4. Communication and Revocation of Offer and Acceptance
This is the second topic post in Unit I — General Principles of Contract. It builds directly on Definition and Nature of Contract, so read that first if you haven't.
The Problem This Topic Solves
Post 1 established that a proposal, once accepted, becomes a promise. But when exactly is a proposal or acceptance considered "made" in the eyes of law? If A posts a letter offering to sell his house, and changes his mind the next day and sends a telegram cancelling it — is he too late? What if B has already posted a letter of acceptance? Contract law needs precise rules for exactly when communication is legally "complete," because until that moment, either party can walk away. Sections 3 to 9 of the Act supply those rules.
Communication, Acceptance, and Revocation — Section 3
Section 3 lays the foundation: "the communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, are deemed to be made by any act or omission of the party by which he intends to communicate" such proposal, acceptance, or revocation — or which has the effect of communicating it. In plain terms: communication isn't just about words, it includes any act (or deliberate silence) intended to convey the message.
When Communication Is Complete — Section 4
This is the most tested section in this topic. It sets three separate rules:
1. Communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
2. Communication of an acceptance is complete: as against the proposer — when it is put into a course of transmission to him, so as to be out of the power of the acceptor (e.g. the moment the letter is posted); as against the acceptor — when it comes to the knowledge of the proposer (e.g. when the proposer actually reads the letter).
3. Communication of a revocation is complete: as against the person who makes it — when it is put into a course of transmission, out of his power; as against the person to whom it is made — when it comes to his knowledge.
Illustration from the Act: A proposes by letter to sell his house to B. Communication of the proposal is complete when B receives the letter. B accepts by letter. Communication of the acceptance is complete against A when the letter is posted (even before A reads it); it is complete against B only when A actually receives it.
This creates an important asymmetry, often called the postal rule: once B posts the acceptance letter, A is bound even if the letter is delayed or lost in transit — but B is not yet bound to A until A actually receives it. Between posting and delivery, B can still revoke.
When a Proposal or Acceptance Can Be Revoked — Section 5
"A 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."
In short: A can revoke his offer any time before B posts the acceptance. B can revoke his acceptance any time before that acceptance letter reaches A — even if it means the revocation telegram arrives before the letter, or alongside it, as long as it's not after.
How a Proposal Is Revoked — Section 6
A proposal comes to an end (is revoked) by: 1. Notice of revocation communicated by the proposer to the other party. 2. Lapse of the prescribed time for acceptance, or a reasonable time if none is prescribed. 3. Failure of the acceptor to fulfil a condition precedent to acceptance. 4. Death or insanity of the proposer — but only if this fact comes to the acceptor's knowledge before he accepts.
Ramsgate Victoria Hotel Co. Ltd. v. Montefiore (1866) illustrates the "lapse of time" mode directly. Montefiore applied for shares in June and paid a deposit. The company only tried to accept nearly five months later, in November — by then share values had shifted, and Montefiore refused to proceed. The court held his offer had already lapsed: where no time limit is stated, an offer lapses after a reasonable time, and what counts as reasonable depends on the subject-matter — a fast-moving asset like shares needs a prompt acceptance, not one five months later.
Acceptance Must Be Absolute — Section 7
For a proposal to convert into a promise, the acceptance must: 1. Be absolute and unqualified — matching the offer exactly, no changes or conditions attached (a "yes, but" is not acceptance — it's a counter-offer). 2. Be expressed in some usual and reasonable manner, unless the proposal itself prescribes a manner of acceptance — in which case that manner should be followed.
Acceptance by Conduct — Section 8
Acceptance isn't always a spoken or written "yes." Performing the conditions of a proposal, or accepting the consideration offered with it, itself amounts to acceptance. This is how general offers (made to the public, not one person) get accepted — through the act of complying with the offer's terms.
Carlill v. Carbolic Smoke Ball Co. (1893) is the classic illustration. The company advertised that anyone who used their smoke ball as directed and still caught influenza would be paid £100, and backed this with a £1,000 bank deposit "shewing their sincerity." Mrs. Carlill used it exactly as instructed and still caught flu. The company argued there was no contract — the advertisement wasn't directed at her specifically, and she never communicated acceptance. The court held: this was a valid general offer to the whole world, and performing the stated conditions was itself the acceptance — no separate communication was needed. Mrs. Carlill won her £100.
Express and Implied Promises — Section 9
A promise is express when made in words (spoken or written). It is implied when it can be inferred from the conduct of the parties or the circumstances of the case — the parties never said it aloud, but their actions show agreement.
Communication of Proposal Requires Knowledge — Lalman Shukla v. Gauri Dutt
Sections 3 and 4 aren't just about when communication is complete — they establish that communication has to happen at all for acceptance to be valid. Lalman Shukla v. Gauri Dutt (1913) tests exactly this.
Gauri Dutt's nephew went missing. He sent his servant, Lalman Shukla, to search for the boy, covering his travel expenses. After Lalman had already left, Gauri Dutt announced a ₹501 reward by handbill for anyone who found the boy. Lalman, unaware of this reward, found the boy anyway and brought him back. He later learned of the reward and sued to claim it.
The Allahabad High Court held Lalman was not entitled to the reward: a person cannot accept an offer they don't know exists. Acceptance requires knowledge of the proposal — performing the exact act named in an offer, purely by coincidence or pre-existing duty, is not acceptance if the offer was never communicated to you first. Since Lalman was also just performing his existing duty as a servant, there was no fresh consideration either.
- Section 3 — How communication, acceptance, and revocation are deemed made
- Section 4 — When communication of proposal / acceptance / revocation is complete (the postal rule asymmetry)
- Section 5 — Time limits for revoking a proposal or an acceptance
- Section 6 — The four modes of revoking a proposal
- Section 7 — Acceptance must be absolute and unqualified
- Section 8 — Acceptance by performing conditions or accepting consideration
- Section 9 — Express vs. implied promises
- Felthouse v. Bindley — silence does not amount to acceptance; an offeror cannot impose an obligation on the offeree to reject an offer
- Lalman Shukla v. Gauri Dutt — acceptance is not valid unless the acceptor had knowledge of the offer before performing the act
- Carlill v. Carbolic Smoke Ball Co. — a general offer to the world can be accepted by anyone who performs its stated conditions; no separate communication of acceptance is needed
- Ramsgate Victoria Hotel Co. Ltd. v. Montefiore — an offer with no stated time limit lapses after a reasonable time; what's reasonable depends on the subject-matter
Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co. (AIR 1966 SC 543) — the postal rule under Section 4 applies to non-instantaneous communication like post. The Supreme Court held that for instantaneous communication (in this case, telephone), the contract is complete only where and when the acceptance is actually heard by the proposer — not where it is spoken. This matters today because it's the reasoning courts extend to instant modes like phone calls, and by analogy, arguably email and messaging.
Postal Rule vs. Instantaneous Communication — At a Glance
| Basis | Postal / Non-Instantaneous (Sec. 4) | Instantaneous (Telephone, per Kedia) |
|---|---|---|
| When acceptance binds proposer | The moment it is posted | Only when actually heard/received by proposer |
| Risk of loss in transit | Falls on proposer (he's bound even if letter is delayed) | Not applicable — no "transit" gap |
| Revocable by acceptor | Yes, until the proposer actually receives it | Not meaningfully possible — communication is instant |
A Practical Example
Priya, in Hyderabad, posts a letter to Arjun on 1st August offering to sell her law books for ₹3,000, asking for a reply within a week. Arjun posts his acceptance letter on 5th August. The contract is complete against Priya the moment Arjun posts that letter on 5th August — even though Priya hasn't read it yet. If Priya tries to revoke her offer by telegram on 6th August, she's too late — Arjun's acceptance was already communicated (as against Priya) on the 5th.
But if Arjun, having posted his letter on the 5th, changes his mind and sends a faster courier revoking his acceptance, and it reaches Priya on the 6th — before her actual receipt of his original acceptance letter — Arjun's revocation is valid, since it reached Priya before the acceptance was complete against him.
Quick Revision Points
- Section 3: communication can happen by act or omission, not just words
- Section 4: three different completion points — proposal (knowledge), acceptance-against-proposer (posting), acceptance-against-acceptor (proposer's knowledge)
- The postal rule creates a gap where the acceptor can still revoke, but the proposer usually cannot
- Section 5: proposer can revoke before acceptance is posted; acceptor can revoke before acceptance reaches the proposer
- Section 6: four ways a proposal ends — notice, lapse of time, failure of condition precedent, death/insanity known before acceptance
- Section 7: acceptance must mirror the offer exactly — no modifications
- Section 8: conduct can be acceptance (performing the offer's terms)
- Section 9: express = words; implied = conduct
- Felthouse v. Bindley: silence is never acceptance
- Kedia case: instantaneous communication (phone) does not follow the postal rule — contract completes only on actual hearing
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