The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. There can be acceptance only when there is knowledge of the offer. Offer should be brought to the knowledge of the person to whom it is made.
Communication of Acceptance:
(i) as against the proposer, when it is put in the course of transmission to him, so as to be out of the power of the acceptor. In case of acceptance through post, the contract is complete on the date when the letter of acceptance is posted. Whether or not the letter is received by the offeror is absolutely immaterial. The offeror, however, becomes bound only when a properly addressed and adequately stamped letter of acceptance is posted. The contract is complete when acceptance of offer is put in the course of transmission to the offeror.
(ii) As against the acceptor, when it comes to the knowledge of the proposer.
Communication should be duly posted at a correct address. In case of delay in the post, the parties are not bound. As a general rule, the contract would be complete as soon as acceptance is posted. The time and place of making the contract is determined by when and where the letter of acceptance is posted.
A contract is said to take place at the place where communication of acceptance is received. In England, unlike under Indian Law, when a letter of acceptance is posted, both the offeror and the acceptor become irrevocably bound, whereas in India acceptor becomes bound only when it comes to the knowledge of the proposer. Same principles apply in case of telephonic communications.
Revocation of Proposal and Acceptance:
Revocation means ‘withdrawing’ or ‘taking back’. Revocation may be of proposal or acceptance. After a transaction has ripened into a contract it requires the consent of both the parties to revoke or modify it.
Revocation of Proposal:
When can proposal be revoked? A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. Therefore in case of posting of a letter of acceptance the same can be revoked by a telegram/e-mail/fax reaching earlier than letter. In case both letter of acceptance and revocation by faster means arrive simultaneously, both cancel each other, and as such, there would be no binding contract. Revocation is effective only when it comes to the knowledge of the person to whom the offer is made.
How is proposal revoked? When a proposal is revoked, offer comes to an end. A proposal can be revoked in any of the four ways mentioned in the Act.
(1) By communication of notice of revocation by the proposer to the other party.
(2) By lapse of time prescribed in such proposal for its acceptance. If no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance. What is reasonable time will depend upon the facts and circumstances of each case.
(3) By failure of the acceptor to fulfill a condition precedent to acceptance; or
(4) By death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.
Revocation of Acceptance:
When can acceptance be revoked? An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.
Communication of Revocation:
(i) 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;
(ii) as against the person to whom it is made, when it comes to his knowledge.
In Byrne & Co. v. Ven Fienhoven, where A offered by a letter of 1st October to sell goods to B in New York, and B who received the offer on the 11th October, immediately telegraphed his acceptance, it was held that revocation by A on 8th October through a letter revoking his offer and received by B on 25th October, was of no effect, as by that time the contract was made.