Revocation of Proposals and Acceptances

Broken down: the two windows in section 5

The Act's own illustration to section 5 states both:

A proposes, by a 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 the 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.

Note the words "before or at the moment". The Act gives the benefit of the exact instant to the party revoking.

The practical consequence for the acceptor is that a revocation must overtake the acceptance. If B posts an acceptance on Monday and wants to withdraw, a letter of revocation posted on Tuesday will arrive after the acceptance and is useless. A telegram, telephone call or email that reaches A before the letter does will work, because the acceptance is not complete against B until A knows of it.

The four modes of revocation in section 6

(1) Notice of revocation by the proposer

The notice must be communicated, and by section 4 a revocation is complete as against the person to whom it is made when it comes to his knowledge. So an unposted or undelivered revocation revokes nothing. A revocation must also come from the proposer or from someone authorised by him; the Act says "by the proposer".

(2) Lapse of time

If the offer says "this offer is open until 5 p.m. on Friday", it dies at 5 p.m. on Friday without anyone doing anything. If it fixes no time, it dies after a reasonable time, and what is reasonable depends on the subject matter. An offer to sell perishable goods or shares in a volatile market lapses quickly; an offer to sell land does not.

(3) Failure to fulfil a condition precedent

Where the proposal requires something to be done before acceptance, failure to do it revokes the proposal. An offer to sell goods on credit "subject to your furnishing a bank guarantee first" lapses if no guarantee is furnished.

(4) Death or insanity of the proposer

Read this clause carefully, because its condition is easy to miss. The proposal is revoked by death or insanity only if the fact comes to the knowledge of the acceptor before acceptance. So an acceptor who accepts in genuine ignorance of the proposer's death can, on the words of the Act, form a contract binding on the estate. That is a deliberate choice: the Act protects the party who acted honestly on an offer that appeared to be alive.

Two further points that the section does not state and that students should not invent:

• The death or insanity of the ACCEPTOR is not mentioned. Section 6 speaks only of the proposer.
• Rejection is not in the list either, but a rejection communicated to the proposer plainly ends the offer, and a counter offer operates as a rejection. That is section 7 territory and is taken up in [Acceptance Must Be Absolute and Unqualified].

A worked example

On 1 August Kavita offers by letter to sell her shop to Deepak for fifty lakh rupees, saying "this offer is open for one month". Deepak receives it on 3 August.

(a) On 10 August Kavita posts a letter revoking the offer. It reaches Deepak on 12 August. Deepak had posted his acceptance on 11 August. The revocation is complete against Deepak only when it comes to his knowledge, on 12 August. The acceptance was complete against Kavita when posted, on 11 August. The acceptance came first, so the revocation is too late and there is a contract.

(b) Same facts, but the revocation reaches Deepak on 10 August and he posts his acceptance on 11 August. The offer was revoked on 10 August. There was nothing left to accept on 11 August, and there is no contract. The promise to keep the offer open for a month does not prevent this, because a bare promise to keep an offer open is itself without consideration and is not binding. This is one of the sharper points in the topic: an offer said to be open for a month may still be withdrawn within the month unless the offeree has paid for the option.

(c) Deepak posts his acceptance on 11 August and immediately regrets it. He telephones Kavita on 12 August, before the letter arrives on 13 August. The acceptance is not complete against Deepak until it comes to Kavita's knowledge on 13 August. His telephone revocation on 12 August is within the window, and it is effective. There is no contract.

(d) Kavita dies on 9 August. Deepak, not knowing, posts his acceptance on 11 August. Section 6(4) revokes a proposal by the death of the proposer only if the fact comes to the knowledge of the acceptor before acceptance. Deepak did not know. On the language of the Act the proposal was not revoked, and the acceptance is good.

What it does NOT mean

"An offer expressed to be open for a fixed period cannot be withdrawn within it." In India it can, unless the offeree has given consideration for the promise to keep it open, in which case there is a separate contract of option. Note that Uttar Pradesh has added an Explanation to section 5 by a State amendment which makes such a proposal irrevocable within the stated time, but that is a local amendment and is not the general law.

"An acceptance once posted is irrevocable." It is not. Section 5 gives the acceptor a window until the letter reaches the proposer, and it is real: a faster communication that overtakes the letter will revoke it.

"Death always ends an offer." Only the proposer's death or insanity is mentioned, and only where the acceptor knew of it before accepting.

"A revocation is effective when sent." Only as against the sender. As against the person to whom it is made it is complete when it comes to his knowledge, section 4, and that is the moment that decides whether it beat the acceptance.

Quick revision

• Section 5, proposal: revocable until the acceptance is complete against the proposer, that is, until it is posted.
• Section 5, acceptance: revocable until the acceptance is complete against the acceptor, that is, until it is received. A revocation must overtake it.
• The illustration says "before or at the moment", so the exact instant favours the revoking party.
• Section 6, four modes: notice; lapse of time prescribed or reasonable; failure of a condition precedent; death or insanity of the proposer known to the acceptor before acceptance.
• A revocation is complete against the offeree only when it comes to his knowledge.
• A promise to keep an offer open is not binding without consideration.

Test yourself

1. Until when may a proposal be revoked? Until the communication of its acceptance is complete as against the proposer, that is, until the acceptance is put in course of transmission out of the acceptor's power, section 5.

2. List the four modes in which a proposal is revoked. Notice of revocation by the proposer; lapse of the time prescribed or of a reasonable time; failure of the acceptor to fulfil a condition precedent; death or insanity of the proposer coming to the acceptor's knowledge before acceptance. Section 6.

3. A offers to keep an offer open for ten days and withdraws on the fourth. Is the withdrawal good? Yes, generally. A bare promise to keep an offer open is without consideration and does not bind, so A may revoke within the period, provided the revocation reaches B before B posts his acceptance.

4. Can an acceptance be revoked, and how? Yes, at any time before it comes to the proposer's knowledge. In practice the revocation must travel by a faster medium so as to reach the proposer before or with the acceptance.

5. The offeror dies after posting his offer and the offeree accepts in ignorance. Contract? On the words of section 6(4), yes. The proposal is revoked by death only if the fact came to the acceptor's knowledge before acceptance.