Revocation of Offer and Acceptance
Introduction
In contract law, an offer becomes a contract only after acceptance.
Before acceptance takes place, the offer is not legally binding, and the person making the offer can withdraw it.
The Indian Contract Act, 1872 explains the rules regarding revocation (withdrawal) of an offer and also the limited situations in which acceptance itself may be revoked.
Meaning / Definition
Revocation means the withdrawal or cancellation of an offer or acceptance before a contract is completely formed.
Under the Indian Contract Act, 1872:
- An offer may be revoked at any time before it is accepted.
- Once an offer is accepted and a contract is formed, it cannot be revoked.
- Acceptance may also be revoked, but only before its communication becomes complete against the acceptor.
Modes or Types
Revocation of Offer
Section 6 of the Indian Contract Act, 1872 provides different ways in which an offer may be revoked.
Revocation by Notice
An offer may be revoked by communicating a notice of withdrawal to the person receiving the offer.
Important points:
- Revocation must be communicated by the offeror or his authorised agent.
- The revocation must reach the offeree before acceptance.
Position in India
The withdrawal must be communicated by the offeror.
Position in English Law
The offer may be considered revoked if the offeree learns about the withdrawal from any reliable source, even if the offeror did not communicate it directly.
Revocation by Lapse of Time
An offer may end because of the expiry of time.
This may happen in two situations:
- When the time mentioned in the offer for acceptance expires.
- When no time is mentioned, and a reasonable time passes.
Example:
A offers to sell his property to B and states that the offer will remain open until 12 June, 9:00 a.m..
If A sells the property to another person on 11 June and informs B, the offer is revoked earlier.
Even if B attempts to accept the offer before 9:00 a.m. on 12 June, the acceptance will be invalid because the offer has already been revoked.
Revocation by Failure to Fulfil a Condition Precedent
Sometimes an offer is made subject to certain conditions.
These are called conditions precedent (conditions that must be fulfilled before acceptance).
If the acceptor fails to fulfil these conditions, the offer is revoked.
Examples of such conditions may include:
- Payment of advance money
- Deposit of earnest money
- Signing certain required documents
If the condition is not fulfilled, no contract arises.
Revocation by Death or Insanity of the Offeror
An offer may be revoked if the offeror dies or becomes mentally incapable (insane).
Under Indian law, the offer is revoked only if the acceptor learns about the death or insanity before acceptance.
If the acceptor does not know about the death or insanity and accepts the offer, the acceptance may still create a valid contract.
Important Case Law
State of M.P. v. Goberdhan Nath
Facts
The government invited tenders (formal offers) for the sale of goods.
A condition required that 25% of the price must be paid when the tender is accepted.
A submitted the highest tender, which was accepted.
However, A failed to pay the required amount.
Judgment
The court held that no contract was formed.
Reason
Payment of 25% was a condition precedent.
Since this condition was not fulfilled, the contract did not arise.
Distinction / Comparison
Revocation in Indian Law vs English Law
| Basis | Indian Law | English Law |
|---|---|---|
| Revocation of Offer | Must be communicated by the offeror or his agent | Offer may be revoked if the offeree learns of it from another reliable source |
| Death of Offeror | Offer revoked only if offeree knows about death before acceptance | Offer automatically revoked on death |
Practical Example
A offers to sell his car to B.
Steps:
- A sends the offer by post.
- B sends a letter accepting the offer.
- Before the letter reaches A, B sends a faster message cancelling the acceptance.
If the revocation message reaches A before the acceptance letter, the acceptance is successfully revoked.
Summary
- Revocation means withdrawal of an offer or acceptance before a contract is formed.
- An offer can be revoked at any time before acceptance.
- Section 6 lists the modes of revocation of an offer.
- An offer may be revoked by notice, lapse of time, failure of a condition precedent, or death/insanity of the offeror.
- Failure to satisfy a condition precedent (required condition before acceptance) prevents formation of a contract.
- Under Indian law, death of the offeror revokes the offer only if the acceptor knows about it before acceptance.
- Acceptance can also be revoked before its communication becomes complete against the acceptor.
- Revocation of acceptance must reach the offeror before the acceptance itself reaches him.