Communication

Communication of
Offer and Acceptance
section 3-9.
Communication, acceptance, and revocation
of proposals.
3. Communication, acceptance, and revocation of proposals.—The communication of
proposals, the acceptance of proposals, and the revocation of proposals and
acceptances, 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.
What communication is ???
Meaning of Communication?
Communication imparts knowledge and if there is no knowledge there can not be any
communication.
Devaronda Education Society v. All India Council for Technical Education AIR 1997
AP 389.
• In the matters of contract formation, the objective test of
agreement is adopted. The judicial task is not to discover the
actual intentions of each party; it is to decide what each was
reasonably entitled to conclude from the attitude of party. The
court is required to review what the parties wrote and how they
acted and from that material to infer whether the intention as
expressed in correspondence was bring into existence to
mutually binding contract.
• Rickmers Verwlatung GmbH v. Indian Oil Corporation (1999)
1SCC
Section 4 communication when complete
4. Communication when complete.—
+ The communication of a proposal is complete when it comes to the
knowledge of the person to whom it is made.
+ 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.
+ 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. (Read with
section 5, 6).
+ Just receiving of offer without any knowledge about the content
of proposal will amount to receiving of proposal?
+ When the actual proposal is made ? (Decide jurisdiction)
+ At the place of the offeror or offeree? ( Sadhana Arun Kohari v.
Mrs. Raj Bhalla 2007 (4) Bom CR 61.
Communication when complete
• Communication of Offer completed when it's come to the
knowledge of the person to whom it is made.
• Lalman Shukla v. Gauri Datta (1913)11 ALL LJ 489.
• General rule is that acceptance must be communicated to the
party and its must be notified to the party.
• Baroda oil cake traders v. Purushotam Narayan Das Bagulia AIR
1954, Bom. 491.
Communication of Acceptance

The communication of a proposal is complete when it comes to the

knowledge of the person to whom it is made. 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.
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.
Communication of revocation is complete?
+ 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.
General Rule of communication is???
+ General rule is that acceptance must be communicated to the
party and its must be notified to the party.
+ Exception to the General Rule is
+ Postal Rule and
+ section 8
+ Acceptance though received but never read by the offeror.
+ Where the acceptance send by the post, but never reaches
to the offeror. Its bind the offeror.
 What happens if the letter of acceptance is misplaced?
Household fire Accident insurance Co. Vs. Grant:
The defendant, Mr Grant, applied for shares in the complainant’s company, the Household Fire Insurance. The complainants allotted shares to
Mr Grant and they completed this contract by posting him a letter with notice of the allotment. However, this letter never reached Mr Grant
and it was lost in the post. Mr Grant never paid for the shares as a consequence. When the Household Fire Insurance company went bankrupt,
the liquidator asked the defendant for payment of the shares. Mr grant refused to pay, as he did not believe he was a shareholder nor was there
a binding contract in his mind.
+ Issues
+ The court held that the liquidator was entitled to recover this money, as there was a binding contract between Mr Grant and the Household
Fire Insurance company. This decision was appealed. The issue in the appeal concerned whether there had been an acceptance of the share
offer and if there was a legally binding contract.
+ Decision/Outcome
+ The appeal was dismissed and it was held that there was a valid contract between the parties for the shares. The postal rule was affirmed,
which states that acceptance is effective when it is mailed, as long as the parties consider the post as an acceptable way of communicating.
This rule is true even though the letter never arrived to Mr Grant. Lord Justice Thesiger stated that posting acceptance creates a ‘meeting of
minds’, which created a binding contract. Lord Justice Bramwell dissented, arguing that the postal rule can hinder transactions and that
acceptance should only be effective once the letter arrives.
Postal Rule
Offer and acceptance is the most fundamental part in contract law which
determined the existence and operation of a contract among parties. Postal
rules were created as an exception to the general offer and acceptance rules.
In general offer and acceptance rules, an offer could be withdrawn or
revoked anytime before its acceptance. There are often conflicts about when
the offer was accepted or revoked. Postal rules were created to solve the
problematic issues between offeror and offeree. Distant communication also
raised some particular issues. Post or mailing is often referred to as “snail
mail” because it could take a long period of time to get to the recipient. This
may cause some problems according to the formation and revocation of a
contract. Offerors could not precisely know when the acceptance and
revocation took place
Adam v Lindsell [1818] B & Ald 681.

+ . The court had to decide the contract formation period by mail. Two
parties communicated by post in which the precise time of the
acceptance could not be determined. Mailing often lasts for a few days
and both parties could not aware of the communication at the same
time. This caused lots of problems and led to the creation of postal rule
+ Henthorn v Fraser [1892], the postal rule was stated as “Where the
circumstances are such that it must have been within the
contemplation of the parties that, according to the ordinary usages of
mankind, the post might be used as a means of communicating the
acceptance of an offer, the acceptance is complete as it is posted.”
Email Communication
+ Great offshore Ltd v. Iranian offshore engineering and
construction (2008, 14 SCC 240).
+ The impact of the Electronic Transactions Act 1999 and the
Electronic Transactions Act 2000 on the Postal Rule of Acceptance
+ Based on the United Nations Commission on International Trade Law’s Model Law on Electronic Commerce (UNCITRAL), the Electronic Transactions Act
1999 (Cth) was started on March 15th 2000, as a part of Australia government’s strategic policy to develop its information economic. Australian
government especially the Electronic Commerce Expert Group which was established to report the issues relating to ecommerce adopted UNCITRAL to
deal with conflicts in B2B business. UNCITRAL ensured that people would benefit from the growth of new information technology (IT).

+ According to the report released by the Attorney General’s E-Commerce Expert Group in April 1998, the country of offeror conducting business will
govern the contract if the contract acceptance occurs at the offeror’s place of business, unless parties agreed. The Electronic Transactions Act 2000 was
created to respond to the report. According to the Act, the electronic communication corresponded to “the person to whom the information is required
to be given consents to the information being given by means of an electronic communication” and “. .. the time of receipt of the electronic
communication is the time when the electronic communication enters that information system”. This statement reiterated the current postal rule
application in email contracts which are not received until the offeror get into the system. This legislation will not be applied to the telex machines or
facsimile.

+ These two Acts give new insights to the application of postal rules. Once instantaneous communication exists, postal rules will still be used to determine
conflicts in distant business. Postal rules have been amended and developed a lot since its creation to meet the ongoing business demand.
+ With the development of IT technology, distances between people are greatly shortened. People can
communicate with each other through various methods: telephone, email, on-line chatting and etc. Many
law professionals express their views whether emails and other on-line contract methods are
instantaneous communication to which general acceptance rules could apply. (Hill, 2004) Actually, website
acceptances depend on the actual time and space between sending and accepting of the contract. For
example, email communications are treated differently than website contracting. The following will discuss
postal rule application on emails.
+ In email contracts, there is absence of legislative establishment regarding to determine the acceptance or
revocation of offer. During the transmission of information through emails, the message is considered to
be sent out when the offeror gets online and presses the icon. Offeree may receive the message when it is
successfully sent, or the offeree will receive a failed delivery notice in its email box. Computers and
internet may take several minutes or longer to respond. Regarding the timing issues in the electronic
transactions, emails might not be treated the same as contracting through websites, which is generally
regarded as an example of instantaneous method of communication. (O’shea and Skeahan, 1997)
+ Since there are many delays and failure situation in sending and receiving message through emails, parties
could not get instantaneous communication between each other. Postal rules should be applied to email
contracts but there are no legislative acts to decide the time and status of emails. Website acceptances are
clearer that general rules of offer and acceptance could be applied to. Postal rules need to be developed
and applied to the email communications which could benefit all parties. New technologies will develop
more instant communication methods and email may be the last place for the application of postal rules.
Click wrap agreement
+ Click wrap agreement are non negotiable but they are enforceable
unless they violate the public policy.
+ ProCD inc v. Mathew Zeindenberg, (Pg. 128 of pollock and mulla)
Time of conclusion of contract????
+ A contract is concluded when the acceptance is posted.
+ Progressive construction limited v. Bharat Hydro power
corporation ltd. AIR 1996 Del 1992. (pg. no. of pollock mulla
137).
+ Jurisdiction : cause of action and completion of contract.
+ Place of contract in electronic contract section 13 (3); PR
Transport agency v. Union of India AIR 2006 All 23, 2006 (1)
AWC 504.
Revocation of Proposal
+ Section 5 :
+ A proposal may be revoked at any time before the
communication of its acceptance is complete as against the
proposer, but not afterwards.
An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the
acceptor, but not afterwards.
+ A Proposal can be revoked in such manner that revocation
reaches the offeree before the accepts,
+ An acceptance can be revoked in such manner that the
revocation reaches the proposer before the acceptance.
Withdrawal of offer prematurely
+ National High Way authority of India v. Ganga Enterprises:
+ It it lawful for the party to bound by the condition that the offer
will remain open for specified period of time and no one will
withdraw that offer prematurely without the consent of the
other party.
+ Revocation of standing offer????
+ Revocation of Auction?
How revocation made?
+ Section 6:
+ 6. Revocation how made.—
+ A proposal is revoked— (1) by the communication of notice of
revocation by the proposer to the other party; (2) 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; (3) by the failure of the acceptor to fulfil a condition
precedent to acceptance; or (4) 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.
+ Notice from the other person than the proposer: No (it only
cause uncertainty).
Revocation of proposal in Commercial
organization
+ If the revocation reaches the offeree, but the offeree does not
read it, or is not read by him, staff, until next day despite its
arrival during business hours, the revocation is effective when it
is received.