Communication of Offer
Communication of Offer
The section 4 of 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.
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.
Let us take the same example. A writes to B offering to fix his roof for five thousand rupees. He
posts the letter on 2nd July. The letter reaches B on 4th July. So the communication is said to
complete on 4th July.
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. Let us first talk about the mode of acceptance. Acceptance
can be done in two ways, namely
Timing of Acceptance
JJJJJ.
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LLLLL. as against the proposer, when it is put in a course of transmission to him, so asto
be out of the power of the acceptor;
MMMMM.
NNNNN. as against the acceptor, when it comes to the knowledge of the proposer.The
above mentioned sections of the Act are vividly seen as being based on themailbox rule,
taking post as the main method of written communication. (the mailboxrule is discussed
hereinafter). It can be seen that the Law of Contract Act, 2002, has lefta lacuna as far as
the instantaneous modes of communication are concerned.
OOOOO. Effective Acceptance Communication
PPPPP. The process of contract formation is, essentially, a process of communication. A
simpledefinition in social sciences is that "communication is the effective transmission of
amessage." From the perspective of electronic acceptance examples of
failedcommunication may include email messages which have been corrupted,
electronicdocuments which cannot be opened without specific software, and failure of an
internetservice provider (“ISP”) to deal properly with and route an electronic message.The
courts have developed various strategies to allocate to the recipient the risk as towhether
an acceptance is actually received (in relation to paper contracts), in order togive some
protection to the sending party who will not be aware there is a problem withhis message
until it is too late.Perhaps the best known of these strategies is the “postal rule” whereby a
postedacceptance will be deemed to have been communicated when it has been posted
rather than when it is received. However, these strategies were developed in a world
whereinstantaneous communication was not possible. As faster communication becomes
thenorm, the protection offered by the postal rules has been reduced for others forms
of communication. For example, faxes are communicated when received rather than
whensent, although they need not have been read, or even printed if the fax machine
cansave faxes to its memory, as it was in the case of
QQQQQ. Anson -v- Trump.
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SSSSS. 8
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UUUUU. Dominance of the
VVVVV. Mailbox rule (Postal acceptance rule)
WWWWW. As a rule of convenience, if the offer is accepted by post, the contract
comes intoexistence at the moment that the acceptance was posted. Posting binds the
Offeror,and when the acceptance comes to the knowledge of the Offeror, the Offeree
becomesbound by the terms of the contract. This rule only applies when, impliedly or
explicitly,the parties have in contemplation post as a means of acceptance.The Common
Law position is that both the Offeror and Offeree become irrevocablybound when the
acceptance letter is posted in due course. The phrase “
XXXXX. in due course
YYYYY. ”means that the letter must be properly addressed, adequately stamped, and
posted. Incase the letter gets lost while in transit, the parties continue to be bound by the
terms of the contract.For quite a while, post has been regarded as the main form of written
communication.This has been so for the time when other written communication methods,
such as faxand email, have not been in existence.The Mailbox rule excludes contracts
involving land, letters incorrectly addressed andinstantaneous modes of communication,
which is the main concern of this paper.
ZZZZZ. Instantaneous Communication
AAAAAA. With the development of Information and Communication Technology
(ICT), here camenew and faster modes of communication, such as telephones (land lines
and mobilephones), fax, telex and email. Such methods have made the globe look like
one village,enabling instant delivery of voice and data (text) communication.
Generally,Instantaneous forms of communication do not fall under the mailbox rule.
Acceptanceby these methods is, therefore, only valid
BBBBBB. when the message is received
CCCCCC. .Reasoning with instantaneous communication is that people should consider
thesituation as if the parties are in each other’s presence.
DDDDDD. 9
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FFFFFF. Place of Contract
GGGGGG. The place of contract is governed by the place of acceptance of the offer;
and
HHHHHH. acceptance takes place at the place where it is received
IIIIII. . Where acceptance iscommunicated by letter it is regarded as received at the
place of
JJJJJJ. posting
KKKKKK. rather than atthe place of actual receipt. This is because, once a letter has
been posted, the PostOffice holds it on behalf of the addressee. Where telephone
communication is used theplace of acceptance is the place where the recipient of the
acceptance is. That is thegeneral rule for instantaneous communication. It would apply
also to an acceptancesent by
LLLLLL. telex
MMMMMM. or
NNNNNN. fax
OOOOOO. directly from the acceptor's office to the offeror's office. The generalrule
may need qualifying when a cable company's services are used. A telegram like aletter is
regarded as received when put into the hands of the Post Office.
PPPPPP. Acceptance of an Offer by Fax:
QQQQQQ. If you accept an offer by fax, it will probably bedeemedto be accepted as it is
printedout by the offeror's fax machine, whether or not there is anyone there to receive it. In
RRRRRR. NM Superannuation Pty Limited v. Hughes (1992)
SSSSSS. , a decision of the New South WalesSupreme Court, Cohen J held that if a fax is
left switched on its owner is indicating their preparedness to receive messages on it and in
such circumstances it was sufficient for a notice to be communicated by fax, even though
the document might arrive outsidenormal business hours. The same principles probably
apply to other electronic means of communications, such as email but these have so far
not been tested in a court.Basically, acceptance must be communicated effectively. Where
timing is, or may becritical, you should agree on a method of acceptance and its timing at
the beginning.Various complications can arise with regard to whether offer/acceptance
sent duringoffice hours. In the case of the Brimnes (1975), notice of withdrawal sent by fax
duringoffice hours but not seen by staff until the following Monday. The Court held that
thecontract became effective when the message was received. Possible factor was
staff’snegligence. Conversely if sent outside office hours, acceptance will be effective from
thefirst new day. Some problems might also arise if the fax machine that has run out of
TTTTTT. 10
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VVVVVV.
WWWWWW. paper and cannot store messages electronically? In this case, is there a
contract?Acceptance will not have been effectively communicated, and therefore no
contract!
XXXXXX. Acceptance of an Offer by Telephone:
YYYYYY. In any contract, there has to be effective communication. Acceptance is,
therefore, notcommunicated until such time as the acceptance actually comes to the
attention of theparty to whom it is directed.There are no real problems when acceptance is
given verbally, face-to-face or bytelephone. But what about acceptance by less direct
means? If communication is`instantaneous' (e.g., telephone), then acceptance does not
occur when thecommunication is made, but when it is received. Of course, these events
are legallycontemporaneous, but it is possible for communication to fail during acceptance,
andno-one should have to be bound by an acceptance that he has not heard.Therefore, if
a case occurs that acceptance is attempted by telephone but the line isvery poor and the
acceptance is not heard, it will be concluded that acceptance was noteffectively
communicated. Therefore, no enforceable agreement came into being.
ZZZZZZ. Acceptance of an Offer by Telex:
AAAAAAA. In the case of Entores v Miles Far East Corporation (1995), the defendants
were inLondon, while the plaintiffs were in USA with agents in Amsterdam. Both parties
hadtelex. Plaintiffs placed order by telex, agent accepted by telex. The dispute arose
andplaintiffs sued for breach of contract. The Court held same as if in each
other’spresence. Thus contract formed when acceptance received in LondonWith regard
to acceptance of a bilateral contract between two companies, a certainstandard of conduct
is expected from the offeror. As suggested in the Entores Case itwas said that this principle
could apply where an offer is accepted by telephone and theofferor did not catch the words
of acceptance but did not ask for the words to be
BBBBBBB. 11
CCCCCCC.
DDDDDDD. repeated and in the BRIMNES case (1975) where acceptance is sent by
Telex duringbusiness hours, but is simply not read by anyone in the Offeror’s office.As in
the case of