REVOCATION OF CONTRACT

Revocation

To constitute a valid contract, a valid offer and valid acceptance of offer is pre-requisite. In the commercial world, time of communication of offer and acceptance has significant role to play. Let us look at this communication timeline and also learn about the revocation of an offer.

Communication of Offer and Acceptance

One of the fundamentals of contract law is that an offer cannot be revoked after the offeror has communicated it to the offeree. Thereupon, the offer becomes legally binding on the two parties. So when is the communication complete? Effective communication of the offer and a clear understanding of it is important to avoid misunderstanding between all the parties.

No difficulty shall arise when the parties are communicating face-to-face. This is primarily because communication takes place in no time. The offer and its acceptance is communicated on the spot, creating no confusion. However, in practically, the situation is quite complex. The communication takes place via letters, emails etc. So, for these cases, timeline of the communication is important.

Communication of Offer

Section 4 of Indian Contract Act 1872, states that the communication of the offer is complete only when it comes to the knowledge of the person it has been made to. So when the offeree (in case of a specific offer) or any member of the public (in case of a general offer) becomes aware of the offer, the communication of the offer is said to be complete.

Communication of Acceptance

Mode of Acceptance

In the case of communication of acceptance, there are two factors to consider, the mode of acceptance and then the timing of it. Let us first talk about the mode of acceptance. Acceptance can be done in two ways, namely

Communication of Acceptance by an Act: This would include communication via words, whether oral or written. So this will include communication via telephone calls, letters, e-mails, telegraphs etc.

Communication of Acceptance by Conduct: The offeree can also convey his acceptance of the offer through some action of his, or by his conduct. So say when you board a bus, you are accepting to pay the bus fare via your conduct.

Timing of Acceptance

The communication of acceptance has two parts. Let us take a look

As against the Offeror: For the proposer, the communication of the acceptance is complete when he puts such acceptance in the course of transmission. After this it is out of his hand to revoke such acceptance, so his communication will be completed then. So, for example, A accepts the offer of B via a letter. He posts the letter on 10th July and the letter reaches B on 14th .For B (the proposer) the communication of the acceptance is completed on 10th July itself.

As against the Acceptor: The communication in case of the acceptor is complete when the proposer acquires knowledge of such acceptance. So in the above example, A’s communication will be complete on 14th July, when B learns of the acceptance.

Revocation of Offer

The Indian Contract Act lays out the rules of revocation of an offer 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.

Revocation of Acceptance

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 a date.

The modes of revocation of offer

Section 6 mentions various modes of revocation of offer  A proposal is revoked

a. By the communication of notice of revocation by the proposer to the other party.

b. By the lapse of time described 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

c. By the failure of the acceptor to fulfill a condition precedent to acceptance

d. By the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

 Illustrations

Illustration 1:-

If A tells B he will fix his roof for five thousand rupees, the communication is complete as soon as the words are spoken.

Illustration 2:-

A writes to B offering to fix his roof for five thousand rupees. He posts the letter on 2nd July. The letter reaches B on 4th July. So the communication is said to complete on 4th July.

Illustration 3:-

A proposes by a letter sent by 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.

Illustration 4:-

Mr. S wants to sell his furniture. He writes about the same and makes an offer to his friend Mr. K to buy the same. Mr. K has just bought another house for which this furniture would be useful. So after going through the details he likes the same, writes to Mr. S stating that he has accepted the offer, and posts it to him. Mr. K’s family is not OK with this second-hand furniture. Hence, they convince him to refuse Mr. S’s offer. Mr. K then sends in a fax to Mr. S stating that he has revoked his acceptance. In normal circumstances, a fax works faster than regular post. If Mr. S receives the fax first then we say that this is considered as proper, legal Revocation of Acceptance.

Illustration 5:-

A accepts the offer and posts the letter on 10th July. B gets the letter on 14th July. But for B (the proposer) the acceptance has been communicated on 10th July itself. So revocation of offer can only happen before the 10th of July. The communication of the acceptance is complete against A (acceptor) on 14th July. So till that date, A can revoke his/her acceptance, but not after such a date. So technically between 10th and 14th July, A can decide to revoke the acceptance.

Can an acceptor revoke the acceptance after they have mailed the letter of acceptance?

Yes, the acceptor can revoke the offer until the communication of the acceptance is complete against the said acceptor. Such a communication is complete when the proposer receives the letter of acceptance. So in the time frame between posting the letter and the letter being received by the proposer, the acceptor can revoke the acceptance.

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