In this blog post, Sakshi Bhatnagar, a student of National Law University Odisha, Cuttack writes about contract inter –absentes and gives an insight as to how postage and telephone can be used as a mode of communicating offers and acceptances in making a valid contract between two or more parties who are not present in each other’s vicinity at the time of making a contract.

What does contract inter-absentes mean?

Contract inter-absentes are those contracts in which the contracting parties are not in the presence of each other at the time of making the contract. The contracting parties use different types of methods to communicate their offers and acceptances in the case of contracts inter-absentes like postage, telegram, telegraph, telephone, email, etc. But how does one determine as to when a contract has been formed? Or how can a party seek revocation of contract? Or when is the communication of offer and acceptance complete against the offeror and offeree? All of these questions have been answered below.

Postage: When is acceptance of offer completed?

According to the Indian Contract Act, When the person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted.[1]Thus, when a proposal is assented to by the offeree, he is said to have accepted the proposal. The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptance, 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.[2] 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.[3]

The communication of an Acceptance is only complete when the knowledge of the acceptance reaches the proposer, the proposer receives i.e. the letter containing the absolute and unqualified acceptance to the terms of the offer. Here the words “put in the course of transmission” implies that postal or telegram services can be used[4].

Since the proposal has been communicated using the postal service, any means of communication which is faster than or at least equally efficient can be used to communicate the acceptance. These methods are, however, contingent to the provisions of the offer. If the proposal specifies a particular method, then that method should be followed. Also, if there is and urgency or the time-period is limited, an appropriate method should be used.

Place of communication of acceptance

The offer may specify where the letter of acceptance may be addressed to, in which case the letter must reach that place within the given period, the communication should be posted to the correct address[5] or the last known address[6].If the offer does not specify any address, then the letter can be directed to a reasonable or usual places like the place of business or residence.The letter of acceptance may be sent to the address of the sender, as mentioned in the letter, if the usual address is not known.  A letter, not addressed correctly, cannot be said to have been put in the course of transmission[7].

Completion of contract

Time of Contract- The time of the finalization of the contract is the time when the letter of acceptance has been posted[8].Place of Contract. The place of the contract is the place from where the letter of acceptance has been posted.

Revocation of Proposal

According to Section 5, a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterward. According to Section 4, 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.

Thus, an offer can be revoked at any time before the offeree has posted the letter of acceptance[9].^.The revocation of the proposal is said to be complete when it comes to the knowledge of the offeror. Any offer is made irrevocable by acceptance[10].

Telephone and Telex: When is acceptance of offer and acceptance is completed?

The communication by telex or telephone, fax or emails is categorized under “instantaneous” modes of communication. They are called so because in these modes in an absence of the contracting parties the communication of offer or acceptance or counter offers reaches the party within a fraction of second or microseconds, i.e., instantaneously in the form of electronic signals. The four instantaneous modes for communicating are the telephone, telex, fax, and emails.

Further, telephone and telex are dealt together in the next section and fax has been dealt in the succeeding section.

Acceptance and Communication of Acceptance

Section 2 Clause (b), of the Indian Contract Act, 1872 states when the person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted. Thus, when a proposal is assented to by the offeree, he is said to have accepted the proposal. The communication of  proposal through telephone or telex is complete when the proposal is being communicated to the offeree, i.e., in the case of telephone, when the offeree hears the offer and in the case of telex, when the offeree receives and read the offer, the communication of the proposal is said to be complete.[11]

Revocation of proposal

A person may revoke the plan anytime before the offeree accepts the proposal and communicates his acceptance to the offeror. The communication of the revocation is complete when the offeree receives the message of the revocation, need not be read by him. According to Section 5, a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterward.  According to Section 4, 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.

Thus, an offer can be revoked at any time before the offeree has posted the letter of acceptance[12].^.The revocation of the proposal is said to be complete when it comes to the knowledge of the offeror. Any offer is made irrevocable by acceptance[13].

Acceptance when complete

When parties are present in front of each other during the time the proposal is being made, the acceptance can easily be communicated by the offeree. But the absence of the parties in front of each other, makes them rely on external sources for transmission of their message. When a telephone is used as a means of communication, then the acceptor is well known for the fact if the offeror has received his message or not, and thus, he can send it again if any disturbances occur in the transmission of the message regarding acceptance.

Therefore, in the case of acceptance, the contract is concluded when acceptance reaches the proposer, i.e., when he has heard the message of acceptance.The postal rule of completion of acceptance, which when acceptance is put in the course of transmission it is deemed to be complete does not apply in the case of communication through telephone or telex.

Place where contract is complete

In Indian law, when parties are at a distance and communicate an offer and acceptance via telephone or telex, then the place of completion of the contract is the place where the offeree speaks to the offeror his acceptance to the offer.[14]Thus, when the offeree expresses his acceptance, the place at which he says it is the one where a contract is formed.

While in English law, when parties are at a distance and communicate an offer and acceptance via telephone or telex, then the place of completion of the contract is the place where the offeror receives the news of acceptance of the offer by the offeree.[15]  Thus, when the offeror receives the communication of acceptance, the place where he receives the communication is the place where the contract is formed.

In the case of Bhagwandas Goverdhandas Kedia v M/S. Girdharilal Parshottamdas[16], which is considered to be a landmark case in Indian law describing communication using instantaneous methods, telephone, the following guidelines were given:

• When the offeree speaks his acceptance, and his words are put in the course of transmission, he is unable to revoke his acceptance. With technological advancement, the device called telephone delivers the message signal instantaneously and within a gap of nanoseconds, the offeror can know the acceptance of the offeree. Thus, it can be said that when offeree speaks his acceptance the offeror gets to hear it and hence, the contract is formed at the place offeree speaks of his acceptance.
• A contract via instantaneous modes of communication is formed when the offeree accepts the offer and intimates the offeror of his acceptance. The intimation must be by the same external manifestation which law regards as sufficient[17].
• In the case of telegrams or post, a contract is formed when the offeree puts his acceptance in the course of transmission. This rule, will not apply in case of instantaneous modes of communication like the telephone. A contract, in the event of inter-absentes of parties where communication takes place via telephone, will be complete when the offeree accepts the offer and intimates the offeror of his acceptance. This intimation would make the offer and acceptance of a binding contract. Thus, the postal rule would not apply in instantaneous modes of communication.

This is because a telephonic conversation is taken in a sense that the parties are in the presence of each other, where each party can hear the voice of the other. “Telephone is an instantaneous communication of speech intimating offer and acceptance, rejection and counter-offer. Intervention of an electrical impulse which results in the instantaneous communication of messages from a distance does not alter the nature of the conversation so as to make it analogous to that of an offer and acceptance through post or by Telegram”[18]Also, no third or external agency is involved in communicating the acceptance of one party to another in the case of telephone, making it a conversation that can be taken as instantaneous mode and thus it can be taken in a sense that parties are in the presence of with each other.[19]

[1] Entores Ltd. v. Miles Far Eastern Corp. [1955] 2 Q.B.D

[2] AIR1966 SC 543

[3] Ibid

[4] Ibid

[5] Entores Ltd. v. Miles Far Eastern Corp. [1955] 2 Q.B.D

[6] Section 4, Indian Contract Act, 1872

[7] Offord v.Davies (1862) 12 CBNS 748.

[8] Northern Railway Co. v. Witham (1873) LR 9 CP 16.

[9]Bhagwandas Goverdhandas Kedia vs M/S. Girdharilal Parshottamdas AIR1966 SC 543

[10] Tricumdas Mills v. Haji Sadoo Siddick, 4 Bom LR 215(220).

[11]  Powell v. Lee (1908)99 LT 284 (KB).

[12] Ram Das v. The Official Liquidator, (1887) 9 All 366(384).

[13] Kamisetti Subbiah v. Katha Venkatswami, (1903) 27 Mad 355 at 359.

[14] Offord v.Davies (1862) 12 CBNS 748.

[15] Northern Railway Co. v. Witham (1873) LR 9 CP 16.

[16] Section 2(b), Indian Contract Act, 1872

[17] Section 2(c), Indian Contract Act, 1872

[18] Section 2(d), Indian Contract Act, 1872

[19] Henthorn v. Fraser (1892) 2 Ch 27.