REVOCATION OF OFFER & ACCEPTANCE

Written By :- Saba Siddiqui (Amity Law School)

If there are specific requirements governing the making of an off­er and the acceptance of that off­er, we also have specific law governing their revocation.

In term of Section 4, communication of revocation (of the proposal or its acceptance) is complete.

  1. As against the person who makes it when it is put into a course of transmission to the person to whom it is made so as to be out of the power of the person who makes it, and
  2. As against the person to whom it is made, when it comes to his knowledge.

The above law can be illustrated as follows: If you revoke your proposal made to me by a telegram, the revocation will be complete, as far as you are concerned when you have dispatched the telegram. But as far as I am concerned, it will be complete only when I receive the telegram. As regards revocation of acceptance, if you go by the above example, I can revoke my acceptance (of your off­er) by a telegram. This revocation of acceptance by me will be complete when I dispatch the telegram and against you, it will be complete when it reaches you. But the important question for consideration is when a proposal can be revoked? And when can an acceptance be revoked? These questions are more important than the question when the revocation (of proposal and acceptance) is complete.

Ordinarily, the off­eror can revoke his o­ffer before it is accepted. If he does so, the o­fferee cannot create a contract by accepting the revoked o­ffer.

For example; the bidder at an auction sale may withdraw (revoke) his bid (off­er) before it is accepted by the auctioneer by fall of hammer. An o­ffer may be revoked by the off­eror before its acceptance, even though he had originally agreed to hold it open for a definite period of time. So long as it is a mere off­er, it can be withdrawn whenever the o­fferor desires.

Example: X o­ffered to sell 50 bales of cotton at a certain price and promised to keep it open for acceptance by Y till 6 pm of that day. Before that time X sold them to Z. Y accepted before 6 p.m., but after the revocation by X. In this case it was held that the off­er was already revoked. In terms of Section 5 of the Act a proposal can be revoked at any time before the communication of its acceptance is complete as against the proposer. An acceptance may be revoked at any time before the communication of acceptance is complete as against the acceptor.

Example: A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. Whereas B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

An acceptance to an o­ffer must be made before that off­er lapses or is revoked.

The law relating to the revocation of o­ffer is the same in India as in England, but the law relating to the revocation of acceptance is different. In English law, the moment a person expresses his acceptance of an o­ffer, that moment the contract is concluded, and such an acceptance becomes irrevocable, whether it is made orally or through the post. In Indian law, the position is di­fferent as regards contract through post.

  • Contract through post– As acceptance, in English law, cannot be revoked, so that once the letter of acceptance is properly posted the contract is concluded. In Indian law, the acceptor or can revoke his acceptance any time before the letter of acceptance reaches the o­fferor, if the revocation telegram arrives before or at the same time with the letter of acceptance, the revocation is absolute.
  • Contract over Telephone– A contract can be made over telephone. The rules regarding off­er and acceptance as well as their communication by telephone or telex are the same as for the contract made by the mutual meeting of the parties. The contract is formed as soon as the off­er is accepted but the off­eree must make it sure that his acceptance is received by the off­eror, otherwise there will be no contract, as communication of acceptance is not complete. If telephone unexpectedly goes dead during conversation, the acceptor must con‑rm again that the words of acceptance were duly heard by the o­fferor.

Revocation of proposal otherwise than by communication :-

When a proposal is made, the proposer may not wait indefinitely for its acceptance. The off­er can be revoked otherwise than by communication or sometimes by lapse.

Modes of Revocation of Off­er

  • By notice of revocation
  • By lapse of time :- The time for acceptance can lapse if the acceptance is not given within the specified time and where no time is specified, then within a reasonable time. This is for the reason that proposer should not be made to wait indefinitely. It was held in Ramsgate Victoria Hotel Co. Vs Montefi­ore , that a person who applied for shares in June was not bound by an allotment made in November. This decision was also followed in India Cooperative Navigation and Trading Co. Ltd. Vs Padamsey PremJi. However these decisions now will have no relevance in the context of allotment of shares since the Companies Act, 2013 has several provisions specifically covering these issues.
  • By non-fulfilment of condition precedent: Where the acceptor fails to fulfil a condition precedent to acceptance the proposal gets revoked. This principle is laid down in Section 6 of the Act. The off­eror for instance, may impose certain conditions such as executing a certain document or depositing certain amount as earnest money. Failure to satisfy any condition will result in lapse of the proposal. As stated earlier ‘condition precedent’ to acceptance prevents an obligation from coming into existence until the condition is satisfied. Suppose where ‘A’ proposes to sell his house to be ‘B’ for ` 5 lakhs provided ‘B’ leases his land to ‘A’. If ‘B’ refuses to lease the land, the off­er of ‘A’ is revoked automatically.
  • By death or insanity: Death or insanity of the proposer would result in automatic revocation of the proposal but only if the fact of death or insanity comes to the knowledge of the acceptor.
  • By counter o­ffer
  • By the non-acceptance of the off­er according to the prescribed or usual mode
  • By subsequent illegality