Basics of Communication of Offer
In our daily lives, we may encounter many forms of contract such as an insurance policy, lease agreements, employment contract, non-disclosure agreement etc. Even a marriage license is a type of legally binding contract. Hence, one should have a comprehensive knowledge of all the essential aspects of a contract. It can be defined as a written or oral agreement between two or more parties that is enforceable under law.
Furthermore, all the parties involved should be mentally sound and agree to enter the contract voluntarily. An agreement has three main components – offer, acceptance, and consideration. Additionally, one should also know about the communication of offer and acceptance.
Consideration
Consideration is an act of value that one of the parties provides to another in exchange for successful fulfillment of the terms and conditions of the contract. Without it, an agreement is null and void. However, consideration needs to satisfy some parameters to be considered valid – it should not involve illegal or fraudulent activities, such as causing damage to a person or property. Moreover, it should be offered at the desire of the promisor. It can also come from a third party.
Offer
Before a contract is drawn up, an offer is placed by one party to another. An offer is a promise to perform or abstain from an act at the desire of the other party in exchange for consideration. It should also contain a statement that communicates intent to enter into a contract.
The party that makes an offer is known as the offeror, and the individual who accepts it is known as an offeree. For instance, if A offered to paint B’s house for a sum of money, then A is the offeror and B is the offeree. An offer can be categorized into two types – unilateral and bilateral.
Unilateral – It is a type of offer that is made to the general public at large. This type of offer includes only the promisor who makes an open offer which anybody can enter into. For instance, advertisements can be considered unilateral offers. Display of goods by a vendor can also be a unilateral offer as any individual can choose to buy a product or service from a shopkeeper which results in a contract. In this case, the offeror does not wait for communication of acceptance.
Bilateral – An offer that is made to a specific individual or a group of individuals is called bilateral. In this type of offer, acceptance must be communicated, and all parties involved promise to provide some consideration to others.
Communication of Offer Acceptance and Revocation
An offer can only be considered valid after it is communicated to the offeree. Communication of offer in contract law is only complete when it is conveyed to the other party and is accepted by them. The offer can be dispatched through any common means such as post, email, telephone or through word of mouth.
Additionally, communication of acceptance of an offer is also necessary since an offer only becomes a contract after the individual to whom it was sent gives his or her consent to it. Some conditions need to be met while accepting a proposal which has been given below –
Acceptance must be communicated to the offeror through written or oral means as silence will not be considered a valid form of approval.
The communication of acceptance of an offer should be absolute.
The offer will be considered accepted, once the promisee dispatches their acceptance.
In case of instantaneous communication in contract law cases, such as telephone, email, fax, a contract will form only when the offeror receives the offeree’s acceptance. It is not so in the case of postal communication.
It is also vital that the communication of acceptance is carried out either by the offeree or an authorized agent hired by him or her. If any other individual dispatches the approval, it is not considered valid.
An example of communication of acceptance cases is the Powell vs Lee case; Powell applied for the post of headmaster which was accepted by members of the school board. Plaintiff heard through a person who was on the board that he had been appointed for the post.
However, he later came to know that he was not selected and he sued the school board for breach of contract. The court ruled that since the communication of acceptance was not relayed by an authorized agent, there was no breach of contract.
Communication and Revocation of Offer and Acceptance
Revocation of the offer refers to when an offer has been terminated or canceled. A proposal can be revoked by the offeror at any time before the communication of acceptance is dispatched by the offeree but not afterwards. On the other hand, the offeree may revoke his acceptance any time before the post conveying it reaches the offeror but not later than that.
A revocation of a proposal may take place in the following instances –
When the offeror passes away or gets diagnosed as mentally incompetent, and the offeree comes to know the fact before the communication of acceptance of a proposal.
When the offeror notifies the other party regarding the Revocation of the offer
After the time specified by the offeror has passed. Additionally, in situations where no time has been stipulated, then the offer can be rejected after a reasonable amount of time has been mentioned.
The offeror can reject the proposal if the other party fails to fulfill a necessary condition
FAQs on Communication of Offers, Acceptance, and Revocation
1. What are the essential rules for the communication of an offer to be legally valid?
For the communication of an offer to be legally valid under the Indian Contract Act, 1872, it must be communicated to the person to whom it is made (the offeree). The communication is considered complete only when it comes to the knowledge of the offeree. An offer can be communicated through written means (like a letter or email), oral means (like a phone call or in person), or even by conduct. The key is that the offeree must be aware of the proposal.
2. When is the communication of acceptance considered complete against the offeror and the acceptor?
The communication of acceptance is complete at different times for the offeror and the acceptor, especially under the 'postal rule':
- Against the Offeror: Communication is complete as soon as the letter of acceptance is put into a course of transmission to the offeror, so as to be out of the power of the acceptor. For example, when the letter is posted.
- Against the Acceptor: Communication is complete only when the acceptance comes to the knowledge of the offeror. For example, when the offeror receives the letter.
This means the offeror is bound once the acceptance is dispatched, but the acceptor is only bound when it is received.
3. Explain the difference between a unilateral and a bilateral offer with an example.
A unilateral offer is made to the public at large, where acceptance is shown by performing the conditions of the offer. Only the offeror makes a promise. For example, an advertisement offering a reward of Rs. 5,000 for a lost pet. Anyone who finds and returns the pet accepts the offer by their action. In contrast, a bilateral offer is made to a specific person or group. Here, both parties exchange promises. For instance, if A offers to sell their car to B for Rs. 2,00,000, and B agrees to buy it, it's a bilateral offer where both A and B have obligations.
4. How can an offer be revoked, and when does the communication of revocation become effective?
An offer can be revoked by the offeror at any time before the communication of its acceptance is complete against the offeror. Revocation can happen in several ways:
- By sending a notice of revocation to the offeree.
- If a specified time for acceptance has lapsed.
- If the offeree fails to fulfill a condition precedent to acceptance.
- Upon the death or insanity of the offeror, provided the offeree knows of this fact before accepting.
The communication of revocation is complete against the offeree only when it comes to their knowledge.
5. Can an acceptance be revoked after it has been dispatched? Provide an example.
Yes, an acceptance can be revoked at any time before its communication is complete against the acceptor. This means the acceptor can revoke their acceptance as long as the revocation reaches the offeror before or at the same time as the letter of acceptance.
Example: A offers to sell a plot to B. B posts their letter of acceptance on Monday. B then changes their mind and sends a telegram revoking the acceptance on Tuesday. If the telegram reaches A before the letter, the revocation is valid and no contract is formed.
6. Why is silence generally not considered a valid form of acceptance in a contract?
Silence is generally not considered a valid form of acceptance because acceptance must be an active and clear communication of consent. The law protects an offeree from being forced into a contract without their express agreement. If an offeror states, "If I don't hear from you by Friday, I will assume you have accepted," it is not binding on the offeree. Acceptance requires a positive act to show that the offeree has agreed to the terms of the offer, preventing ambiguity and ensuring mutual consent (consensus ad idem).
7. How do the rules of communication differ for instantaneous methods (like email) versus non-instantaneous methods (like post)?
The key difference lies in when the contract is formed. For non-instantaneous methods like post, the 'postal rule' applies. The contract is formed as soon as the acceptance is sent by the offeree. For instantaneous methods like telephone, telex, or email, the contract is only formed when the acceptance is received by the offeror and comes to their knowledge. This is because, in an instant conversation, the acceptor will know immediately if their acceptance has not been received and can try again.
8. What is the importance of having acceptance communicated by an authorised person, as seen in the Powell v Lee case?
The case of Powell v Lee highlights a crucial principle: for an acceptance to be valid, it must be communicated by the offeree or their authorised agent. In this case, Mr. Powell was told he got a job by a board member acting in their individual capacity, not as an authorised representative of the school board. When the board later appointed someone else, the court ruled there was no contract. This shows that information from an unauthorised source does not constitute a legal acceptance, reinforcing the need for clear, official communication to form a binding agreement.
