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Revocation of Offer under Indian Contract Act

The word Contract´┐Ż is defined under section 2(h) of the Indian Contract Act, 1872 as an agreement which is legally binding and is legal enforceable. So in order to establish a legally binding contract there are two elements which are to be satisfied; there should be an agreement between two or more people and the agreement should be legally enforceable. A proposal´┐Ż made by a person in order to indicate his/her readiness to carry out or refrain to carry out anything, when accepted becomes a promise´┐Ż, the promise/set of promises further in exchange of consideration forms an agreement´┐Ż. The term promise and agreement are defined under section 2(b) and 2(e) of the Indian Contract Act, 1872 respectively.

Not all agreements are contracts but all contracts are agreements. For an agreement to be a contract there should be:
  1. Promise/set of promises in exchange of some consideration. An agreement without consideration is void.
  2. The parties should be Competent to enter into a contract as defined under Section 11&12 of the ICA.
  3. Free consent of parties to the contract and ought not to be vitiated by coercion, Undue influence, fraud, misrepresentation and mistake.
  4. Lawful object and consideration.

What Is Revocation Of Offer?
Revocation in literal sense means to nullify something but in legal phrasing, Revocation of Offer alludes to a withdrawal of an offer made by the offeror/proposer whenever before the acceptor/offeree acknowledges it. In the event that the offeror wishes to repudiate/pull back the equivalent after the offeree's acknowledgment, it doesn't fall in the domain of 'Revocation'. It is explained under section 5 of ICA.

Relevant Legal Provision(S)
A valid offer and a valid affirmation are the two prerequisites of a sound contract and communication acts as a channel between the offer and its affirmation. There are two types of communication under the ICA; the communication of offer and the communication of acceptance. As explained under the Section 4 of ICA a communication of offer concludes when it comes to the understanding of the person to whom it directs.

The communication of acceptance on the other hand as explained under Section 5 of the ICA concludes against the person by whom the offer is made at the point when it is placed in course of transmission to the offeror. ICA provides flexibility to the parties to the contract i.e. the offeror and the offeree to rescind or revoke the offer at a particular point of time.
Communication of Revocation

The communication of revocation is finished ´┐Ż as against the individual who makes it, when it is placed into a course of transmission to the individual to whom it is made, in order to be out of the intensity of the individual who makes it, as against the individual to whom it is made, when it comes to his understanding.

Modes of Revocation of an offer
Section 6 of Indian Contract Act describes the modes of revocation of an offer
  1. Revocation of offer before acknowledgement by communication of the notice of revocation by the offeror
  2. Revocation by lapse of time.
    For example, the firm stipulated January 18 to accept the offer, and person A could not send an acceptance letter till January 18. The offer is revoked.
  3. Revocation by non-performance to fulfil a promise prior to acceptance. For example, A agrees to sell her watch to B if she pays a quarter of the actual price till January 11. If B is not able to pay the said amount by January 11 then the offer can be revoked.
  4. Revocation by death or insanity of the offeror
  5. Revocation by cross offer.
    For example, A agrees to sell his bike to B for Rs.400,000. B replied I will buy it for Rs.375,000. The offer from A is revoked by this counter offer from B.
  6. Revocation by failure to accept in the manner prescribed.

Rejection of offer by the offeree
Offeree might dismiss the offer and once the offer has been dismissed, it can't be acknowledged subsequently by the offeree.
Dismissal might be communicated or inferred:
  • Express: by words spoken or written.
  • Implied: by counter offer or contingent offer

Rules governing the procedure of revocation of offer by the offeree
  1. Offeree can deny the proposal for revocation whenever before the communication of its acknowledgment is finished as against the offeror but not later.
  2. Revocation is complete when it is conveyed to the offeree and it comes to his understanding.
Rules governing the procedure of revocation of offer by the offeror
  1. Offeror can rescind the proposal whenever the offer is acknowledged by the offeree.
  2. In the event that offeror has consented to save the offer open for a specific period, he can deny it before termination period if there is no consideration for keeping the offer open
  • The offer, once rescinded, cannot be subsequently accepted.
  • The offer, once accepted, cannot be subsequently revoked.

Case Laws
  1. Payne v Cave[i]
    The respondent made the most elevated offer for the plaintiff party's merchandise at an auction, however he pulled back his offer before the fall of the auctioneer´┐Żs final call. It was held that the respondent was not bound to purchase the products. His offer added up to an offer which he was qualified to pull back whenever before the auctioneer connoted acknowledgement by thumping down the mallet. Note: The customary law rule set down for this situation has now been classified in s 57(2) Sale of Goods Act 1979.
  2. Martin Walford v. Charles Miles[ii]
    Dodds offered to Dickinson to sell a house for £800. Dodd's offer letter expressed that the offer was to be opened until 12 June, 9 a.m.'. On 11 June morning, Dodds offered the house to the third party and Dickinson was recounted the deal by someone else on that day evening. Before 12 June 9 a.m. on Friday Dickinson needed to acknowledge Dodds' offer so Dickinson gave him a conventional letter.

It was held that no acknowledgement was made. The offeree knew that Dodds was not, at this point, disapproved of offering property to him already and subsequently the offer was truly pulled back.

Critical Analysis And Conclusion
Mainly, an agreement is supposed to be closed when and where the offeree proclaims the consent to be limited by the proposition of the offeror. Deciding the proper time of determination of an agreement is by and by not as simple as it might appear at a first look. This issue is exacerbated by the opportunity of people to pull back or renounce their recommendations of finishing up an agreement.

The guideline of withdrawal and revocation of offer and acceptance assumes an imperative job not just in deciding the hour of determination of an agreement yet in addition in keeping up smooth exchanges among people. Thus, it helps the gatherings in limiting exchange costs. Up until now, no accord is reached among lawful instruments concerning this basic issue. Various laws moved toward the issue from their points of view in this manner making the procedure of harmonization scarcely conceivable.

  1. [100 E.R. 502]
  2. [1992] ADR.L.R. 01/23

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