ACCEPTANCE-

COMMUNICATION-
REVOCATION
 Section 4- Communication when complete
◦ The provision is essential to see whether the contract has been concluded at all or not.
◦ Communication of proposal
◦ A (Offeror)---Knowledge----- B(Offeree)
◦ Complete proposal when it comes to the knowledge of the offeree

Therefore, can an acceptance without knowledge be possible? (Guess the case law)
Whether a proposal has come to the knowledge of the person is a question of fact
Illustration- A proposes, by letter, to sell a house to B at a certain price. The communication of
the proposal is complete when B receives that letter.
 Section 4- Communication of acceptance

◦ Notification of acceptance is essential

◦ Therefore, acceptance has to be complete in some predictable
form (communicated to the proposer)
◦ B accepts A’s proposal by a letter sent by post
Communication as against acceptance is complete
As against A, when the letter is posted
As against B, when the letter is received by A
Communication of electronic messages

◦ A sends the acceptance to B to a designated computer resource

(where an offer expressly specifies the address to which
acceptance must be sent), it will be considered as received when
the electronic record enters the designated computer resource.
◦ A----sends---B to a non designated computer, the record is
considered as received when it enters the computer resource of the
addresse.
General Rule

◦ 1) Acceptance must be communicated to the proposer

◦ 2) The acceptance comes to the knowledge of the proposer
◦ 3) Third party communicates acceptance. Is it valid?
Exceptions
1) An acceptance is binding without communication
(a) Proposer has waived the requirement of communication. Mere performance
of the act prescribed by the proposal is sufficient acceptance
(b) Where the acceptance is sent by post, the acceptance binds the offeror even
though it never reaches him
Instantaneous Mode of communication

Where the acceptor uses the telephone or telex for

communication, the acceptor can send it across again.

ENTORES V. Miles Far East Corporation

Facts
◦ The plaintiffs, Entores, were a company that was based in London and Miles Far East
Company (the Defendants) were an American corporation with agents in various locations,
including Amsterdam.
◦ The plaintiffs had sent an offer for the purchase of 100 tons of Japanese copper cathodes to the
defendants, Miles Far East Corp. Their company was based in Amsterdam and this offer was
communicated by Telex, a form of instantaneous communication. The Dutch company sent an
acceptance of this offer by Telex to the complainants.
◦ When the contractual obligations were not fulfilled, the plaintiffs tried to sue the defendants
for damages.
Issue
When and where did the defendant’s acceptance complete the contract?
 The issue was when the contract entered into force, as this would determine
whether the action for damages should arise in English or Dutch law would
apply to the contract. If it was when the contract acceptance was sent, damages
would be dealt with under Dutch law. If acceptance was when it was received,
then it would be under English law. Specifically, the Court was required to
determine whether the postal rule (providing that acceptance occurs when and
where the letter is sent) applied to telex communications.
RULE
◦ Section 4 of the Indian Contract Act, 1872 deals with the completion of a proposal, acceptance and
revocation
◦ Postal Rule: Acceptance is made, and the contract becomes binding when the accepter has put the mail
in the transmission. The postal rule applies on only letters by post and telegrams that are non-
instantaneous forms of communication (Henthorn v. Fraser).
◦ The communication of a proposal is complete when it comes to the knowledge of the person to whom it
is made. The communication of an acceptance is complete,— as against the proposer, when it is put in a
course of transmission to him so as to be out of the power of the acceptor; as against the acceptor, when
it comes to the knowledge of the proposer.
Judges
◦ Denning L.J: ‘The postal rule cannot be
applied to instantaneous mode of
communications, such as telephone and telex.
If a phone line “went dead” just before the
offeree said “yes”, it would be absurd to
assume that the contract was formed and the
parties would not have to call each other back.
The same applied to telex. Since the contract
was therefore only formed when and where
the telex was received, the place of formation
was London.
The court held that the contract and damages were to be decided by English
law. It was stated that the postal rule did not apply for instantaneous
communications. Since Telex was a form of instant messaging, the normal
postal rule of acceptance would not apply and instead, acceptance would be
when the message by Telex was received. Thus, the contract was created in Held
London. This general principle on acceptance was held to apply to all forms of
instantaneous communication methods. Acceptance via these forms of
communication had to be clear before any contract is created.

Contract created when acceptance received.

Reasoning

Acceptance needed to be communicated before

the contract was effective

As such, the contract was made in England and

the damages were decided subject to English law
NON INSTANTENOUS MODES OF
COMMUNICATION: ‘The Postal Rule’
◦ Acceptance is binding on the proposer when the acceptor puts the acceptance
into such course of transmission as to be beyond the power of the acceptor
◦ It is binding on the acceptor when it comes to the knowledge of the proposer.
◦ Therefore, there will be a time when the intended receiver is bound and the
sender is not.
◦ Postal Rule- If the acceptance is sent by post or telegram, the acceptance is
effective when the letter is posted or the telegram is handed over for
transmission to the offeror. (handed over to the post office) (See- ADAMS V.
LINDSELL)
Adams v. Lindsell
Letter from defendant to
Plaintiff, offer to sell wool,
Defendant selling wool to
Letter wrongly addressed
3rd Party

5 Sep. 9 Sep.

2 Sep. 8 Sep.

Defendant receiving letter

Letter of Acceptance, from
of Acceptance from
plaintiff to defendant
Plaintiff
Issues
◦ Legal - When exactly is the contract formed between parties via post?

◦ Factual - Whether Defendant will be held liable for violating the contract of
sale between them and the plaintiff by selling wool to the 3rd party.
Arguments

Contract formed when Letter of Acceptance Posted

The delay of deliverance of offer was caused due to Defendant

Contract formed when Letter of Acceptance reaches Defendant

Used the backing of Cooke v. Oxley.

Held

Postal Rule – Contract is formed when letter of acceptance is

posted

Acceptance is held even if letter of acceptance doesn’t reach

Offeror.
Justification of the postal rule
◦ - When the proposer is at a distance, and the acceptor posts his
acceptance, it stands communicated to the proposer. (Postal Rule favours
the offeree)
◦ - Justification- Proposer can avoid risk on the ground that the proposer
can ask for actual notification of acceptance.
◦ - It stops the proposer from withdrawing the offer
◦ - Post Office acts as an agent between the 2 parties
Generally
Acceptance is binding only on the proposer when the letter is posted, and on
the acceptor only after the letter has reached the proposer.

Therefore, during that time in transit, it is binding only on one of the parties,
i.e, the proposer, and the acceptor is able to revoke it by faster means of
communication

Remember- If the proposer has stated that the acceptance shall be notified to
him, the acceptance is not effective until it reaches the proposer.
Acceptance Lost or Delayed in Transit
◦ The Act is silent as to when the acceptance is lost or delayed in transit
◦ A contract is concluded even if the acceptance gets lost in the post and
never reaches the proposer. (The contract is concluded when at the time
the acceptance is posted)

The same rule would apply if the acceptance was delayed through an
accident in the post.
Proper address and delivery
◦ A letter of acceptance misdirected by acceptor’s fault, because of incorrect
address, is not effectively put in course of transmission of the proposer.
◦ Receipt- Question of fact
◦ Postal Rule can be excluded by the terms of the offer.
◦ (If it was expressly agreed that the acceptance to be binding must not only
be in writing but had to reach the proposer, the mere posting is not
enough, there would be no contract till the condition is not fuliflled)
A person who has made an offer is considered to be
continuously making it until he has brought to the
knowledge of the person to whom it was made that
it is withdrawn.
Revocation of
Proposal

Revocation of a proposal is effectual if it reaches

before the despatch of the acceptance.

The rule is that the revocation of proposal is

effective when it reaches the offeree and not when it
is posted, applies to revocations sent through post.
However, it should be actually communicated
 Comes to the knowledge of the person
◦ The word ‘comes to the knowledge’ of the person should be read with certain
qualifications-
◦ (a) Usual business days
◦ (b) If it is received on usual business days by the offeree but not read, it is effective when
received.
◦ A message received by telex is taken to have been received by the offeree when the
message is received by the telex machine and not when the offeree’s attention is drawn to
it.
◦ In a general offer, it is sufficient if the proposer has taken sufficient steps to bring the
revocation to the attention of the public in general.
Communication by fax and email
◦ Contract is complete where acceptance is received by telex, fax or email.

◦ Can email be considered under the postal rule? A question to ponder about
Place of contract
The contract becomes complete as soon as the acceptor makes the acceptance.
The contract is completed when the proposal is accepted; it is therefore the
acceptance that gives rise to the ‘cause of action’ and not merely the proposal.
In post- the contract is concluded not at the place where the acceptance is
received but at the place where the acceptance was sent
 Bhagwandas v. Girdharilal
◦ Facts-
a) Girdharilal based in Ahemdabad ordered a supply of cotton seed cakes from
Kedia Factory oil mills in Khamgaon
◦ Respondents made an offer from Ahemdabad by a long distance telephone
calls to purchase goods, and the Appellants accepted the offer at Khamgaon.
General Arguments
◦ A) The respondents alleged that the offer was made in Ahemdabad and the
acceptance was received in Ahemdabad, the Ahemdabad court had jurisdiction.

◦ B) The appellant contended that since the words were spoken in the telephone
at Khamgaon and thereby put into a course of transmission so as to be out of
the power of the appellant, the contract was concluded at Khamgaon.
Held
A contract made by instantaneous communication is concluded when the
acceptance is received by the proposer, and that generally an acceptance must
be notified to the proposer making a binding contract.

Communication of acceptance is a necessary part of the formation of contract,

and the exception of the postal rule did not apply.

Hence Ahemdabad
Section 5
◦ Section 4 provides the time at which communication of acceptance, revocation
of proposals and acceptance is complete, this section first states that both
proposal and acceptance can be revoked and then provides the time.
◦ A proposal can be revoked in such a manner that the revocation reaches the
offeree before he accepts, or posts the acceptance. An acceptance can be
revoked in a manner that the revocation reaches the proposer before the
acceptance.
Revocation of proposal

A proposal can be revoked any Acceptance is complete- Where

time before the acceptance, even the proposal requires doing of a The proposer has the right to
if the proposer has promised to particular act as a condition of revoke the offer at any time
keep the offer open for a proposal, the proposal may be before acceptance.
specified time. revoked before the act is done.
Keeping the offer open
It is implied in the section that the proposer of a contract cannot bind himself to
keep his offer open for any definite time, and that the words ‘promise to keep
the offer open’ can only operate for the benefit of the offeror and the warning
that an acceptance after the specified period will be late.

The reason? (Consideration)- Undertaking an offer to be open is a promise but

without consideration, and such promise is unenforceable.
Section 6- Revocation

By the lapse of time prescribed in

Proposal is revoked by the
such proposal for its acceptance. By the failure of the acceptor to
communication of notice of
No time is prescribed, by the lapse fulfil a condition precedent to
revocation by the proposer to the
of reasonable time, without acceptance
other party
communication of the acceptance

By the death or insanity of the

proposer, if the fact of his death or
insanity comes to the knowledge
of the acceptor before acceptance
Notice of Revocation
◦ It requires that the notice must be given (i) by the proposer and
(ii) to the offeree.
◦ It may be express or implied notice (eg- offeror varying the terms of the offer)
◦ Where the offer is general/ whole world, it is sufficient if the offeror has taken
suitable steps to bring the notice to persons to whom it is made (i.e. multiple
offerees). It may be done with the same process as the offer.
Dickinson v. Dodds- Facts

Dodds made a written offer to Dickinson to sell certain property and promised to keep
the offer open for some time.

Before that time, Dodds sold the property to another without notice to Dickinson.

Dickinson came to know about the sale from his own agent. Nevertheless, Dickinson
accepted the offer before the time specified in the offer and sought specific
performance.
Held
◦ There was no binding contract- Beyond all question, the plaintiff knew that
Dodds was no longer minded to sell the property to him as plainly and clearly
as if Dodds had told him in so many words : ‘I withdraw the offer’
Mulla’s analysis
If an owner of immovable property made a proposal to sell it to one man, and
before that proposal was answered, agreed to sell it to another, and the first with
the knowledge of this fact then formally tendered an acceptance, the purchaser
who first actually accepted had a better right to specific performance.

Acceptance of the proposal, which the proposer has made impossible to

fulfil, is not necessarily inoperative, even if the obligation cannot be
specifically performed, the proposer is bound to pay damages for default.
An analysis

An offer to sell property will not be revoked

Nor will the subsequent sale of the property to
by a sale of the property to someone else. As
someone else constitute legal obstacle to the
evidence of the change of mind on the part of
continuance of the offer. The original offeree
the offeror, such an act cannot be put higher
and the subsequent purchaser cannot both
than a letter of revocation sent to the offeree
acquire the property, but they can both
by an email; and yet it is well settled that a
acquire the right as against the seller.
letter of revocation will not be operative until
(damages
the offeree receives it.
Notice
◦ An act of one man selling property already offered to another, cannot by itself
be an act which has the effect of communicating the notice to that other. Such
notice must be in the effect of some act or event.
◦ In Dodds, a stranger cannot inform the original offeree about the other
transaction. This is not the act of the party supposed to be revoking. (Can
it be good authority in India?)
◦ The express language of the section precludes revocation other than one
communicated by the proposer himself.
2- Lapse of Time
◦ The power to accept the offer ends at the time specified in the offer.
◦ If the offer does not specify any time for acceptance, it will come to an end on
the lapse of reasonable time, and therefore, must be accepted within a
reasonable time in order to conclude a contract.
◦ What is a reasonable time is question of fact and would depend on the purpose
of the offer, its subject matter, the method by which the offer is communicated,
conduct of the parties, etc.
Condition precedent to acceptance
◦ Eg- The employer made an offer to the trade union which was threatening
to go on a strike. He said that if the trade union withdrew the strike, the
workers would be paid a certain amount from the profits arising from the
transfer of the mill. The condition was not accepted by the union. The
transfer took place. It was held that there was no acceptance of the
condition of the offer, and hence no liability to pay the amount whatsoever.
Death or Insanity of the proposer
◦ The proposal stands revoked on the death or insanity of the proposer, if the
acceptor has the notice of the death or insanity of before acceptance.
◦ If the proposed contract is of personal service, it terminates on the death of the
offeror. In case of other offers, not involving personal service, an irrevocable
offer would not be determined by the death of the offeror or the offeree.
◦ Death of the offeree- If an offer is addressed to a particular man who dies
without having accepted or refused it, his executors have no power to
accept it.
Rejection of the proposal
◦ An intimation, express or implied, by the offeree to the offeror that he rejects
the offer, terminates the offer. After the rejection, the offer cannot be accepted
again, unless it is revived by the offeror.
The plaintiffs Butler Machine, offered to the defendants, Ex Cell-O Corp to provide delivery of
machine tools for the price of 75,535 pounds. Battle of Forms- Butler
Machine Tool Co. Ltd. v. Ex-
The delivery of the tool was set for 10 months, with the condition that orders will only be qualified
Cell- O Corporation
as acceptance once the terms in the quotation were met and prevailed over any of the buyer’s terms. (England) Ltd.

The buyer responded to the offer with their own terms and conditions, which did not include the
‘price variation clause’ listed in the seller’s terms. This is a leading English
Contract Law Case.
This included a response section that required signature and its return in order to accept the order.
It concerns the problem
found among some large
The sellers returned the response slip with a cover letter signalling that the delivery would be in
accordance with their original quotation. businesses, with each side
attempting to get their
The tool was ready for delivery but the buyers refused to pay the higher price
preferred standard form
agreements to be the basis
for a contract
This was denied by the buyer and an action by the seller to claim the cost and interest was brought.
Chronology/ Main Issue
◦ May 23, 1969- Sellers make an offer to the buyer with a price variation clause.
◦ May 27, 1969- Buyers make another offer which does not include the ‘price variation
clause’ but includes a slip for acknowledgement
◦ June 5, 1969- Sellers sign the acknowledgment slip and attach a cover letter that
mentions “in accordance with our revised quotations of May 23”
◦ Sept, 1969- The machine is ready but the buyer is not ready to accept it
◦ Nov, 1969- The sellers invoked the ‘Price variation clause’ and claimed 2,892 euros
for the cost.
◦ On whose terms of the offer were the contract based?
Arguments
◦ Sellers ◦ Buyers

◦ We did not accept seller’s quotation as it

◦ We did all that was necessary was. We gave an order for the same
and reasonable to bring the ‘pvc’ machine at the sae self-price. We had our
own terms and conditions which did not
to the notice of the buyers include a PVC.
Appeal against the judgment
◦The first instance judgement ordered that the defendants
pay to the plaintiffs £2,892 damages, £1,410 interest and
costs. The substantial ground of the appeal was that the
judge was wrong in law in finding that the conditions of
sale in the plaintiff sellers quotation and in particular the
price variation clause formed part of the contract between
the parties.

◦ The defendant appealed against the decision

A usage of Battle of Forms
◦ The seller’s communication was held to be an acceptance of the buyer’s counter offer
contained in the tear off slip. As far as the letter was concerned, the courts rejected that saying
that the letter consisting of the words “this is being entered in accordance with our revised
quotation of May 23 for delivery in 10/11 months” did not include the terms and conditions
mentioned on the back of the quotation of May 23.
◦ Moreover, if the letter of June 5 which accompanied the form acknowledging the terms which
the buyers had specified had amounted to a counter-offer, then the parties were never ad idem.
Therefore, it cannot be said that the buyers accepted the counter-offer by reason of the fact that
ultimately they took physical delivery of the machine.
Criticism
◦ The ‘last shot’ approach has been criticised on the ground that it would
encourage businessmen to fire salvos of standard terms with a hope to fire the
last shot and induce acceptance.