REVOCATION OF OFFER AND ACCEPTANCE
The Indian Contract Act lays out the rules of revocation of an offer and acceptance in Section 5.
It says the offer may be revoked anytime before the communication of the acceptance is complete against the proposer/offeror. Once the acceptance is communicated to the proposer, revocation of the offer is now not possible.
ACCORDING TO SECTION 5 OF THE CONTRACT ACT
“A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.”
Hence, an offer can be revoked at any time before the letter of acceptance has been posted.
For example, A offers by letter to sell his car to B at a certain price. A may revoke his offer at any time before B posts his letter of acceptance, but not afterwards. Once the letter of acceptance has been posted, the offer cannot be revoked. Therefore, when the offeror wishes to revoke his offer, he must do so by a speedier mode of communication so that the revocation notice reaches the offeree before he posts his letter of acceptance.
Revocation must always be expressed and move from the offeror himself or a duly authorized agent. Notice of revocation of a ‘general offer’ must be given through the same channel by which the original offer was made.
CONSTITUENTS OF REVOCATION OF OFFER
The main criteria for a binding revocation are that it’s communicated to the offeree before they accept the offer.
Communication of revocation can be direct or indirect and can be made by a third party. If the communication is indirect, it must meet several requirements. It needs to be:
- Correct
- Communicated by a reliable source
- Able to be understood by a “reasonable person”
Selling an item to someone else is considered a legal revocation so long as the original offeree is notified of the sale before they accept the offer.
Offers made through a publication are something of a special case. These offers can be revoked by a notice in that publication without specifically contacting the offeree.
COMMUNICATION OF REVOCATION
The communication of revocation is complete at different times for the person who 4 makes it and the person to whom it is made.
ACCORDING TO SECTION 4 OF INDIAN CONTRACT ACT
“The communication of revocation is complete.
- 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 make it.
- ii) As against the person to whom it is made, when it comes to his knowledge.”
Example: A proposes by letter to sell his house to B at a certain price. B accepts the proposal by a letter sent by post. If A revokes his offer by telegram, then revocation of offer is complete as against A, when the telegram is sent and for B it is complete when B receives the telegram. If B revokes his acceptance by telegram the revocation of acceptance is complete for B when the telegram is sent and as against A, when it reaches him.
MODES OF REVOCATION OF OFFER
The following are the various modes of revocation of offer:
Revocation by Communication
Revocation can be both, expressed or implied. It can be either orally expressed
or expressed in writing. EXAMPLE: Mr.
A. wishes to sell his gold chain to Mr. K. The former offers to sell the same
to the latter. Mr. K is still contemplating what to do and has not accepted the
offer yet. Meanwhile, Mr. A revokes the offer, as he does not wish to sell his
chain anymore. This is considered as a proper, legal and accepted revocation.
Revocation by Expiry/Lapse of
Time
At times, the offer extended has a time limit. In case it remains unaccepted,
the offer expires or lapses. Any formal acceptance made after this mentioned
date does not create a contract as the offer is not open anymore.
EXAMPLE: Angel Holidays had made an offer to the public that any holiday packages booked with them before the 31st of May will be entitled to a 25% discount. So this implies that the offer is time-bound and shall expire after the aforementioned date. In case a person accepts the same on or after 1st of June would do so as it has lapsed.
Revocation by Failure to
Fulfill a Condition Precedent
There could be an offer made by a proposer but it may be subject to certain
conditions.
EXAMPLE: M/s AYB Associates had a job opening for an accountant. They wanted a person who was certified by the Chartered Accounts’ Association. They interviewed several candidates and like Arin. Arin too was keen on working with them and accepted the job offer. But at the time of joining, he was asked to submit the original certificate of his diploma from the Chartered Accounts’ Association. He could not submit the same. So M/s AYB Associates revoked the job offer and the condition precedent could not be fulfilled.
Revocation by Death/Insanity of
Proposer
Offers are automatically revoked if the proposer has passed away or has
officially been declared insane. If the person has passed away, it is
understood that a contract cannot be created. If he/she is declared insane then
he/she is not competent to contract. Hence, if there is any offer made by a
party who either dies or is declared insane after the offer is made, by default
it is revoked
EXAMPLE: Tyson made an offer to sell his house to Lytus. Unfortunately, Tyson passed away and hence his offer stands revoked.
Revocation by Unqualified
Acceptance
In case there is some offer made and the acceptor accepts it subject to his/her
own conditions, the offer stands revoked, as the acceptance is not clear,
absolute and qualified.
EXAMPLE: Abraham offered to sell his bike to Araz. Abraham wanted a cheque for the full amount. Araz accepted to buy and was OK with the price as well but was adamant that he will pay partly by cheque and partly by cash. Abraham has every right to revoke the offer.
WHEN OFFERS ARE CONSIDERED IRREVOCABLE/ EXCEPTION OF REVOCATION
Offers are considered irrevocable under the following conditions:
- If it is stated that the offer shall be kept open as part of consideration.
- If the offeree relied on the offer being open to their detriment/ option.
- If the contract is unilateral, has been partially completed or is underway and the offeree is still in compliance with the terms.
- Signed offers with firm terms that guarantee a party will buy or sell goods that include an assurance that the offer must be held open, even if no consideration is present.
- If a stated period is provided, the offer is irrevocable for the lesser of that period or three months time.
REVOCATION OF ACCEPTANCE
Section 5 of the Indian Contract Act, 1872
“An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.”
Hence, the acceptor can revoke his acceptance at any time before his letter accepting the offer reaches the offeror. Once the letter acceptance reaches the offeror, the acceptance cannot be revoked. Thus, for effective revocation of acceptance it is necessary that the acceptor should adopt some speedier mode of communication so that his revocation reaches the offeror before the letter of acceptance.
For example, A offers by a letter dated February 2, sent by post, to sell his house to B at a certain price. B accepts the offer on February 6 by a letter sent by post. The letter reaches A on February 8 at 2 p.m. Here B may revoke his acceptance at any time before 2 p.m. on February 8, but not afterwards.
Sometimes, an interesting situation may arise. The letter of acceptance and the telegram containing revocation of acceptance may be delivered to the offeror at the same time. In such a situation the formation of a contract is a matter of chance. Which one is opened first by the offeror will decide the issue. Generally it is presumed that a man of ordinary prudence will first read the telegram. Hence, the revocation will be quite effective. When the parties at distant places communicate over telephone or telex, the question of revocation does not arise because there is instantaneous communication of the offer and its acceptance. The offer is made and accepted at the same time. In brief you should remember that an offer can be revoked at any time before the letter of acceptance’ is posted and an acceptance can be revoked before it reaches the offeror.
Section 5 also states that acceptance can be revoked until the communication of the acceptance is completed against the acceptor. No revocation of acceptance can happen after such date.
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