements where an acceptance made by the offeree/promisee is deemed to be valid:
- The proposal must be unconditionally accepted in order for it to be turned into a promise, according to Section 7(1) of the Indian Contract Act.
- The acceptance shall not be taken under any coercion, undue influence, or threat. It should be given with the free consent of the offeree/promisee.
- The offeree/promisee must reflect his intention to enter into a contract.
- The acceptance must be communicated in a proper manner to the offeror/promisor. Acceptance can be either implied or expressed.
- If any specific time period is mentioned in accepting the offer, the offeree/promisee should be accepted within that specified time period.
- The offer should be accepted without making any modifications or prescribing any conditions. It must be accepted unconditionally.
- If the offeree/promisee remains silent after receiving the offer, then in that case, it does not imply that the offer has been accepted by the offeree/promisee. There should be proper communication about the same.
Communication of offer and acceptance
For every contract to be valid, an offer and acceptance have to be communicated. Unless an offer is communicated, it cannot be accepted. And thus, in the same way, an acceptance that has not been communicated does not bind any legal relations between the parties.
Communication of offer
Section 4 of the Indian Contract Act says that the communication of an offer is complete when it comes to the knowledge of the person to whom it is made and when the letter containing the offer is received and acknowledged by the offeree.
For example, X of Agra has sent his offer via letter by post to Y of Lucknow, offering to sell his property for Rs. 10 lakhs. The letter is posted on March 5, and this letter reaches Y on March 7. Thus, it can be said that the communication of the offer made by the offeror/promisor was completed on March 7. And if, by any chance, the letter containing the offer never reaches Y, but Y comes to know about the proposal from some of the other sources and thereafter sends his acceptance to X, it will not amount to any proper communication of the offer, and thus there will be no valid contract.
Communication of acceptance
The rules for communication of acceptance are different for the person who makes it and the one who gets it because the communication of acceptance is completed at different times for both parties, i.e., the offeror and the offeree.
The completion of communication of acceptance is described under Section 4 of the Indian Contract Act and it is complete when:
- In opposition to the proposer, when it is transmitted to him, so as to be beyond the acceptor’s control, and
- When it comes to the proposer’s knowledge, as opposed to the acceptor’s.
Thus, the offeror becomes bound by the acceptance when the acceptor has given his acceptance and sent the letter of acceptance to the proposer, but the acceptor is bound by his acceptance only when the letter of acceptance reaches the offeror. Further, the offeror shall be bound by the acceptance only at the time when the letter of acceptance sent by the Acceptor was correctly addressed, properly stamped, and actually posted. Hence, in case of failure to do so, the acceptance shall not be deemed to be binding upon the offeror.
Revocation of offer and acceptance
The word ‘revocation’ simply means ‘taking back’ or ‘withdrawing’. Both the offer and acceptance can be revoked or withdrawn. But it is possible only up to a certain stage.
Revocation of offer
A proposal may be withdrawn at any time prior to the complete communication of its acceptance as against the proposer, but not after, according to Section 5 of the Indian Contract Act. In layman’s terms, the communication of acceptance can be said to be completed as against the offeror when it is put in a course of transmission so as to be out of his power. Hence, an offer can be revoked easily before the offeree/promisee post’s his letter of acceptance.
For example, A offers to sell his car to B by mail. A may revoke his offer before B posts his letter of acceptance, but not afterwards. The offer cannot be revoked after the posting of the letter of acceptance. So, if the offeror wants to revoke his offer, the revocation notice must reach the offeree before he receives the letter of offer.
The cancellation must be expressed and not merely implied. The offeror must send the revocation notice directly or through an authorised person. A “general offer” must be revoked in the same manner that it was originally made, according to the law.
Revocation of acceptance
As per Section 5 of the ICA, acceptance can be revoked before the letter of acceptance has been communicated and not afterwards. In layman’s terms, it is possible to say that the communication of acceptance is finished as opposed to the acceptor when it comes to the knowledge of the offeror. Therefore, the acceptor has the right to revoke his acceptance anytime before the offeror receives his acceptance letter. Once the letter of acceptance is received by the offeror, the acceptance cannot be revoked.
Communication of revocation
The communication of the revocation is different for both parties for the party making it and the party receiving it. As per Section 4 of the Indian Contract Act, the communication of revocation is said to be completed when:
- As against the person who makes it, when it is put into a course of transmission to the person to whom it is made, it is out of the power of the person who makes it.
- Against the person to whom it’s made, after coming to his knowledge
Conclusion
Therefore, an offer or acceptance can be revoked before the formation of a contract. A proposal can be revoked before its acceptance, and acceptance can be revoked before its communication is complete. But in light of recent developments like e-contracts or smart contracts, the provisions of the ICA must be amended to create modern modes of communication.
References
- https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-i/what-is-a-contract/
- https://www.vedantu.com/commerce/communication-of-offer-and-acceptance-and-revocation-of-offer
- https://www.indiacode.nic.in/handle/123456789/2187?sam_handle=123456789/1362
- https://egyankosh.ac.in/bitstream/123456789/13367/1/Unit-2.pdf
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