Communication of acceptance and Post Box rule in Contract law

Author: Prince Chandak

Email: princechandak@nls.ac.in

With the growing advancements in the world and integration of the economies, the quantum of transactions has upsurged lately. The significance that contracts hold in today’s world can’t be questioned. The research paper will mainly deal with most significant step in the  contract formation –‘ Communication of acceptance’.
It will deal with essentials of a valid acceptance and the exception of Post box rule in India. It will delve into its origin, developments and present applicable rules in relation with the “Indian Contract Act, 1872”.
The paper begins with definition of acceptance, essentials of valid acceptance, origin of the rule and its misuse by the offeror. The rules of postal rule in England are also discussed to facilitate comparison so as to better understand India’s regulations on the mailbox rule.
The rules relating to instantaneous communication along with principle of the revocation are also reasoned with comparison. Major English case law judgements as well as Indian case laws are also included to support the arguments presented in the paper.
COMMUNICATION OF ACCEPTANCE.
A contract is a mutual agreement between the parties that governs and recognizes their rights. It has been defined as: “an agreement enforceable by law[1]”. As every clap requires striking of both hands, both offer and acceptance are necessary to form a valid contract. For a valid offer, the proposer must intend to communicate that offer or which has effect of communicating the offer. The offer can be express or implied and must be certain with definite terms and conditions. It must be made with intention to create legal relations.
Acceptance has been defined as “When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted becomes a promise.[2].” In this definition, “person” as defined under General Clauses Act, 1963 and the Indian Penal Code is considered. The offeree is not bound to accept the offer. He may reject it or lapse due to by non-acceptance. In General Saw & Blades Co. v. Bharat Coking Coal Ltd[3], the company rejected the highest bid of tender and decided to re-auction the goods. The court held that it was lawful as the person giving the bid was making the offer and company had full authority to not accept it. “Acceptance is to an offer what a lighted match is to a train of gunpowder[4].” Just like a lighted match comes in contact with gunpowder and cause irreversible explosion, similarly after acceptance a contract is created, bounding both parties to honor it.
The communication of a proposal is complete when it comes to knowledge of the person to whom it is made[5].” The meeting of both minds i.e. consensus-ad-idem is necessary to make a valid contract. Thus an offer cannot be accepted when the acceptor is ignorant about it[6].
Essentials Of Valid Acceptance
For a valid contract, the acceptance must be communicated and should be made to the offeror or his authorized agent. In Felthouse v. Bindley[7] Felthouse wrote a letter to his nephew to buy his horse stating that if he did not hear about his acceptance, he will consider the offer to be approved. The nephew did not reply but told his auctioneer about the same. The auctioneer sold the horse by mistake and the uncle sued him for conversion. The court decided that no contract is formed as acceptance was not communicated at all.
Communication of acceptance must be made by the offeree or his duly authorized person. In Powell v. Lee[8] Powell was selected by Board of Managers for post of headmaster. One of the members of board unauthorizedly communicated this to him and later he wasn’t selected. The court adjudicated that there was no formal communication by any authorized person on behalf of Board which doesn’t give rise to any contract. When any acceptance is made to the wrong person or posted at wrong address, the offeror is held not liable[9].
The communication is not required when the acceptance is made through conduct. The conduct would amount to acceptance only when it is clear that offeree did the act with the intention of accepting the offer[10]. The acceptance should follow the mirror-image rule as it should be absolute and unqualified in relation to the offer[11]. Any change in conditions of offer lead to the counter offer[12], rendering the original offer rejected. But an enquiry as to terms of the offer does not necessarily mean a counter offer.[13]
The acceptance must be expressed in some usual or reasonable manner, unless the proposal prescribed the manner in which it to be accepted[14].” If offeree sent his acceptance through a mode other than other prescribed mode and if offeror remains silent, the contract is accepted. The manner used to convey acceptance generally depends upon customs of trade. Acceptance through telegram, fax, post, telephone or mail can be regarded as usual or reasonable manner.
Agreement in Sub Silentio
An agreement can be accepted through words or gestures i.e. orally, by signing the agreement, shaking hands and by impliedly through conduct[15]. Generally an offer is not accepted through silence as there is no consensus but in certain circumstances offeree’s silence coupled with his conduct can take the form of positive act, may be construed as acceptance[16]. This is known as agreement sub silentio.
When the proposer while making proposal clearly indicates that there is no requirement of intimating the acceptance and only performance of conditions of proposal would be enough, it would result into a valid contract[17].
POST BOX RULE – AN EXCEPTION
The contract comes into existence and parties become bound by their promises as soon as the communication of acceptance is completed. In case, parties are present at same place, it can be done immediately but when parties are at distant places it is made by post, fax, telegram, mail etc.
 
 
ACCEPTANCE BY POST   
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[18]”. This signifies that the moment the letter of acceptance is posted and out of control of acceptor, the proposer becomes bound by it. It is no difference whether the letter is delayed in post or lost in transit and the offeror never receives it. Through the offeror become bound, once the acceptance is out of power of acceptor in India the acceptor is only bound when it comes to knowledge of proposer.
The post rule was first held in Adams v. Lindsell[19] in 1818 in London. It involved two parties engaging in sale of wool. On 2nd September, the defendants asked the plaintiff to supply fleeces of wool through the post but they misdirected it and it reached the plaintiff on 5th September. On same day, they posted their acceptance but it was received on 9th September by defendants. In mid-time, the defendants sold the wool as they did not received any answer on 7th September, as was expected. The plaintiff sued them for the breach of contract. The court decided in the plaintiff’s favor and evolved the post-box rule. CJ Edmund ruled that “if that was true it would be impossible to complete any contract through the post; if the defendants were not bound by their offer until the answer was received, then the plaintiffs would not be bound until they had received word that the defendants had received their acceptance, and this could go on indefinitely[20]”. It was decided as such this view involves the lesser departure from consensus model.
The same reasoning was applied in Henthorn v Fraser,[21] by the court of England and Wales in 1892. The defendant called the claimant to his office to purchase some houses. The claimant gave unconditional acceptance through post on the same day but the defendant withdrew the offer through post but it never reached the claimant. It was decided that a valid contract had come into existence between them.
In Progressive Constructions Ltd. v. Bharat Hydro Power Corporation,[22] it was decided that the contract would be deemed to be complete where the offer was received and acceptance was posted. “The time and place of contract is very crucial as the place where the acceptance is posted has jurisdiction to settle the disputes[23].”
The rule is regarded to be unfair on the part of offeror as he is bound to wait till the acceptance is received. It omits the situation of acceptance not arriving at all due to getting  lost in transit and as a result, the offeror suffers uncertainty[24]. This enables offeree to act immediately on the contract and perform his obligation but offeror is left clueless.
The rule is justified as the post office is considered to be an agent not merely for the the offeree, but also for its intended recipient, the offeror. As soon as acceptance is posted, it is already with proposer, thereby communication of acceptance is assumed to be completed. The proposer can protect himself and avoid this risk by requiring actual notification of the acceptance. It is justified not based on logic but on commercial convenience. It also prevents fraud as under a rule requiring him to receive the acceptance, the proposer can claim that he hadn’t received and there would be no contract.
Through this research paper, I have analyzed the requirement of communication of acceptance to the offeror to form a valid contract. The exception of post box rule has been also described, and with comparison of Indian rules and England laws regarding the acceptance of an offer has been used to better understand the rule. Through detailed assessment of relevant case laws, I have concluded that as every sword is double edged, similarly this rule also has positives as well as negatives.
In conclusion, the exception of post box rule is an important part of contract formation while communicating the acceptance to offeror.
[1] Indian Contract Act, Section 2(h), 1872
[2] Indian Contract Act, Section 2(b), 1872
[3] AIR 1990 Cal 96
[4] Anson’s Law of Contract, 23rd Ed. p.55
[5] Indian Contract Act, Section 4, 1872
[6] Lalman Shukla v. Gauri Dutt, (1983) 11 All. L.J. 489
[7] (1863) 7 L.T. 835
[8] (1908) 99 L.T. 284
[9]
Karan Singh v. The Collector, Chattarpur, AIR 1980 MP 89
[10] Bhagwati Prasad Pawan Kumar v. Union Of India, AIR 2006 SC 2331
[11] Hyde v. Wrench, (1840) 49 ER 132
[12] UNIDROIT Principles ARTICLE 2.1.11 (Modified Acceptance)
[13] Stevenson, Jaques & Co. v. Mclean, (1880) 5 Q.B.D. 346
[14] Indian Contract Act, Section 7(2), 1872
[15] M/s. Rakesh Kumar Dinesh Kumar v. U.G. Hotels & Resorts Ltd, AIR 2006 HP 135
[16] Bharat Petroleum Corporation Ltd. v. Great Eastern Shipping Co. AIR 2008 357
[17] Carlill v. Carbolic Smoke Ball C+o. (1983) 1 Q.B. 256
[18] Indian Contracts Act, Section 4, 1872
[19] EWHS KB 659
[20] Gardner, S. (1992). Trashing with Trollope: A Deconstruction of the Postal Rules in Contract. Oxford Journal of Legal Studies, 12(2), 170-194. Retrieved from www.jstor.org/stable/764702
[21] [1892] 2 Ch. 27 (CA)
[22] AIR 1996 Delhi 92
[23] Bhagwandas v. Girdharilal & Co. AIR 1996 SC 543
[24] Household Fire Insurance Company Ltd. v Grant, (1878–79) LR 4 Ex D 216

Leave a Comment