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Importance of communication in Law of Contract

Communication In Contract

According to Section 2(h) of the Indian Contract Act 1872[1], Any agreement with legal enforceability is a Contract.
(Indian Contract act 1872, Hereinafter referred to as, Act.)
It can be deduced from the above definition that-
Agreement + Enforceability by Law = Contract……….(1)

Now, according to Section 2(e) of the Act[2], Every promise or set of promises, along with consideration is an Agreement.
And according to Section 2(b) of the Act[3], when the proposal is accepted, then it becomes a promise.
Proposal according to section 2(a) of the Act[4], A person is said to make the proposal when he signifies his willingness to do or not to do something to other party, with the intention to obtain the assent of that party for the same.
Acceptance according to section 2(b) of the Act[5], The proposal is said to be accepted when the person to whom the proposal was made signifies his assent for the same.
Therefore, from the above definition it can be deduced that-
Proposal + acceptance = promise…………(2),
Promise + consideration = agreement……….(3), { section 2(e) }
From (1), (2), (3)
It can be said that at the initial stage a contract starts with a proposal and its acceptance, and going through the definition of both the proposal and the acceptance, the word ‘signifies’ is common in both.
Signifies here means ‘to communicate’ the proposal or its acceptance to the other party. It is taken as an essential element in the process of proposal and acceptance, therefore, it is important to communicate both proposal or acceptance so as to complete it and create a valid promise.
The communication can be done in any way such that it comes to the knowledge of the other party, it can be oral, written or even by conduct also.
Section 3 of the Act[6] states, a person intending to communicate a proposal, acceptance or revocation of proposal or acceptance is assumed to communicate the same through an act or omission.

It can be said that the communication of proposal, the acceptance of proposal and the revocation of proposal and acceptance is done through an act or omission.

In the case of Har Bhajan Lal v. Harcharan Lal,[7] the son of the defendant ran away from the house he then issued a pamphlet stating: "Anybody who finds a trace of the boy and brings him home will get Rs. 500." And his son was found by the plaintiff who already had the knowledge of the offer, he then sent a telegram to his father and claimed for his reward, the court also upheld the same.

Here in the fact there was no oral or written communication of acceptance to the offer of the another party, the conduct i.e. fulfillment of the condition in offer was itself a considered as acceptance.

In another case Coffee Board v CCT,[8] it was held that Offer and acceptance can be spelled out from the conduct of the parties that cover not only their acts but also omissions.
A daily life example where the bus driver offers the passengers to carry them from one place to another at a certain ticket price, and the passengers enter the bus to travel, this conduct of boarding the bus itself signifies the acceptance of offer by the passenger, there is no oral or written communication done between both the parties.

Communication is required both when the proposal is made and also when that proposal is accepted, thus it forms the essence of both the process of proposal and acceptance. Now there are instances where the proposer may want to undo his/her proposal or the acceptor wants to undo his/her acceptance, this is known as revocation where again the communication of revocation of proposal or acceptance is important.

Communication In Proposal

Section 4 of the Act[9] states, as to when the communication of a proposal is complete, as and when it comes to the knowledge of the person to whom it is made.
Therefore, it is necessary for the communication of a proposal is made in a way that it comes to the knowledge of the other party, to complete the process of the proposal. A proposal which does not comes to the knowledge of the person to whom it is made is no proposal.

Importance of communication in proposal:
In every agreement there should be the communication of the proposal to the other party and that proposal should come to the knowledge of that party, and being in the knowledge, that proposal should be accepted by other party for formation of a valid agreement.

Here even if the person fulfills the terms of the proposal, and the proposal is communicated in such a way that it was not in the knowledge of the other party, it will not create a valid agreement. The same was also held in the case of Lalman Shukla v. Gauri Dutt,[10] in this case, a general proposal was given by a person with certain award if anyone finds his lost nephew, a person without the knowledge of this offer, found the nephew and later claimed the award, the court held that since the person was not having the knowledge of the offer was not entitled for the award.

In a similar case Fitch v Snedkar,[11] where Snedkar offered reward to anyone who found out the lost dog, Fitch found out the dog and returned it before being aware of the offer given by Snedkar, it was held in this case that since Fitch fulfill the terms of the offer, but the offer communicated was not in the knowledge of him, he is not entitled to get the reward.

Therefore, from the above cases it can be said that the communication of any offer or proposal plays a really important role in creating a valid agreement, if the communication of a proposal is not in knowledge of other person then no one is bind by the promise.

Communication In Acceptance

Section 4 of the Act[12] 1872 also states as to when,The communication of an acceptance is complete:
When it is put in transmission by the acceptor such that it is now out of control of the acceptor, then it is complete against the proposer.
And when the proposer gets the knowledge of the communication by acceptor, then it is completely against the acceptor.
The section above states both as to when the communication of acceptance is completed against the proposer and the acceptor.
So as against the proposer the communication of acceptance is complete that is, the proposer is now bound by the acceptance of the acceptor when, the acceptance is being put to transmission and it is out of the power of the acceptor. On the other hand, as against the acceptor, it is complete only when the communication of acceptance comes to the knowledge of the proposer, only then the acceptor is bound by the agreement.

Importance of communication in acceptance:
To create a valid agreement the communication of acceptance should reach the knowledge of the proposer. Further there are essentials for how the acceptance should be communicated
  1. It should be communicated by an authorized person or agent to the proposer or a person duly appointed by the proposer.
  2. Should be communicated in the manner as prescribed by the proposer.

If the communication of acceptance is not done in accordance, then there will be no valid agreement between both the parties.

In LIC of India v. Raja Vasireddy,[13] where Mr. Raja filed a proposal for insurance on his life and he also paid the first premium, the premium was also accepted by LIC of India, but before the LIC could despatch the policy to Mr. Raja, he died, in this the court held that the contract of insurance was not created as there was no communication of acceptance by LIC of India to the proposal of Mr. Raja.

An exception in the communication of acceptance is in the case of general proposal or general offer, where it is not necessary to communicate the acceptance, mere fulfillment of the condition laid down in the general offer is itself considered as acceptance, unless the person who fulfilled the terms of the offer was not aware of the general offer being made.

In the case of Carlill v. Carbolic Smoke Ball Co.,[14] the company issued an advertisement (general offer) stating that they will give £100 to anybody who uses the carbolic ball in a prescribed way still get caught by influenza, the plaintiff purchased the ball and used it in the prescribed manner and still got caught by influenza, and thus claimed £100 as advertised by the company. The company contended that the offer was not made to specific person and thus was not accepted. The court held that since it was a general offer and the plaintiff fulfilled the terms thus, it was itself an acceptance, therefore, he was made entitled to get the price.

After a valid communication of proposal is done and its valid acceptance is given by the acceptor then it creates a binding agreement between the parties.

Legal Consequence Of Communication

As stated in section 2(b) of the Act[15: When the proposal is accepted then it becomes a promise.

The promise or set of promises along with consideration forms an agreement, the agreement between both the parties then forms a legal binding against both the parties, that is, both the parties now have rights and duties against each other and they can enforce the agreement by law, if other elements apart from the valid agreement is fulfilled.

Therefore, the first consequence is that there will be a legal binding between both the parties, once the proper communication of both proposal and its acceptance is done by the parties.

If any of the parties wish to not to create a legal binding, then they have the option of revocation of proposal of acceptance.

The revocation of proposal or acceptance also need to be duly communicated if the party wants to revoke their proposal or acceptance.

Section 4 of the Act[16] also states as to when, The communication of revocation is complete:
when the communication is put for conveyance to the other party, such that it is out of control of the person who made it, then it is complete against the person by whom it is made.
And, when the communication comes to the knowledge of the person to whom it was conveyed, then it is complete against him.

And, section 5 of the act[17] states as to when the revocation can be done:
The proposer can revoke the promise before the communication of proposal is complete as against the proposer himself, and not after that.
And the acceptor can revoke the acceptance before the communication of acceptance is complete against the acceptor himself, and not after that.

Therefore, section 4 read with, section 5, it can be said that:
A proposer can revoke his proposal anytime before its communication is complete against him, that is, before his proposal comes to the knowledge of the other party, but not afterward. If he revokes his proposal in this way he will not be bound by the acceptance of that the proposal by the other party.

On the other hand, an acceptor can revoke his acceptance anytime before the communication of acceptance is complete as against him, i.e. anytime before the communication of acceptance comes to the knowledge of the proposer, but not afterward. If the acceptor revokes his acceptance in this way the acceptor will not be bound by the promise which would have resulted if no revocation was done.

Therefore, the communication also have importance in the process of revocation which would result in non-binding of both the parties. If there is no valid communication of revocation between parties, it will result in a promise which holds legal binding.

Conclusion
It can be said that at the initial stage a contract starts with a proposal and its acceptance, and going through the definition of both the proposal and the acceptance, the word ‘signifies’ is common in both. It is taken as an essential element in the process of proposal and acceptance, therefore, it is important to communicate both proposal or acceptance so as to complete it and create a valid promise. It can be said that the communication of proposal, the acceptance of the proposal, and the revocation of proposal and acceptance is done through an act or omission.

Communication is required both when the proposal is made and also when that proposal is accepted, thus it forms the essence of both the process of proposal and acceptance. Furthermore, the valid communication of both the proposal and the acceptance has some legal consequence, that is, it creates a legal binding between the parties and both can enforce it legally against each other.

Communication of both the proposal and acceptance are also being required to be made in a particular way, to create a valid promise, which is also been supported in the study with case laws. Also, the communication of the revocation is required for the parties not to create a legal binding. If one of the parties to the agreement willing to revert back their proposal and acceptance, then it has to be done before the proper communication of the same is not complete against the parties.

Otherwise, the revocation of the same cannot be done. Therefore, the communication in the law of contract has a lot of importance and also contains legal consequences, as stated above in the study.

End-Notes:
  1. ICA 1872.
  2. ICA 1872.
  3. ICA 1872.
  4. ICA 1872.
  5. ICA 1872.
  6. ICA 1872.
  7. AIR 1925 All 539.
  8. (1988) 3 SCC 263: AIR 1988 SC 1487.
  9. ICA 1872.
  10. 1913 40 ALJ 489.
  11. (1868) 38 NY 248.
  12. ICA 1872.
  13. 1984 AIR 1014, 1984 SCR (3) 350.
  14. [1892] EWCA Civ 1, [1893] 1 QB 256 (CA).
  15. ICA 1872.
  16. ICA 1872.
  17. ICA 1872.??

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