Question:

‘A‘ applied for allotment of 100 shares in ‘B‘ company. A letter of allotment addressed to ‘A‘ was posted in due time, but it never reached ‘A‘. The posting of letter of allotment:

Updated On: Jul 13, 2026
  • completes the contract
  • does not completes the contract
  • makes the contract voidable
  • makes the contract void
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The Correct Option is A

Approach Solution - 1

The Correct Option is (A): completes the contract
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Approach Solution -2

This question applies the postal rule of acceptance, as recognised in Household Fire and Carriage Accident Insurance Co. v. Grant, to a share allotment scenario.

  1. Completes the contract: a share application is an offer by the applicant, and allotment by the company is the acceptance of that offer. Once the company posts the letter of allotment, communication of acceptance is complete as against the offeror, the applicant, under Section 4 of the Indian Contract Act, so the contract comes into existence at the moment of posting, whether or not the letter is ever actually delivered.
  2. Does not completes the contract: this would be true only if Indian law required actual receipt for a contract to form, but the postal rule specifically dispenses with that requirement for the party to whom acceptance is addressed.
  3. Makes the contract voidable: non-delivery of the allotment letter does not create a defect of consent or capacity, the two grounds that make a contract voidable under Sections 19 and 19A, so this option misapplies a different concept.
  4. Makes the contract void: a contract is void only if it lacks an essential element such as free consent, lawful object, or consideration from the outset. Non-receipt of a letter after posting does not strip the transaction of any of these.

Because the postal rule fixes completion at the point of posting rather than delivery, the applicant becomes a shareholder as soon as the company posts the allotment letter, even if it is lost in transit.

So, the correct answer is completes the contract.

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