COMMUNICATION OF PROPOSAL/OFFER
According to Section 4 of the Indian Contract Act 1872, The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
For example:
A sent a letter to B offering to sell his horse for Rs. 6000.
Communication of offer is complete as soon as B gets the letter. The communication is complete as soon as B knows about the offer.
The communication of an acceptance of a proposal as against the proposer is complete when it is put in a course of transmission to him so that it is out of the power of the acceptor whereas the communication of an acceptance of a proposal as against the acceptor is complete when it comes to the knowledge of the proposer.
In the Household Fire Insurance Co. V. Grant, 4 LR 216(1879) case, the court ruled that when an offer is properly accepted by letter or any other appropriate means of communication, the acceptance is complete and a binding contract is formed as soon as the letter is sent, even if the letter is lost in the post and never reaches the offeror.
In the Entorse Ltd. V. Miles Far East Corporation, 1 QB 327(1955)case, The plaintiff was a London-based firm that made a telex bid to the defendant, an American firm, to sell a certain amount of meat, and the defendant’s firm accepted the offer via telex. The question was raised as to where the contract was made and, in the event of a dispute, which court will have jurisdiction. The contract was agreed to be concluded in London because a contract is considered to be made at the location where the approval is issued, i.e. the offeror’s location.
COMMUNICATION IN CASE OF TELEPHONIC CONVERSATION
The case mentioned above is only applicable when the proposal is communicated through postal services or other services that take time for the proposer to deliver his or her message. However, a telephone call may also be used to make a proposal.
When the proposer uses the telephone to deliver his message to others. The proposal is then communicated to the promisee at the same time the message arrives in his or her knowledge. If there are network problems or calls are disconnected during conversations, it is not considered a legitimate proposal because it is not definite and certain.
REVOCATION OF PROPOSAL/OFFER
According to Section 5 of Indian Contract Act 1872, a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. This means that the communication of revocation from the offeror should reach the offeree before the offeree posts the letter of acceptance and makes it out of his power.
According to Section 6 of the Indian Conract Act, revocation of proposal can be made in the following ways:
- by the communication of notice of revocation by the proposer to the other party.
- by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;
- by the failure of the acceptor to fulfill a condition precedent to acceptance; or
- by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.
In the case of Henthorn V. Fraser, 2 Ch. 27 (1892), The appellant was called to the Liverpool office of a building society to negotiate the purchase of a number of houses from the society. The society offered him the opportunity to buy for 750 Euros for fourteen days. The next day, between 12 and 1 p.m., the society mailed a letter withdrawing the bid. The claimant did not receive the letter of withdrawal until after 5 p.m. on the same day. Meanwhile, at 4 p.m. that day, the appellant mailed his acceptance letter. Since the letter of acceptance arrived after the office had closed for the day, the secretary in the society office opened it the next day. The contract was found to be valid because the appellant had no power over the acceptance at 4 p.m and she hadn’t got the revocation letter by then.
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