Section 3 of the Indian Contract Act, 1872 provides for Communication, acceptance and revocation of proposals which reads as follows:
3. Communication, acceptance and revocation of proposals.
The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptance, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicated such proposal, acceptance or revocation, or which has the effect of communicating it.
The general rule is that it is the acceptance of offer by the offeree and intimation of that acceptance to the offerer which results in a contract. [Karan Singh Chandan Singh v. Collector Chhatarpur, AIR 1980 Madh Pra 89 : 1980 MP LJ 231].
One of the exceptions to this general rule is that when by agreement, course of conduct of usage of trade, acceptance by post or telegram is authorised, the bargain is struck and the contract is complete when the acceptance is put into a course of transmission by the offeree by posting a letter or despatching a telegram. [Bhagwandas v. Gir-dharilal & Co., AIR 1966 SC 543]
But even in such case, where the intimation of acceptance does not reach the offerer it has to be shown that the letter or telegram of acceptance was correctly addressed to the offerer otherwise it could not, although posted or despatched, be said to have been put in a course of transmission to him. [Kalluram Kesharvani v. State of Madhya Pradesh, AIR 1986 Madh Pra 204]
The communication was put in transit on an address given by the petitioner himself, and in that view of the matter offer of the petitioner shall be deemed to have been accepted. [J.K. Enterprises v. State Of Madhya Pradesh, AIR 1997 MP 68, 1997 (2) MPLJ 31]
A policy of insurance is a contract based on an offer (proposal) and acceptance. [Deokar Exports Private Limited v. New India Assurance Company Limited, (2008) 14 SCC 598]
Basic principles of law of contract, as enunciated in Sections 3, 4 and 7 of the Indian Contract Act, are applicable to the insurance contracts as well in the sense that for the formation of a contract, there has to be a proposal followed by an acceptance, and communication thereof to the proposer. [M/S Weston Tubes (Pvt) Limited v. National Insurance Company Ltd., Delhi High Court 14 May, 2013]
Mere deposit of 20% of bid amount by highest bidder does not amount to acceptance of bid. Communication of acceptance of highest bid is necessary for concluding the contract. [U.P. Avas Evam Vikas Parishad v. Om Prakash Sharma, (2013) 5 SCC 182]