Revocation of Proposals

REVOCATION OF PROPOSALS

Acceptance should be made before the offer lapses. Section 6 lays down the circumstances when an offer lapses.

REVOCATION HOW MADE:

A proposal is revoked –

  1. By the communication of notice of revocation by the proposer to the other party.
  2. By the lapse of the time prescribed in such proposal for its acceptance or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance.
  3. By the failure of the acceptor to fulfill a condition precedent to acceptance,
  4. By the death of or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

NOTICE OF REVOCATION:

The provisions relating to communication of revocation is to be found in Sections 4 and 5. Section 4 has been dealt earlier. In Section 5 Revocation of proposals and acceptance. A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete as against acceptor, but not afterwards.

For example: A proposes, by 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 any moment when B posts his letter of acceptance but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

Section 5 provides that “a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, bit not afterwards”. As against the proposer, the communication of acceptance is complete” when it is put in a course of transmission to him, so as to be out of the power of the acceptor”. It means, therefore, that the communication of revocation to be effective must reach the offence before he mails his acceptance putting it out his power. A revocation becomes effective only when it reaches the offeree as held in Henthorn v Fraser (1862) 2Ch 27.

Lord HERSCHELL observed : “ if the acceptance by the plaintiff of the defendant’s offer is to be treated as complete at the time the letter containing it was posted, I can entertain no doubt society’s attempted revocation of the offer was wholly ineffectual. I think that a person who has made an offer was wholly ineffectual. I think that a person who has made an offer must be considered as continuously making it until he has brought to the knowledge of the person to whom it was made that it is withdrawn.”

Thus the communication of revocation of offer should reach the offeree before acceptance is out of his power.

REVOCATION OF TIME- BOUND PROPOSALS:

Where an offer gives the offeree an option to accept within a specified period, it may be withdrawn even before the expiry of that period unless there is some consideration for keeping it open. In Alfred Schonlank vs. Muthunayna Chetti (1892) 2 Mad LJ 57. The defendant left an offer to sell quantity of indigo at the plaintiff’s office allowing him eight days’ time to give his answer. On the 4th day, however the defendant revoked his proposal. The plaintiff accepted it on the 5thday. Holding the acceptance to be useless, the court said: “bothon principle and on authority it is clear that in the absence of consideration for the promise to keep the offer open for a time, the promise is mere nudum pactum.

Where the agreement to keep the offer open offer open for a certain period of time is for consideration, the offeror cannot cancel it before expiry of that period.

COMMUNICATION OF REVOCATION TO BE FROM PROPOSER:

The communication of revocation should be from the offeror himself or from his duly authorized agent. But it has been held in England in Dickinson vs. Dodds (1876 ) 2 Ch D 463, that it is enough if the offeree knows reliably that the offer has been withdrawn. This rule will not be applicable in India for the simple reason that Section 6(1) requires in so many words that the notice of revocation should be “by the proposer to the other party”.

WITHDRAWAL OF GENERAL PROPOSAL:

Where an offer of a general nature is published through newspapers, it can be withdrawn by the same media and the revocation will be effective even if a particular person, subsequently to the withdrawal, happened to perform its terms in ignorance of the withdrawal.

REVOCATION OF BID:

“A bid may be retracted before assent is signified. In Joravarmull Champalal vs. JeygopaldasGhanshamdas (1922) 43 Mad LJ 132, the court held that “ the plaintiff’s bid was no more than an offer and he was entitled to withdraw the same before it was accepted by the property being knocked down to him by the auctioneer.

In Somasundaram Pillai vs. Provincial Government of Madras, AIR 1947 Mad 366, the same High Court extended this principle to cease where a bid has been provisionally accepted and is subject to confirmation by higher officers. The bidder can withdrew before any such confirmation takes place.

LAPSE OF TIME:

An offer lapses on expiry of the time, if any, fixed for acceptance. Where an offer says that it shall remain open for acceptance up to a certain date, it has to be accepted within that date. Where no time for acceptance is prescribed, the offer has to be accepted within reasonable time. What is “reasonable time” will depend upon the facts and circumstances of each case. Where the subject matter of the contract is an article, like gold, the prices of which rapidly fluctuate in the market, very short period will be regarded as reasonable, but not so in reference to land.

In Ramsgate Victoria Hotel Co vs. Montefiore. The offer was made by M on June 8 to take shares of R and the Acceptance was received on 23Nov i.e. beyond reasonable time, it was held to be no valid acceptance.

In Head vs. Diggon the offer to sale of wool was made on Thursday and three days’ time limit for acceptance was suggested, the offeree sent his acceptance on Monday. It was held that the offer had lapsed.

NON- FULFILMENT OF CONDITION PRECEDENT:

Where an offer is subject to condition precedent, it lapses if it is accepted without fulfilling the condition. For example, A offered to sell goods to B on a condition that the agreed price between then must be paid before certain date, B fails to pay by the specified date. It was held that the offer stands revoked.

DEATH OR INSANITY OF OFFEROR:

An offer lapses on the death or insanity of the offeror, provided that the facts comes to the knowledge of the offeree before he makes his acceptance. There is no provision in the Act about the effect of the death of an offeree. A solicitor obtained the acceptance of his client but communicated it to the offeror after the client’s death though in ignorance of it. The communication was held not to have resulted in contract.

REVOCATION OF ACCEPTANCE

According to English Law an acceptance once made is irrevocable. In the words of Anson “acceptance is to offer what is lighted match is to a train of gun powder. Both do something which cannot be undone”. This rule is obviously confined in its operation only to postal acceptance. It is suggested in Anson that in other cases “an acceptance can be revoked at any time before acceptance is complete, provided, of course that the revocation itself is communicated before acceptance arrives”.

In India, on the other hand, acceptance is generally revocable. An acceptor may cancel his acceptance by a speedier mode of communication which reach earlier than the acceptance itself. Section 5 is the relevant provision in this regard.

 

REVOCATION OF PROPOSAL AND ACCEPTANCE

A proposal may be revoked at any time before the communication of the acceptance is complete as against the proposer, but not afterwards.

When the contract is created through post, according to sec 4 by the posting of letter of acceptance-

  • The proposer becomes bound when the letter of acceptance is posted to him
  • The acceptor becomes bound when the letter of acceptance reaches the proposer.

Since the acceptor does not become bound immediately on posting his letter of acceptance, he is free to revoke the acceptance by adopting the speedier mode of communication, whereby his communication of revocation of acceptance may reach earlier than his letter of acceptance. Sec 5 expressly permits the revocation of acceptance through following provision:

“An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards”. For example A proposes by a letter sent by a post, to sell his house to B. B accepts the proposal by a letter sent by post. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

The communication of revocation is complete-

Sec 4 lays down that, the communication of revocation 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,
  2. As against the person to whom it is made, when it comes to his knowledge.

For example Revocation of proposal: A revokes his proposal by telegram.

The revocation is complete as against A when the telegram is dispatched. It is complete as against B when B receives it.

Revocation of acceptance: B revokes his acceptance by telegram. B’s revocation is complete as against the B when the telegram is dispatched, and as against A when it reaches to him.

 REVOCATION OF ACCEPTANCE (ENGLAND)

According to English law, once the letter of acceptance is posted it binds both the parties and there appears to be no scope of revocation of acceptance by sending a telegram or through a phone call. The reason for this position is that if the acceptor is allowed to withdraw his acceptance he will have the best of both the worlds, having a choice to make the offeror liable by relying on his acceptance, and also having an option to withdraw his acceptance by telegram or telephone call. On this point Anson has observed as under

Since the acceptance is complete as soon as the letter of acceptance is posted, a telephone call or telegram revoking the acceptance would be inoperative, though it reached the offeror before the letter. Thus, it is argued as according to both the logical and fair conclusion, otherwise the offeree could blow both hot and cold, having the benefit of certainty in his postal acceptance, and the opportunity to revoke it if it turned out suddenly to be to his disadvantage.

“In India, the position is different. Indian law permits revocation of acceptance after the letter of acceptance has been posted.

 

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