This assignment will explain the core principles governing the formation of a contract under the laws of Bangladesh, focusing on the communication and revocation of offers and acceptances. The framework for these rules is provided by the Contract Act 1872. We will examine how the communication of an acceptance and a revocation operate in opposite ways, when an acceptance is considered complete, and whether an acceptance can be revoked once communicated.
1. The Opposing Nature of Communication and Revocation
The statement that the communication of acceptance and revocation works in "the exact opposite way" is a useful way to understand a key principle in contract formation. The rules, found in Section 4 of the Contract Act 1872, are designed to create certainty while also protecting the parties involved.
The communication of an acceptance is unique. It is complete at two different times for the two different parties involved:
- As against the proposer (the person who made the offer): It is complete when the acceptance is 'put in a course of transmission to him, so as to be out of the power of the acceptor'. For example, when a letter of acceptance is posted. At this moment, the proposer is bound by the contract and cannot revoke their offer.
- As against the acceptor (the person accepting the offer): It is complete only when the acceptance 'comes to the knowledge of the proposer'. For example, when the letter of acceptance is actually received and read by the proposer.
By contrast, the communication of a revocation (of either a proposal or an acceptance) is much simpler. It is only complete:
- As against the person to whom it is made: When the revocation 'comes to his knowledge'. This means a revocation has no legal effect until it has been received by the other party.
The "opposite" nature is clear here. An acceptance can bind the proposer as soon as it is sent, but a revocation only binds the recipient when it is received. This protects the acceptor. If an acceptor posts a letter of acceptance, they are protected in the knowledge that a binding contract has been formed, even if the proposer sent a revocation that has not yet arrived. The revocation is ineffective if it reaches the acceptor after they have already posted their acceptance.
2. When is an Acceptance Done?
An acceptance is "done" or made when the person to whom the proposal is made signifies their clear and unequivocal agreement to it. Section 7 of the Contract Act 1872 states that for a proposal to be converted into a promise, the acceptance must be "absolute and unqualified". If the offeree changes any of the terms of the original offer, it is not an acceptance but a counter-offer, which the original proposer is then free to accept or reject.
Furthermore, the acceptance must be expressed in a "usual and reasonable manner", unless the proposal itself specifies a particular method of acceptance. If the proposer requires acceptance by email, for example, a letter sent by post might not be considered a valid acceptance. Therefore, an acceptance is properly 'done' when it is a complete agreement to the offer's terms and is communicated in the manner required.
3. The Communication of an Acceptance
As outlined above, the rules for when an acceptance is communicated are a central feature of the Contract Act 1872. Section 4 provides a two-stage process for communication, distinguishing between its effect on the proposer and the acceptor.
To reiterate, communication is complete against the proposer the moment the acceptance is dispatched by the acceptor (e.g., posting a letter). From this point, a binding contract exists from the proposer's perspective. However, communication is only complete against the acceptor when the proposer actually receives the notice of acceptance. This dual timeline is a distinct feature of contract law in Bangladesh and India, differing from English law where the postal rule, once it applies, generally binds both parties at the time of posting. The logic is to provide certainty for the acceptor who has done all they can to accept, while giving them a final opportunity to change their mind until their acceptance is actually received.
4. The Revocation of an Acceptance
A significant consequence of the unique communication rules in the Contract Act 1872 is that an acceptance can be revoked. This is not generally possible under English law once an acceptance is posted.
Section 5 of the Act provides a clear rule: "An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards."
We know from Section 4 that communication is complete ‘as against the acceptor’ when the acceptance comes to the knowledge of the proposer. Therefore, an acceptor can cancel their acceptance provided the revocation reaches the proposer before or at the same time as the original acceptance.
For example, if Party B posts a letter of acceptance to Party A on Monday, which is scheduled to arrive on Wednesday, Party B can validly revoke that acceptance by sending an email or telegram on Tuesday that arrives before the letter. If Party A receives the email of revocation first, no contract is formed. This rule allows an acceptor to correct a hasty decision, provided they can communicate their change of mind faster than their original acceptance.
References
Jain, M.P. (2018) Indian Contract Law: Cases and Materials. 8th edn. LexisNexis.
The Contract Act 1872 (Bangladesh).
