Critical Analysis on Role

of Communication in
Law of Contract
A Project for Law of Contract I

Diptiman Mondal
Roll No.: UG/03/BSCLLB/2018/017
Enrolment No.: AU/2018/03/0002651
B.Sc.-LL.B.(H)
Semester 2
School of Law &Justice
Adamas University
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Table of contents
Topic Page No.
1. Introduction 2
2. Where Communication is necessary (in Agreement)? 3
3. Rules of Communication 3
4. Communication in Indian Contract Act 4
5. Communication of Offer 6
6. Communication of Acceptance 6
7. Communication of Revocation 7
8. Communication in E-Contract 8
9. Some Known Case Laws 8
10. Conclusion 10
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Introduction:
Communication comes from the Latin word “Communicare”, that means "to
share". So, Communication is the act of conveying meanings from one entity or
group to another through the use of mutually understood signs, symbols, and
semiotic rules.
There are certain parts of Communication like ‘Sender’, ‘Message’, ‘Channels’,
‘Receiver’ and ‘Feedback’.
In the process of making an Agreement (or Contract) importance of
Communication is immense. As the Offerer or Offeree has to convey their
‘message’ to another they need to communicate. Communication is necessary
for one party of the agreement to inform the other party about ‘Offer’ or
‘Acceptance’ or ‘Revocation’. Sometime skilful people take advantage of
loophole in the rules to fulfil their improper acts. So, it is necessary for a lawyer
to know the importance of communication in law of contracts.
Communication during making an agreement is regulated by Sections 3, 4, 5,
6 of Indian Contract Act, 1872. We can also find instances of Communication in
case of E-contract in Sections 10A, 11, 12, 13 of The Information Technology
Act, 2000.

This project tries to find the importance of Communication in Law of

Contract.
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Where Communication is necessary (in Agreement)?

During the formation of an Agreement communication is necessary in 3
instances and they are:
1. Communication of Offer
2. Communication of Acceptance
3. Communication of Revocation

Rules of Communication
THE POSTAL ACCEPTANCE RULE (1818)
In English law, the first rule is “the postal acceptance rule.” This governed at
which point the ‘contract’ is formed when the acceptance is done by snail mail.
The postal acceptance rule states the point of acceptance is the moment the
acceptance was dropped into the mailbox — i.e. at the point of sending.
The test case formalising this in English law were:
 Adams v. Lindsell1 (High Court King’s Bench)
 Dunlop v. Higgins2 (in Scots Law)
Civil Code jurisdictions don’t have the postal acceptance rule — there is no
need for them to. That’s because their doctrinal position is already the general
rule in law above. The fact that the party was conveying the acceptance is
already the point of acceptance. It’s dynamite on paper, but unfortunately,
there are grey zones — which was exactly what Adams v. Lindsell remedied.
THE COMMUNICATION RULE (1955)
It is also known as “Instantaneous Rule”. The Postal Rule was found inadequate
for dealing with contract formation made via modern telecom means (such as
telex, fax, etc).
The communication rule states the point of ‘acceptance’ occurs where the
message of acceptance is actually read — i.e. at the point of receiving.
Therefore, this is the ‘opposite’ or exception to the postal acceptance rule.

1
(1818) B & Ald 681
2
(1848) HL Cas 381
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The test cases formalising or confirming the communication rule are:

 Entores Ltd v. Miles Far East Corporation3 (Court of Appeal of England
and Wales)
 Brinkibon Ltd v. Stahag Stahl GmbH4 (House of Lords)

CURRENT SITUATION
The communication rule is naturalised into the current UNCITRAL model
law [1966] for instantaneous or electronic contracts.
The UN Convention on Contracts for the International Sale of Goods [1980]
(a.k.a. the Vienna Convention on the International Sales of Goods) provides
two approaches:—
 Article 16(1): Acceptance is effective on dispatch (i.e. postal acceptance
rule) — which means the offer is irrevocable once the offeree has sent
out his acceptance.
 Article 18(2): Acceptance is effective when it reaches the offeror.

Communication in Indian Contract Act

We can find rules regarding communication in the following sections of Indian
Contract Act, 1872 .
Section 3. Communication, acceptance and revocation of proposals.
The communication of proposals the acceptance of proposals, and the
revocation of proposals and acceptances, respectively, are deemed to be made
by any act or omission of the party proposing, accepting or revoking by which
he intends to communicate such proposal, acceptance or revocation, or which
has the effect of communicating it.

3
[1955] EWCA Civ 3, [1955] 2 QB 327
4
[1983] 2 AC 34
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Section 4. Communication when complete.

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.
The communication of a revocation is complete,—
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;
as against the person to whom it is made, when it comes to his knowledge.

Section 5. Revocation of proposals and acceptances.

proposal may be revoked at any time before the communication of its
acceptance is complete as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication of the
acceptance is complete as against the acceptor, but not afterwards.

Section 6. Revocation how made.

A proposal is revoked—
(1) by the communication of notice of revocation by the proposer to the other
party;
(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if
no time is so prescribed, by the lapse of a reasonable time, without
communication of the acceptance;
(3) by the failure of the acceptor to fulfil a condition precedent to acceptance;
or
(4) 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.
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Communication of Offer
Now we have seen previously that an offer cannot be revoked after the
offeror has communicated it to the offeree. Then the offer becomes binding, it
creates legal relations between the two parties. Effective communication of
the offer and a clear understanding of it is important to avoid
misunderstanding between all the parties. If the parties are talking face-to-face
this is not a problem. The communication happens in real time and the offer
and acceptance will be communicated on the spot, creating no confusion. But
often times in business the communication occurs via letters and emails etc.
So, in this case, the timeline of the communication is important.

The Section 4 of Indian Contract Act, 1872 says that the communication of
the offer is complete when it comes to the knowledge of the person it has
been made to. So, when the offeree (in case of a specific offer) or any member
of the public (in case of a general offer) becomes aware of the offer, the
communication of the offer is said to be complete.
So, when two people are talking, face-to-face or via telephone etc, the
communication will be complete as soon as the offer is made. Example if A tells
B he will sell his car for five lakh rupees, the communication is complete as
soon as the words are spoken.
Let us take the same example. A writes to B offering his car for five lakh
rupees. He posts the letter on 2nd July. The letter reaches B on 4th July. So, the
communication is said to complete on 4th July.

Communication of Acceptance
Mode of Acceptance
In this case of communication of acceptance, there are two factors to
consider, the mode of acceptance and then the timing of it. Let us first talk
about the mode of acceptance. Acceptance can be done in two ways, namely

A. Communication of Acceptance by an Act: This would include

communication via words, whether oral or written. So, this will include
communication via telephone calls, letters, e-mails, telegraphs etc.
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B. Communication of Acceptance by Conduct: The offeree can also convey his

acceptance of the offer through some action of his, or by his conduct. So,
say when you board a bus, you are accepting to pay the bus fare via your
conduct.

Timing of Acceptance
The communication of acceptance has two parts. Let us take a look

A. As against the Offeror: For the proposer, the communication of the

acceptance is complete when he puts such acceptance in the course of
transmission. After this it is out of his hand to revoke such acceptance,
so his communication will be completed then. So, for example, A accepts
the offer of B via a letter. He posts the letter on 10th July and the letter
reaches B on 14th For B (the proposer) the communication of the
acceptance is completed on 10th July itself.

B. As against the Acceptor: The communication in case of the acceptor is

complete when the proposer acquires knowledge of such acceptance.
So, in the above example, A’s communication will be complete on
14th July, when B learns of the acceptance.

Communication of Revocation
Revocation of Offer
The Indian Contract Act lays out the rules of revocation of an offer in Section
5. It says the offer may be revoked any time before the communication of the
acceptance is complete against the proposer/offeror. Once the acceptance is
communicated to the proposer, revocation of the offer is now not possible.
Let us take the same example of before. A accepts the offer and posts the
letter on 10th July. B gets the letter on 14th July. But for B (the proposer) the
acceptance has been communicated on 10th July itself. So, revocation of offer
can only happen before the 10th of July.
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Revocation of Acceptance
Section 5 also states that acceptance can be revoked until the communication
of the acceptance is completed against the acceptor. No revocation of
acceptance can happen after such a date.
Again, from the above example, the communication of the acceptance is
complete against A (acceptor) on 14th July. So, till that date, A can revoke
his/her acceptance, but not after such a date. So technically between 10th and
14th July, A can decide to revoke the acceptance.

Communication in E-Contract
Like an ordinary contract, e-contracts consists of an offer and acceptance. So,
the various methods of communication that are used are
i) Email
ii) Fax
iii) Telex
iv) Interactive Websites
v) EULA of Software’s, etc.

In case of e-contracts Postal Rule of communication is not used. Instead of

that Instantaneous Rule is used as the channel of communication in case of e-
contracts are almost instant.

Some Known Cases

1. Lalman Shukla v Gauri Dutt5
Defendant’s nephew absconded from home. He sent his servant in search
of the boy. When the servant had left, the defendant by hand bills offered
to pay ₹501 to anybody discovering the boy. The servant came to know this
offer only when he had already traced the missing child. He bought an
action to recover the reward, but his action failed.
In the judgement Banerji J said: “In my opinion a suit like the present can
only be founded on a contract. In order to constitute a contract, there must

5
(1913) 11 All LJ 489
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be an acceptance of an offer and there can be no acceptance unless there is

knowledge of the offer.”

2. Bhagwandas Goverdhandas Kedia v Girdharilal

Parshottamdas6
It is considered to be a landmark case in Indian law describing
communication using instantaneous methods, telephone, the following
guidelines were given:

 When the offeree speaks his acceptance, and his words are put in
the course of transmission, he is unable to revoke his acceptance.
With technological advancement, the device called telephone
delivers the message signal instantaneously and within a gap of
nanoseconds, the offeror can know the acceptance of the offeree.
Thus, it can be said that when offeree speaks his acceptance the
offeror gets to hear it and hence, the contract is formed at the place
offeree speaks of his acceptance.

 A contract via instantaneous modes of communication is formed

when the offeree accepts the offer and intimates the offeror of his
acceptance. The intimation must be by the same external
manifestation which law regards as sufficient.

 In the case of telegrams or post, a contract is formed when the

offeree puts his acceptance in the course of transmission. This rule,
will not apply in case of instantaneous modes of communication like
the telephone. A contract, in the event of inter-absentes of parties
where communication takes place via telephone, will be complete
when the offeree accepts the offer and intimates the offeror of his
acceptance. This intimation would make the offer and acceptance of
a binding contract. Thus, the postal rule would not apply in
instantaneous modes of communication.

6
AIR 1966 SC 543
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Conclusion
We can conclude that with progress in society and science mode of
communication has changed dramatically – from Post to Email. So, the laws
regarding communication has been changed to fit the need of the society. The
old Postal Rule has become obsolete and new Instantaneous Rule has
emerged.

We also found that in the practical world of business and economics, the
communication of the offer and the acceptance and the timings of these are
very important factors. It is very necessary for a lawyer to understand the
factors that control different aspects of communication in case of Law of
Contract.