What is Communication & modes of Communication under the Indian Contract Act: Lawcirca

What is Communication & modes of Communication under the Indian Contract Act?

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According to Section 2(h) of the Indian Contract Act 1872, An agreement enforceable by law is a contract. Before a contract comes into existence promisor has to signify his willingness and promisee has to signify his assent. It, therefore, becomes necessary to explain what is meant by such signification and what should be the mode of the same.

To bring into notice willingness or assent of the parties to enter into a contract one needs to communicate. This mode of communication can be postal or instantaneous. Section 3 of the Indian Contract Act states that communication can be made by an act or omission, the first mode any act means any conduct and words, written or oral. Written words include letters, telegrams, messages, advertisements whereas oral words include telephone messages.

COMMUNICATION OF OFFER UNDER INDIAN CONTRACT ACT, 1872

An offer is not valid until communicated, an offer can be communicated by word or by the gesture, hereby word we mean oral or written form gesture means movement of a part of the body it is a form of non-verbal communication an example can be nodding of the head. In Powell v. Lee[3] the managers of a school decided to appoint a person as the headmaster, there was no official communication of this. A master from the same school communicated this decision of the appointment to the person, later on, the school managers decided to reserve this decision. It was held that there was no contract as there is no communication by the side of the authority and the communication happened by the master in his personal capacity. The candidate coming to know indirectly of the selection was not material. 

Communication of offer is very important 

COMMUNICATION OF ACCEPTANCE UNDER INDIAN CONTRACT ACT, 1872

As the communication of offer is important so is the communication of acceptance. When the communication of acceptance is made then only the contract comes into existence, In Lalman Shukla v. Gauri Dutt [4] the defendant sent his servant in search of his nephew who went missing after the servant left he announced a reward for the person who will find his nephew the servant did and claimed the reward. It was held that there is no contract as there was no communication of acceptance. But by this, we cannot say that formation of contact takes place only when communication takes place in words but it is also accepted by the conduct of the party. In Carlill v. Carbolic Smoke Ball Co.,[5] A general offer was made by the smoke ball company that if anyone uses their product in the prescribed manner and gets infected with influenza then they will pay 1000 pound to such a person. Here the plaintiff used the product in the prescribed manner it was held that as it was a general offer made by the company by buying the product and using it in the prescribed manner the plaintiff communicated acceptance by this conduct and hence should be compensated. 

We need to understand how important communication of acceptance becomes in the formation of a contract. One more important element is the time period in which communication of acceptance is made, the communication must take place in the prescribed time period if the communication takes place after lapse of the prescribed time then it does not stand as a valid acceptance. 

For eg – If Mr. X in his offer letter has written that he is expecting reply on or before 6th december it means the person needs to reply before the given time, If he replies after that it will not be held as a valid acceptance. The communication of acceptance must be to the offeror and not to any third person as it will make no contract.

TABLE: COMMUNICATION WHEN COMPLETE

Communication of proposalCommunication of acceptance is complete
When it comes to the knowledge of the person to whom it is madeAgainst proposer-When put in course of transmission Against acceptor-When it comes to the knowledge of proposer

WHAT ARE THE DIFFERENT MODES OF COMMUNICATION UNDER INDIAN CONTRACT ACT?

After we discussed communication of offer and acceptance the next part is the mode in which communication takes place. Earlier it was done mainly by the help of post that is by postal communication or telegrams. But now in the time we live, offer and acceptance takes place through electronic mails or the different social platforms and messaging apps. 

POSTAL RULE OF COMMUNICATION

As mentioned nowadays, the most common mode of communication is electronic but when Indian Contract Act was drafted it only mentioned the postal mode. With the help of the postal mode the rules for the electronic mode were interpreted.

The rules of contracts by post (postal rules) include the following:

  1. An offer made by post/letter is not effective until received by the one to whom it is made
  2. Acceptance is effective as soon as it is posted.

For understanding the postal rule we need to understand these basic two rules first one is when an offer is made is not valid until received by the person to whom it is made. But on the side of the offeree, the acceptance is complete as soon as the letter is posted. This is because it becomes out of the power of acceptor to make any changes. Now if the person wants to revoke this offer he or she might post the letter of revocation with the help of speed post. This revocation will stand valid if comes to the knowledge of the proposer/offeror before the acceptance. 

 Adams v. Lindsell 

Adams v. Lindsell [6] is considered to be the first landmark case in England which led to the establishment of postal rule for acceptance of an offer. 

Facts

The facts of Adams v Lindsell are that: the defendants wrote to the plaintiffs on 2nd September, offering to sell them some wool and requested that the plaintiffs reply ‘in course of post’ they specified the mode here . The letter which contained the offer was wrongly addressed and therefore the plaintiffs did not receive it until the 5th of September. The letter of acceptance was not received until the 9th of September by the defendants, and this was two days later than the date expected. Because of this, on 8 September the defendants had sold the wool to a third person. 

Issue

The issue for the court, in this case, was therefore whether a contract of sale had been entered into before 8 September when the wool was sold to the third party. If the acceptance was effective when it arrived at the address or when the defendant saw it, then no contract would have been made and the sale to the third party would amount to revocation of the offer. 

Decision

The court held that the offer had been accepted as soon as the letter had been posted as it became out of the power of the acceptor. Thus, there was a contract in existence before the sale of the wool to the third party, even though the letter had not actually been received by the defendant. The defendant was therefore liable in breach of contract.

There are several theories about the Postal rule in Adams v Lindsell

1.   First theory is that the offer can reject this offer by a quicker means of communication this can be speed post or anything else.

2.   Another theory is that without the postal rule an offeree would not be able to know for certain whether they had actually entered into a contract or not. When an offeror chooses to start to make an offer by post he takes the risk of delay and accidents in the post, it is understood. However, the offeror can avoid the established in this case by expressly stipulating that he is not to be bound until actual receipt of the acceptance.

3.   A further theory for the existence of the postal rule is if offeror says postal means of acceptance is enough he or she might bear the consequences as we discussed in this case. Moreover, Adams v Lindsell could be considered support for the idea that the offeror should be considered as making the offer all the time that the offer is in the post, and that therefore the agreement between the two parties is complete at the moment that acceptance is posted.

4.   In this case itself it was suggested (at 683) that if the rule did not exist “no contract could ever be completed by post”. This way the offeror will not be bind with his or her offer till it was notified to him and the offree will not be bound by his or her acceptance until notified that it has come to the knowledge of the offeror. One further reason for the existence of the rule in this landmark case is that the Post Office can be considered to be the common agent of both parties, and therefore communication to this agent immediately completes the contract. However, if the acceptance letter is not carrying any address or is not addressed to any particular place or person then the acceptance of the contract is not complete as mere delivery of the letter to the agent doesn’t make the acceptance complete. The Adams v Lindsell postal rule only applies when it is reasonable to use the post as a means of communicating acceptance. So, an offer made in a letter sent by post could be accepted by post. Yet at other times postal acceptance may be reasonable. However, Adams v Lindsell will not normally apply where acceptance is made by post in response to an offer made by some instantaneous mode of communication. This rule will also not be applied if the acceptor knew that modes of postal communication were disrupted during that time.

POSTAL RULE AND ELECTRONIC COMMUNICATION

The postal rule, created in 1818, was not framed in such a manner that it stands in line with instantaneous mode of communication such as fax, email and e-commerce systems and therefore it is criticized by many people. When the court faces different issues each day the problem is of the two methods face to face and distance communication which mixes up and causes confusion. To clear it the courts today do not mix these two up rather solve it using simple laws as it can be interpreted.

Law of contract requires an offer and acceptance to be in place in a certain manner, this is to ensure that there is surety between the two parties contracting; there is also another aspect to this India is a developing country, a lot of people from outside India try to invest in various projects here. There is a contractual relationship taking shape and to provide surety to this strengthening this law becomes of prime importance. 

As we progressed the question courts tackled was if the postal rule was broad enough to be applied to instantaneous mode of communication. As electronic methods have progressed, the dispatch and receipt of a message tends to coincide and any law that deals with the delay between the two, such as the postal rule, seems to be rendered useless or obsolete. It has been held that a telephone conversation is the same as a conversation that is held between two people in the same room so the ‘receipt’ rule applies; we can understand this that communication of acceptance needs to be heard by the offeror then only a contract is formed. There is an assumption here that a message of acceptance sent during office hours tends to be received. However, a problem arises when the mode of communication is called instantaneous but in actual reality is not, Lord Fraser dealt with this problem in Brinkibon Ltd v Stahag Stahl [8] and stated that responsibility and risk was on the person who receives the message if they choose not to man their machines . The law regarding instantaneous seems to be more concise and fairer than the postal rule, instantaneous methods have been used for many years since the cases above and has had little or no effect on commerce which could be an indicator that it is perceived as just and acceptable by society. 

To summarize we can say, it seems the postal rule is not completely outdated; it can still apply to modern non-instantaneous methods of communication such as email. Here we can consider the cases of mails that are not opened for some that get into the trash bin, the court of Singapore considered to be a non-instantaneous form of communication; but nevertheless, the debate goes on as this simple thing can be interpreted by different courts in their own way.            

To bring into notice willingness or assent of the parties to enter into a contract one needs to communicate. This mode of communication can be postal or instantaneous. Section 3 of the Indian Contract Act states that communication can be made by an act or omission, the first mode any act means any conduct and words, written or oral. Written words include letters, telegrams, messages, advertisements whereas oral words include telephone messages.


Sunidhi Singh

Author

Sunidhi hails from Symbiosis Law School, NOIDA and spends most of her time researching, reading and debating. Her Interest areas are law and policy. For any clarifications, feedback, and advice, you can reach us at editor@lawcirca.com

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