In the Indian Contract Act, 1872, “Timing” is everything. Since the parties are not always sitting face-to-face (they might be in different cities sending letters), the law must define exactly when a contract is born and when it is too late to back out.
1. Communication of Offer (Section 4)
The rule for the offer is simple. An offer is not effective until the other person knows about it.
- Rule: The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
- Example:
- Jan 1: A posts a letter offering to sell his house to B.
- Jan 5: B receives the letter.
- Result: The communication of the offer is complete on Jan 5. (B cannot accept the offer before Jan 5 because he doesn’t know about it).
2. Communication of Acceptance (Section 4)
This is the most critical part. The Act creates two different timelines for acceptance—one for the Offeror and one for the Acceptor. This is often called the “Postal Rule.”
A. As against the Proposer (Offeror)
- Rule: Communication is complete when the letter of acceptance is put in a course of transmission to him, so as to be out of the power of the acceptor.
- Meaning: The moment the Acceptor drops the letter in the mailbox, the Offeror is bound. Even if the letter is lost in the post, the contract is valid against the Offeror.
B. As against the Acceptor (Offeree)
- Rule: Communication is complete when it comes to the knowledge of the Proposer.
- Meaning: The Acceptor is not bound until the letter actually reaches the Offeror.
Practical Example (The “Timeline” Problem)
- Jan 1: A offers to sell a bike to B by letter.
- Jan 5: B receives the letter.
- Jan 6: B posts his letter of acceptance.
- Jan 10: A receives the acceptance letter.
Analysis of Completion:
- For A (Offeror): He is bound on Jan 6 (When B posted the letter).
- For B (Acceptor): He is bound on Jan 10 (When A received the letter).
3. Revocation of Offer and Acceptance (Section 5)
Revocation means “taking back” or “cancelling” the promise. Section 5 lays down the deadline—the “Point of No Return”.
A. Revocation of Proposal (Offer)
- Rule: A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.
- Deadline: The Offeror must revoke before the Acceptor posts the letter.
- In the Example above: A can revoke his offer any time before Jan 6. Once B posts the letter on Jan 6, A is too late.
B. Revocation of Acceptance
- Rule: An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.
- Deadline: The Acceptor can cancel his acceptance before his acceptance letter reaches the Offeror.
- In the Example above: B can revoke his acceptance any time before Jan 10 (e.g., by sending a faster telegram or calling A).
4. Landmark Case Law
Here is a leading case regarding the communication of acceptance, specifically regarding Instantaneous Communication (Telephone/Telex/Email) vs. Postal Rule.
Case: Entores Ltd. v. Miles Far East Corp. (1955)
- Facts: The plaintiff (in London) made an offer by Telex (instant message) to the defendant (in Amsterdam) to buy copper cathodes. The defendant accepted the offer by Telex. Later, a dispute arose.
- Issue: When and where was the contract formed? (If formed in London, English law applies; if Amsterdam, Dutch law applies).
- Section: Section 4 (applied principle).
- Ratio Decidendi: The court distinguished between “Postal Rule” and “Instantaneous Communication”.
- Postal Rule: Contract is complete when the letter is posted.
- Instant Rule (Phone/Telex): Contract is complete only when the acceptance is received and heard by the offeror. If the line goes dead, there is no contract.
- Judgement: Since the acceptance was received in London, the contract was formed in London.
- Relevance: In modern times (Email, WhatsApp), the contract is generally formed where the acceptance is received (Offeror’s location), not where it is sent.
5. Summary Table for Exam Revision
| Event | Time it is Complete |
| Communication of Offer | When Offeree receives the letter. |
| Communication of Acceptance (Against Offeror) | When Offeree posts the letter. |
| Communication of Acceptance (Against Offeree) | When Offeror receives the letter. |
| Revocation of Offer | Must be done before Offeree posts acceptance. |
| Revocation of Acceptance | Must be done before Offeror receives acceptance. |