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Business Laws > Indian Contract Act 1872: Part I > Communication of Offer and Acceptance and Revocation of Offer
Indian Contract Act 1872: Part I

Communication of Offer and Acceptance and Revocation of Offer

We know that two very important aspects of a contract are the offer and the acceptance of the offer. However, in the practical world of business and economics, the communication of the offer and the acceptance and the timings of these are also very important factors. Let us look at this communication timeline and also learn about the revocation of an offer.

Communication of Offer and Acceptance

Now we have seen previously that an offer cannot be revoked after the offeror has communicated it to the offeree. Then the offer becomes binding, it creates legal relations between the two parties.

So when is the communication complete? Effective communication of the offer and a clear understanding of it is important to avoid misunderstanding between all the parties.

If the parties are talking face-to-face this is not a problem. The communication happens in real time and the offer and acceptance will be communicated on the spot, creating no confusion.

But often times in business the communication occurs via letters and emails etc. So, in this case, the timeline of communication is important.

Communication of Offer and Acceptance and Revocation of Offer

Communication of Offer

Section 4 of the 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

  1. Communication of Acceptance by an Act: This would include communication via words, whether oral or written. So this will include communication via telephone calls, letters, e-mails, telegraphs, etc.
  2. Communication of Acceptance by Conduct: The offeree can also convey his acceptance of the offer through some action of his, or by his conduct. So say when you board a bus, you are accepting to pay the bus fare via your conduct.

Timing of Acceptance

The communication of acceptance has two parts. Let us take a look

  1. As against the Offeror: For the proposer, the communication of the acceptance is complete when he puts such acceptance in the course of transmission. After this it is out of his hand to revoke such acceptance, so his communication will be completed then. So, for example, A accepts the offer of B via a letter. He posts the letter on 10th July and the letter reaches B on 14th For B (the proposer) the communication of the acceptance is completed on 10th July itself.
  2. As against the Acceptor: The communication in case of the acceptor is complete when the proposer acquires knowledge of such acceptance. So in the above example, A’s communication will be complete on 14th July, when B learns of the acceptance.

Revocation of Offer

The Indian Contract Act lays out the rules of revocation of an offer in Section 5. It says the offer may be revoked anytime before the communication of the acceptance is complete against the proposer/offeror. Once the acceptance is communicated to the proposer, revocation of the offer is now not possible.

Let us take the same example of before. A accepts the offer and posts the letter on 10th July. B gets the letter on 14th July. But for B (the proposer) the acceptance has been communicated on 10th July itself. So the revocation of offer can only happen before the 10th of July.

Revocation of Acceptance

Section 5 also states that acceptance can be revoked until the communication of the acceptance is completed against the acceptor. No revocation of acceptance can happen after such date.

Again from the above example, the communication of the acceptance is complete against A (acceptor) on 14th July. So till that date, A can revoke his/her acceptance, but not after such date. So technically between 10th and 14th July, A can decide to revoke the acceptance.

Solved Question on Revocation

Q: Can an acceptor revoke the acceptance after they have mailed the letter of acceptance?

Ans: Yes. The acceptor can revoke the offer until the communication of the acceptance is complete against the said acceptor. Such communication is complete when the proposer receives the letter of acceptance. So in the time frame between posting the letter and the letter being received by the proposer, the acceptor can revoke the acceptance.

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