An agreement, which is the foundation of a contract, is formed when an offer is met with a valid acceptance. For this process to be effective, the law has developed specific rules about how offers, acceptances, and their revocations are communicated. This is crucial for determining the exact moment a legally binding contract comes into existence. Under the Contract Act 1872, which governs contract law in Bangladesh, these rules of communication are detailed and operate in a precise manner. This assignment will answer four questions concerning the communication and revocation of acceptance, providing a foundational understanding based on the principles of the Contract Act 1872.
1) Communication and Revocation Work in an Opposite Way: Explain
The statement that communication and revocation work in opposite ways is a useful way to understand the different points in time at which parties become bound by their actions. The rules for the communication of an offer, acceptance, and revocation are laid out in Section 4 of the Contract Act 1872.
The communication of an offer is simple: it is complete when it comes to the knowledge of the person to whom it is made. The offeree cannot accept an offer they do not know about.
However, the communication of acceptance and revocation is more complex. They are considered complete at different times for the person sending the communication and the person receiving it.
- Acceptance: The communication of an acceptance is complete as against the proposer (offeror) when it is put in a course of transmission to him (e.g., when a letter is posted). However, it is only complete as against the acceptor (offeree) when it comes to the knowledge of the proposer. This means the offeror is bound once the acceptance is sent, but the offeree is not bound until it is received.
- Revocation: The communication of a revocation works in the reverse. It is complete as against the person who makes it when it is put into a course of transmission. It is complete as against the person to whom it is made only when it comes to their knowledge.
This creates the "opposite" effect. When accepting, the sender (acceptor) binds the receiver (proposer) upon sending. When revoking, the sender (revoker) binds themselves upon sending, but does not bind the receiver until it is received.
2) When is an Acceptance Done?
An acceptance is "done" or made when the person to whom a proposal is made, the offeree, signifies their assent to that proposal. Section 2(b) of the Contract Act 1872 states that when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.
For this assent to be legally effective, it must meet the requirements set out in Section 7 of the Act. Firstly, the acceptance must be absolute and unqualified. If the offeree tries to change any of the terms of the original offer, it is not an acceptance. Instead, it is considered a counter-offer, which destroys the original offer (Haque, 2011).
Secondly, the acceptance must be expressed in some usual and reasonable manner, unless the proposal itself prescribes a specific manner in which it is to be accepted. If the offeror asks for the acceptance to be sent by email, for example, then sending a letter might not be a valid acceptance unless the offeror waives that requirement. Therefore, acceptance is "done" when the offeree provides absolute and unqualified assent in the manner required by the offer.
3) When is an Acceptance Communicated?
The communication of acceptance is a critical step because it determines the moment a contract is formed. As noted earlier, Section 4 of the Contract Act 1872 provides a two-part rule for when communication of an acceptance is complete.
- As against the proposer (the offeror): The communication is complete when the acceptance is put into a course of transmission to the offeror, so as to be out of the power of the acceptor. The classic example is the postal rule, established in cases like Adams v Lindsell (1818). When an offeree posts a letter of acceptance, the offeror is bound at the moment the letter is posted, even if it is delayed or lost in the post.
- As against the acceptor (the offeree): The communication is complete when it comes to the knowledge of the proposer. This means the offeree themselves is not bound by their acceptance until the offeror actually receives it.
This split rule is a key feature of the Contract Act 1872. It protects the offeree by giving them an opportunity to change their mind, while also providing certainty for the offeror in knowing that a contract can be formed even before they have received the physical acceptance.
4) Can that Communication [of Acceptance] be Revoked?
Yes, under the Contract Act 1872, an acceptance can be revoked. This is one of the important consequences of the rule that an acceptance is only complete as against the acceptor when it reaches the proposer.
Section 5 of the Act states: "An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards."
This means that an acceptor can cancel their acceptance as long as their revocation reaches the proposer before or at the same time as the acceptance itself.
For example, imagine A proposes to sell a car to B. B posts a letter of acceptance on Monday. The letter will arrive on Wednesday. On Tuesday, B changes his mind and sends a telegram to A, revoking his acceptance. If the telegram arrives on Tuesday, before the letter arrives on Wednesday, the revocation is effective. B is not bound by the contract. If, however, the telegram arrived after the letter, the revocation would be too late and a contract would have been formed on Monday when the letter was posted (binding on A) and finalised on Wednesday when the letter was received (binding B). This provides a window for the acceptor to change their mind, which is a notable feature of the law in this area.
References
Adams v Lindsell (1818) 1 B & Ald 681
Haque, M. (2011) The Law of Contract. 2nd edn. Dhaka: Shams Publications.
The Contract Act 1872 (Bangladesh)
