Enforcement of the contract | ‘A’ dispatches the letter of acceptance to B which B does not receive. When A sues B for enforcement of the contract, B contends that there is no contract with A.

Question: Enforcement of the contract | ‘A’ dispatches the letter of acceptance to B which B does not receive. When A sues B for enforcement of the contract, B contends that there is no contract with A. Decide. [UPJS 1999]

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Answer

According to Section 4 of The Indian Contract Act, 1872 when a letter of acceptance is posted and is out of the power of the acceptor, the proposer becomes bound. But the acceptor will become bound only when the letter is received by the proposer.

When the parties are at a distance and are contracting through post or by messengers, the question arises when is the contract concluded? Does the contract arise when the acceptance is posted or when it is received? The question first arose in England in Adams v. Lindsel [(1818) 1 B&A 681]

In this case, the facts were that on September 2, 1817, the defendants sent a letter offering to sell a quantity of wool to the plaintiffs. The letter added “receiving your answer in course of post”. The letter reached the plaintiffs on September 5. On that evening the plaintiffs wrote an answer agreeing to accept the wool.

This was received by the defendants on September 9. The defendants waited for the acceptance up to September 8 and not having received it, sold the wool to other parties on that date. They were sued for breach of contract. It was contended on their behalf that till the plaintiffs’ answer was actually received there could be no binding contract and, therefore, they were free to sell the wool on 8th. But the court said:

“If that were so, no contract could ever be completed by post. For if the defendants were not bound by their offer when accepted by the plaintiffs till the answer was received, then the plaintiffs ought not to be bound till after they had received the notification that the defendants had received their answer and assented to it. And so it might go on ad infinitum (endlessly).”

The result of the decision is that a complete contract arises on the date when the letter of acceptance is posted in due course.

This rule was affirmed by the Court of Appeal in Household Fire & Accident Insurance Co v. Grant [(1879) LR 4 Ex D 216 (CA)] The defendant, in this case, had applied for allotment of 100 shares in the plaintiff company. A letter of allotment addressed to the defendant at his residence was posted in due time, but it never reached the defendant. Nevertheless, he was held bound by the acceptance.

Thesiger L.J. stated the rule thus: “An acceptance which only remains in the breast of the acceptor without being actually and by legal implication communicated to the offeror, is no binding acceptance. But if the post is treated as the agent of both parties, then as soon as the letter of acceptance is delivered to the post office, the contract is made as complete and final and absolutely binding as if the acceptor had put his letter into the hands of a messenger sent by the offerer himself as his agent to deliver the offer and to receive the acceptance.

The acceptor, in posting the letter has put it out of his control and done an extraneous act that clinches the matter and shows beyond all doubt that each side is bound. How, then, can a casualty in the post office, whether resulting in delay, which in commercial transactions is often as bad as no delivery, or in non-delivery, unbind the parties or unmake the contract.”

The provision of Section 4 of The Indian Contract Act,1872 also makes no difference in the position of the offeror. The offeror becomes bound when a properly addressed and adequately stamped letter of acceptance is posted. This aspect was emphasized by The Allahabad High Court in Ram Das Chakarbarti v. Cotton Ginning Co Ltd [(1887) ILR 9 All 366]. In this case, a letter of allotment of shares was claimed to have been posted by a company, but the applicant denied having received it.

The High Court said: “It follows from this (Sections 4 and 5) that a notice of allotment, which is the acceptance of the offer to purchase shares, is communicated to the allottee when it is dispatched, and from that moment there is a complete contract for him. Whether or not he receives the letter is absolutely immaterial.”

Hence applying the above principle to the present case at hand, where ‘A’ dispatches the letter of acceptance to ‘B’ which B does not receive. When ‘A’ sues ‘B’ for enforcement of the contract, ‘B’ can’t contend that there is no contract with A. The contract is said to be completed once ‘A’ has dispatched his letter of acceptance and now it is immaterial whether the same has been received by ‘B’ or not.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X