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Communication in Law of Contracts

Communication! The most important essence of human life. Man is a social animal, and imagining life without communicating with people, seems impossible. If we are asked to imagine a life, where no one communicates with anyone. Everyone would unanimously say that such imagination may feel good in a poet's world, but these things don't work in real life.

I got reminded of a very beautiful Sanskrit shloka which read,

vachane kā daridratā,

which when translated to English literally says that one should not act as a poor when speaking or rather communicating...

This is the importance that communication holds in our lives. An equal amount of importance, communication holds, in the law of contracts.

The interpretation clause of the Indian Contract Act starts with the word saying that when one signifies his willingness to do or abstain..

If someone asks me what is the one thing without which formation of a contract is not possible, I personally say it is communication.

One may have the willingness, to do a task with another party; he may also be competent to do it; the task is not one barred by law, but how will this willingness be fulfilled, until and unless you signify it to the other party.

It is communication, which is the foundation of a contract. To prove this, I've another example. We all know that consensus ad idem is required for an agreement to take shape, how does this meeting of minds take place, it takes place only when there is no gap in communication. If there is no communication or miscommunication that happens then consensus ad idem cannot be established at all.

In the coming pages of the report communication, its importance and legal consequences have been dealt with by far and wide.

It is hoped that this report will be light by you, the reader!

Effective communication with regards to the offer and its acceptance and clear understanding of it is really essential to constitute a valid contract and avoid any kind of misunderstanding and misconception. It's due to lack of communication that many contracts fail, and people have to face legal consequences. In order to remain unaffected by this, one needs to communicate the terms of the contract well.

The section 3 of the Indian contract act says:
The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.

An offer can be communicated by any means to the offeree. The fact of such communication should signify to the offeree, the offerors willingness to do or abstain from doing a particular task. It can be spoken, face to face, over call, by a letter or even by conduct. But there should be a communication that is happening. No Communication = No contract.

Section 4 of Indian contract act says:
The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.

It is very obvious that no acceptance of the offer can happen when the acceptor does not even know about it; this was held in the case of Lalman Shukla vs Gauri Datt.[1]

In this case the defendant's nephew went missing. His servant went to search for the kid. After the servant had left, the defendant publicly announced, that he will reward Rs.501, to anyone who finds his nephew. The servant got aware of the offer after he had found the kid out. After knowing about the offer, he claimed his reward, but the defendant denied to give the reward, on grounds that the servant did not have the knowledge of the offer when it is made. Rather he came to know about it, after he had found the child. The servant�s intention was to find the child and not claim monetary reward.

The Allahabad High court held that there was no contract that took place between the parties, because the plaintiff did not have the knowledge of the offer and no acceptance can occur before the knowledge of the offer.

This Lalman Shukla and Gauri Dutt case signifies that communication the complete communication is a necessity to constitute a valid contract if not as a consequence the damages or rewards toward the plaintiff is declined which is made in respect to the offer.

Importance of communication:
In the case of Felthouse vs Bindley[2],
The plaintiff, Felthouse had a talk with his nephew of buying horse, which his nephew had. He replied to his nephew that if he did not hear from the nephew, he would own the horse. The nephew was busy auctioning his other items. He had told the auctioneer Mr Bindley not to auction the horse. Mr Bindley auctioned the horse by mistake. Felthouse sued Bindley for a tort of conversion. The court held that a contract between the plaintiff and his nephew did not arise as, there was no acceptance of the offer from the nephews� side. The court said, acceptance of the offer needs to be communicated clearly in order to constitutes a contract.

This English case is a landmark case, which clears out the importance of communication to form a contract. Without proper communication, no contract comes into existence.

Communication of acceptance by the way of conduct.

As per section 8 of the Indian Contract Act:
Performance of the conditions of a proposal or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal is an acceptance of the proposal

Words are not the only medium of expression to convey as clearly as words, a promise or an ascent to a proposed promise.[3]

Communication of acceptance of an offer is also deemed to be complete by the conduct of the offeree in direction of the offer such acceptance is called an implied acceptance.

This was held in a landmark case of Carlill vs carbolic smoke ball[4]

In this case, the defendant had advertised of a medicine called carbolic smoke ball. This advertisement claimed, that the said medicine is a preventive medicine for the disease called influenza. It also claimed that any one upon taking the medicine, caught influenza, will be awarded a reward of a 100 �. The said amount was also deposited with Alliance Bank, for the payment of the reward. The plaintiff took the medicine as directed, but still caught influenza. She claimed her award from the company, to which the company denied stating that, there was no communication of the acceptance of the offer received by the company.

The court held that this was a general offer to the public at large and this offer became a contract when the plaintiff performed the required conditions and the court granted the plaintiff the due rewards.

Offer and acceptance by a party can be spelt out from conduct of the parties which covers not only their acts but also omissions[5]

This case states that even if the plaintiff by her conduct intends to create that contract. Her conduct in the direction of the offer will be equivalent to the communication of the acceptance.

Communication must be done by the parties or the agent of the parties.

For an offer to stand valid it must be communicated by the party or the agency of the party communication received the given to a third party is not recognised as communication and does not amount to formation of a contract as per the Indian contract act this was held in the case of Powell vs Lee

in this case the plaintiff had applied for a job and a manager that finalize disappointment one person who had no authority communicated to the plaintiff about his appointment but soon the managers decided to appoint someone else in place of the plaintiff. the plaintiff brought a suit to action for a breach of the contract. It was held by the court that, there was no authorised, official communication received due to which the contract was never constituted.This tells us that communication is an important essence, not only communication but how the communication happened by whom did it happen also plays a crucial role in the formation of a contract.

Offer of rendering services must be communicated

The offer of rendering services must be communicated to the receiver, if a service is without the knowledge of the receiver, there remains no chance to ask for the monetary remuneration of the said services.

For example, I, clean your terrace without asking about it to you or rather without telling it you, and then show up at your house, saying, I�ve cleaned your terrace, pay me Rs.500. Your answer would be why did you clean it? Did I ask you to do so? So how can I help it?

This tells that any service before being rendered, should me communicated to the receiver, only then a valid contract is constituted.

This was held in the case of Tailor v. Laird [6].

Taylor was rendering his services in Lairds as the captain of the vessel. When the vessel was returning from a foreign port, back home, he himself left his job as a captain and started to work as any other crew member, but also helped the ship to come back home. This change of position was not informed to the defendant. And when they returned back home, tailor asked for the remuneration, to get the ship back home.

The court held that he cannot recover his remuneration, because Laird was unaware and had no option to accept or refuse the offer. Because, Tailor�s offer was not communicated, it did not result into a contract and tailor got no contractual rights.

This case tell that even when we are rendering our services, it does not bind the receiver of the service to remunerate us, if the service so rendered was not accepted by the receiver.

Pollock said:
One cleans another�s shoes; what can the other do but put them on? Is that evidence of a contract to pay for the cleaning?.
In some cases, the services rendered are necessity and the need of the hour, one may restitute for the said service voluntarily, but there is no contractual obligation.

From case laws and examples explained above in light of the Indian Contract Act, 1872, it is crystal clear that, without communication, no contract is formed and, if so happens, the parties to the contract have to face legal consequences. Before making any contract, consensus ad idem is necessary to be established and that is done through effective communication only!!

  1. Lalman Shukla vs. Gauri Dutt, 1913 40 All LJ 489
  2. Felthouse v Bindley (1862) EWHC CP J 35
  3. Restatement, Contracts, American Law institute, S. 21.
  4. Carlill v Carbolic Smoke Ball Co, [1892] EWCA Civ 1, [1893] 1 QB 256 (CA)
  5. Coffee board v CCT, (1988) 3 SCC 263: AIR 1988 SC 1487
  6. Taylor v Laird (1856) 25 LJ Ex 329

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