Introduction  

• The Indian Contract Act, 1872, (ICA) serves as the foundational legal framework governing contracts in India.  
• It establishes the principles of contract formation, including the communication of proposals, their acceptance, and the circumstances under which they can be revoked.  
• Chapter 1 of the ICA states the provisions for the Communication, Acceptance and Revocation of the Proposal. 

What is Proposal? 

• The first thing for creating a contract is a valid proposal or offer. The term offer has been used in the English law and the term proposal has been used in Indian Law. 
• Section 2(a) of the ICA defines proposal as: 
  • This section states that when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other person to such act or abstinence, he is said to make a proposal. 
  • The person making the proposal is called the Promisor and the person accepting the proposal is called the Promisee.

Legal Provisions based on the Communication, Acceptance and Revocation of the Proposal 

• Section 3 of ICA:  
  • Section 3 of ICA provides for communication, acceptance and revocation of proposals. 
  • As per this Section the communication of acceptance shall be deemed to have been made by an act or omission; 
    • By which he intends to communicate. 
    • Or which has the effect of communicating it. 
  • A proposal is communicated when it comes to the knowledge of the person to whom it is made. 
  • The communication begins when the proposal is put into a course of transmission to the offeree. 
  • Example: When A writes a letter making a proposal to B, the communication begins when A posts the letter and completes when B receives and reads the letter.
• Section 4 of ICA: 
  • Section 4 of ICA provides when the communication of acceptance is complete.  
  • The situation covered here is called postal rule i.e. when acceptance is communicated by post. 
  • Communication of acceptance is complete: 

• • According to Anson “acceptance is to offer what a lighted match is to a train of gunpowder.” 
  • However, the above would not be true in the Indian context with respect to postal rule. This is because the acceptance can indeed be revoked. 
  • Example: 
    • A proposes by letter to sell his house to B for ₹50,000. 
    • B accepts by posting a letter of acceptance. 
    • The communication of acceptance is complete:  
      • Against B (acceptor): When the letter is posted. 
      • Against A (proposer): When A receives the letter.
• Section 5 of ICA: 
  • Section 5 of ICA provides for revocation of both acceptance and proposal. 
  • It provides that an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. 
  • Methods of Revocation: 
    • By notice of revocation. 
    • By lapse of time. 
    • By failure to fulfill a condition precedent. 
    • By death or insanity of the proposer.
• Section 6 of ICA: 
  • Section 6 of ICA sates the modes by revocation to be made as: 
    • By communication of notice of revocation by the proposer. 
    • By lapse of prescribed time. 
    • By failure of acceptor to fulfill a condition precedent to acceptance. 
    • By death or insanity of the proposer, if the fact comes to the acceptor's knowledge before acceptance.
• Section 7 of ICA:  
  • Section 7 of the ICA provides that the acceptance must be absolute. 
  • Acceptance must be: 
    • Absolute 
    • Unqualified 
  • Manner of Acceptance: 
    • It must be expressed in some usual and reasonable manner. 
    • If the proposal prescribes the manner of acceptance the same must be followed. 
    • If the manner is prescribed and the acceptance is not made in that manner. 
    • The proposer may within a reasonable time insist that the proposal be accepted in the prescribed manner. 
    • If he fails to do so he accepts the acceptance.
• Section 8 of ICA: 
  • Section 8 of the ICA provides for acceptance by performing conditions or receiving consideration. 
  • The acceptance can be by: 
    • Performance of conditions, or 
    • Acceptance of any consideration for reciprocal promise.
• Section 9 of ICA: 
  • Section 9 of ICA provides for Promises, express and implied. 
  • In so far as the proposal or acceptance of any promise is made in words, the promise is said to be expressed. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied. 

Principles of Communication and Acceptance 

• Postal Rule:  
  • When acceptance is given by post, the contract is complete when the letter of acceptance is posted. 
  • This applies even if the letter is delayed or lost in transit. 
  • Exception: When the proposal specifically requires actual communication of acceptance. 
• Instantaneous Communication:  
  • For instantaneous forms of communication (telephone, email, etc.), the contract is complete when the acceptance is received by the proposer. 
  • Different rules may apply depending on whether the communication is inter praesentes (between parties present) or inter absentes (between parties at a distance). 
• Cross Offers:  
  • When two parties make identical offers to each other in ignorance of each other's offer. 
  • Cross offers do not constitute acceptance of either offer. 
  • A fresh acceptance is required to form a contract. 
• Counter Offers:  
  • A counter offer amounts to rejection of the original offer. 
  • The original offer lapses and cannot be subsequently accepted. 
  • Example: An offer to sell his car for ₹5,00,000. B replies saying he will buy it for ₹4,50,000. This is a counter offer and A's original offer lapses. 

Conclusion 

Understanding the communication, acceptance, and revocation of proposals is fundamental to the formation of contracts under the ICA. Parties engaging in contractual agreements must be aware of these principles to ensure that their agreements are legally enforceable. By adhering to the provisions outlined in the Act, individuals and businesses can navigate the complexities of contract law effectively.