Revocation of Proposals and Acceptance: How Revocation is made? (Section 5 & 6 of Indian Contract Act, 1857): Lawcirca

Revocation of Proposals and Acceptance: How Revocation is made? (Section 5 & 6 of Indian Contract Act, 1857)

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The Indian Contract Act defines Contracts as an agreement enforceable by law.   If we deconstruct the term agreement, it necessarily involves free consent of both parties for the performance of a promise, competent to contract with each other, in return for a lawful consideration and with a lawful object.  In order to enter into an agreement or contract, one party must make an offer or proposal and the other must convey their acceptance for the same either express or implied. However, sometimes either of the two parties might want to revoke the contract. The revocation may be made by the party making the offer or the party accepting such an offer. 

REVOCATION OF AN OFFER UNDER INDIAN CONTRACT ACT   

An offer is made when one person signifies to the other his willingness to perform or abstain from performing anything, with a view to obtain the acceptance of the other for the same[i]. The offer or proposal may be expressed or implied in nature however, it must be communicated to the concerned party and there must exist an intention to contract. Similarly the revocation of an offer or proposal must also be communicated to the other party for it to be effective. 

As per Section 6 of the Indian Contract Act[ii], an offer is revoked either 

1.    by  a notice of revocation

2.    a lapse of time regarding the communication of the acceptance

3.   Failure on the part of the acceptor to fulfill a condition precedent to contract 

4.     Death or insanity of the party making the offer. 

(1) Revocation of offer by the way of notice 

Under the Contract of Law it has been specified that the revocation of an offer can only be made before the communication of its acceptance is complete i.e. when the acceptance has been put into the course of transmission by the acceptor as per the rules of the communication of acceptance. 

In simple words, any person making an offer must communicate its revocation to the acceptor, before the latter can accept the offer and make an action towards the same.  This rule mostly applies and deals with communication via mail or post which is one of the most traditional forms of communication or more formal forms of communication. 

Cases in which offer can be revoked through  notice

When the offeror revokes the offer before the expiry of a fixed period 

Where the offeror provides an option of acceptance within a fixed period, he has the discretion to revoke that offer before such period expires. One might say that, as long as the revocation is made before acceptance it stands good. This can be reinforced by the judgement of Madras High Court in the case of Alfred Scholank v Muthunyna Chetti [iii] where it was pronounced that in the absence of any consideration for the promise to keep the offer open for a time, the promise is merely a bare promise. 

When there is an agreement to keep the offer open for a specific period of time 

The offeror is prohibited from withdrawing the offer where there exists an agreement on his part to keep the offer open for a certain period of time. Any revocation before the expiry of such period of time will be considered to have no effect on the contract. 

Revocation of general offers by notice 

A general offer is open to all and is often communicated on a large scale, therefore the revocation of a general offer must also be made using the same media and will be considered to be effective even if a particular individual, after the withdrawal happened to perform it in ignorance of such a withdrawal. 

Suspending proposal by fresh proposal 

In cases where the acceptance is yet to be made, a renewed proposal in parts of it (not in the whole) which supersedes the proposal meant to be communicated, then the latter is no longer held to be available for acceptance. The acceptance can only be in regards to the renewed proposal. 

(2) Revocation of offer due to lapse of time  

An offer may lapse on the expiry of the time period fixed for the acceptance. In case of an agreement where the acceptance has been subjected to a specified period of time, then the inability of the acceptor to provide the acceptance before the expiry of that time will lead to revocation of the offer. 

In cases where the time has not been fixed for the acceptance to be solicited, the offer is considered to be revoked after a reasonable amount of time. The amount of reasonable time is not fixed and depends upon the facts and the circumstances of each case. 

Another important point that was suggested by the Calcutta High Court in the case of Bruner v. Moore [vi] was that, in cases where the acceptance is posted within the specified time limit however, reaches the offeror or is brought to his knowledge after the specified time , even then such an acceptance will hold good against the offeror.

 (3) Lapse of Offer when one fails to fulfill condition precedent   

In the situation where the offer is made subject to fulfillment of a condition precedent, any acceptance made without completing the requirements of such a condition will lead to automatic revocation of the offer. 

 (4) Revocation by death or insanity of the offeror 

An offer might also lapse in the unfortunate event of the death or insanity of the offeror, provided that the fact of such death or insanity is notified before the acceptance is made. 

Under the English law, it was believed that an offer terminates, at the moment of the death of the offeror irrespective of the fact that it had been brought to the knowledge of the acceptor, however later the rule was changed and the offer was considered to be open till he is informed of the offeror’s death. 

The Contract law involves no specific provision regarding the effect of death of the acceptor on the contract, although since an offer can only be accepted by the person to whom it has been made to it cannot be accepted by his executor’s.

Communication of revocation should be from offeror himself 

It is quite obvious that the communication of the revocation of the contract must necessarily be made either by the offeror himself or his duly authorized agent.  This rule has its contradiction under Indian and the English law. Under the English Law, the court provides for revocation made by a third person given that the offeree had been reliably informed of such a revocation. This is not applicable under the Indian law, as the Indian Contract Act requires it to be specifically made by the offeror or the proposer under section 6 (1)[iv]. 

REVOCATION OF BID 

A bid is a slightly more complex form of a contractual transaction wherein an offer is made to pay a specified amount of money for an article being sold at an auction. It can be termed as an instant contract as the offer and acceptance take place almost instantaneously or within a span of a few minutes. However, the same rules of revocation apply i.e. the revocation of the offer must be made before the acceptance of it or before the bid is knocked down by the auctioneer. Similarly wherein the bid is only provisionally accepted by the knocking down of the hammer and is subjected to confirmation by a higher authority the offeror or in this case the bidder has the option to withdraw the bid before such a confirmation is provided. The same was held in the case of Union of India v. Bhim Sen Walaiti Ram[v] by the Supreme Court. 

There also arises discussion where the bidder makes a default in the payment of the deposit and whether it must be treated as a revocation of the bid. Usually a default in payment does not mean withdrawal as it would take away the meaning of a confirmation of the bid. 

REVOCATION OF ACCEPTANCE UNDER INDIAN CONTRACT ACT 

 Under English Contract law, acceptance once made is irrevocable; in India on the other hand acceptance is generally revocable. Section 5 of the Indian Contract Act[vii], specifically speaks about the revocation of acceptance. According to the Contract law an acceptance may be revoked any time before the acceptance is complete as against the acceptor i.e. the intimation of the acceptance has reached the offeror or has been brought to his/her knowledge.  As a result, the revocation of the acceptance must reach the offeror before the initial acceptance reaches him. 

What if Communication of acceptance and Communication of revocation of acceptance reach the proposer at the same time ? 

 There is no specification or legal provisions which deal with such a peculiar situation however, in the vase of Countess of Dunmore v Alexander wherein the letter of acceptance and the letter of revocation of acceptance had reached the principal on the same day, the revocation was upheld and the case was put to an end. 

HOW REVOCATION OF AN OFFER IS DIFFERENT FROM REVOCATION OF ACCEPTANCE ? 

 It must be noted that the revocation of either offer or acceptance must take place before the contract comes into existence. However, there is a difference in regards to the point of beginning of contractual obligation of the offeror and the acceptor. An offeror is considered to be bound under a contract, from the moment the acceptance is posted by the acceptor, i.e. the acceptance goes out of the hands of the acceptor[viii]. Therefore the proposer must revoke the contract before the acceptance is posted against him and not afterwards. 

On the other hand an acceptor is considered to be bound in a contract, when the acceptance is brought to the knowledge of the proposer[ix]. As a result, he may revoke the acceptance before the offeror receives information about the acceptance and not after it. 

Endnotes

[i] Sec 2 (d) of the Indian Contract Act

[ii] Section 6 of the Indian Contract Act

[iii] Alfred Scholank v Muthunyna Chetti (1892) 2 MLJ 57 

[iv] Section 6 (1) of the Indian Contract Act

[v] Union of India v. Bhim Sen Walaiti Ram (1969) 3 SCC 146

[vi] Bruner v. Moore (1904)

[vii] Section 5 of the Indian Contract Act

[viii] Section 4 of the Indian Contract Act[ix] Section 4 of the Indian Contract Act


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Shaina Khurana

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Shaina is a very hard-working and diligent writer. She does her work fervently and makes sure that whatever task she takes is completed in given time and is qualitative. She is an avid reader and also has been a writer for school magazine. Besides these, her hobbies include poetry and sketching.

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