AMITY UNIVERSITY,LUCKNOW CAMPUS
(UTTAAMITY
UNIVERSITY,LUCKNOW CAMPUS
(UTTAR PRADESH)
R PRADESH)
AMITY UNIVERSITY,LUCKNOW CAMPUS
(UTTAR PRADESH)
(Contract Act)
TOPIC-: Revocation of Proposals and
Acceptance.
SUBMITTED BY – SUBMITTED TO -
Uttam Singh Ms. Manasvi Agarwal
(A8156124061) (Faculty of Law)
LLB 1st semester
CERTIFICATE
On the basis of declaration submitted by UTTAM SINGH
student of LL.B. I hereby certificate the project titled
"REVOCATION OF PROPOSALS AND ACCEPTANCE "
which is submitted to Amity School of Law.
Amity University Uttar Pradesh, Lucknow, in partial
fulfillment of the requirement for the award of the
degree of BACHELOR OF LAWS. is an original
contribution with existing knowledge and faithful
record of work carried out by him under my guidance
and supervision.
To the best of my knowledge this work has not been
submitted in part or full for any Degree or Diploma to
this University or elsewhere.
Date:-
MS. Manasvi Agarwal
Department of Laws
Amity University Uttar Pradesh,
Lucknow Campus
INDEX
1. Introduction
2. Communication of proposal and
acceptance
3. Mode of communication
4. Revocation of proposal
5. Communication of acceptance
5.1. When is acceptance complete?
Time of acceptance
6. Revocation of Acceptance
6.1. Communication of Revocation of
Acceptance
7. Case Laws
8. Conclusion
Introduction
To create a legally enforceable contract there must be a proposal which has to
be accepted by the other party. Once a proposal is accepted by the other party
and it is properly communicated to the party who made the proposal it
becomes a binding contract, provided the object and consideration is not
illegal and the parties do have an intention to create a legal relationship. Once
it becomes a binding contract the parties cannot go back on their respective
commitments.
The parties can revoke the proposal or acceptance any time before the
communication of the same is complete against the other party.
Communication of proposal and
acceptance:
When the proposal is accepted it creates legal relations between the two
parties. Effective communication and a clear understanding for it is important
to avoid misunderstanding between all parties. When the parties are talking
face – to – face the communication happens in real time and the offer and
acceptance can be communicated on the spot, creating no confusion. But often
in business the communication occurs via letter and e-mails etc. So, in this
case, the timeline of communication is vital.
Mode of Communication:
All communication should be according to the prescribed mode. If no mode is
prescribed, the communication must be through an acceptable mode. If the
offer is not accepted according to the prescribed or usual mode, the offer
lapses provided the offeror gives notice to the offeree within the reasonable
time that the acceptance is not according to the mode prescribed.
Revocation of Proposal:
The party who has made the proposal can withdraw the proposal any time
before the communication of acceptance is complete as against the proposer.
The communication of acceptance of a proposal is complete as against the
proposer. The communication of acceptance of a proposal is complete against
the proposer when it is put in a course of transmission to him, so as to be out
of the power of the acceptor (sec4, Indian Contract Act 1872). The proposing
party must communicate the revocation to the other party before the other
party accepts the offer. Once the revocation has been communicated to the
other party, the original proposal stands cancelled and the other party cannot
legally accept the proposal as the proposal is not in existence anymore.
Revocation comes into effect as soon as it has been communicated to the
relevant party.
In Byrne & Co. v Leon Van Tienhoven &Co (1880) LR 5 CPD 344, Common Pleas
Division the court held that withdrawal of an offer by telegram is only valid if
the telegram is only valid if the telegram is received before the offer is
accepted.
Section 5 of the Indian contract act deals the revocation of the proposal. A
proposal can be revoked by giving a notice of revocation to other party.
Communication of revocation can be direct or indirect and can be made by a
third party. If the communication is indirect, it needs to be clear, unambiguous
and understood by a “reasonable person” and should be communicated by a
reliable source.
Selling an item to someone else is considered a legal revocation so long as the
original offeree is notified of the sale before they accept the offer. In Dickinsow
v. Dodds (1874) the court opines that “if an offer has been made for the sale of
property, and before that offer is accepted, the person who has made the offer
enters into a binding agreements to sell the property to somebody else, and
the person to whom the offer was first made receives notices in some way that
the property has been sold to another person, can he after that make a
binding contract by the acceptance of the offer?” I am of opinion that he
cannot. This case further establishes that the party making the offer can
communicate the revocation through a third party.
Offers made through a publication are something of a special case. These
offers
can be revoked by a notice in that publication without specifically contacting
the offeree.
The communication of revocation is dealt with in section 4 of the act.
The communication of a 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 it 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.
Communication of Acceptance:
In communication of acceptance, there are two factors to consider, the mode
of acceptance and then the time of acceptance. Acceptance can be by an act
which includes communication by words, oral or written by phone, letters, e-
mails, fax, etc. or by conduct like boarding a bus etc.
When is acceptance complete? Time
of acceptance:
A proposal can be accepted by the offeree any time before the communication
of revocation is complete against him. Once accepted by the offeree the
communication of acceptance is complete:
1. as against the proposer, when it is put in a course of transmission to
him, so as to be out of the power of the acceptor;
2. as against the acceptor, when its come to the knowledge of the proposer.
Revocation of acceptance:
There can be instances where a proposer makes an offer and the acceptor
accepts the proposer and communicates the same to the proposer. Can the
acceptor revoke /cancel this acceptance? Yes, the acceptor can cancel this
acceptance before the communication of acceptance reaches the proposer.
That is before the communication of acceptance is complete as against the
acceptor. If the revocation of acceptance reached the proposer before the
acceptance comes to the knowledge of the proposer there can be a valid
revocation of acceptance. The revocation of acceptance is complete only at
any
time before the communication of acceptance is complete as against the
acceptor, but not afterwards.
Communication of Revocation of
Acceptance:
The communication rules for revocation of offer will be applicable to
revocation
of offer will be applicable to revocation of acceptance as well. The
communication is complete against the proposer when it comes to is
knowledge.
Case Laws:
Here are some significant case laws related to the revocation of proposals
(offers) and acceptance under contract law:
1. Byrne v. Van Tienhoven (1880)
Facts: Van Tienhoven, based in Cardiff, offered to sell tin plates to Byrne,
who was in New York. Before Byrne could accept the offer, Van Tienhoven sent
a letter revoking it. However, Byrne accepted the offer by letter before the
revocation letter reached him.
Held: The court held that an offer is only revoked when the revocation is
communicated to the offeree. Byrne’s acceptance was valid, as he had not
received the revocation when he accepted the offer.
2. Dickinson v. Dodds (1876)
Facts: Dodds offered to sell property to Dickinson and stated the offer was
open until a specific date. Before Dickinson accepted, he learned Dodds had
sold the property to a third party.
Held: The court ruled that an offer can be revoked at any time before
acceptance, provided the revocation is communicated, even indirectly. Since
Dickinson knew of the revocation through a reliable third party, the acceptance
was invalid.
3. Ramsgate Victoria Hotel Co. v.
Montefiore (1866)
Facts: Montefiore offered to buy shares in the Ramsgate Hotel Company
but did not get a reply for several months. When the company later accepted,
Montefiore refused to complete the transaction, claiming the offer had
expired.
Held: The court ruled that a proposal can lapse if not accepted within a
reasonable time. Since Montefiore’s offer was not accepted promptly, it was
considered revoked due to the unreasonable delay.
4. Hyde v. Wrench (1840)
Facts: Wrench offered to sell his farm to Hyde for £1,000, but Hyde
counter-offered £950. Wrench rejected the counter-offer, and Hyde then
attempted to accept the original offer of £1,000.
Held: The court held that Hyde’s counter-offer destroyed the original offer.
Once an original offer is rejected or countered, it cannot be revived unless the
offeror reintroduces it.
5. Union of India v. Bhim Sen Walaiti
Ram (1971)
Facts: In this Indian case, the government made an offer to Bhim Sen,
which he accepted by posting a letter. Before the letter of acceptance reached
the government, they revoked the offer.
Held: The court followed the English rule that an acceptance is complete
when posted. Since Bhim Sen had posted his acceptance before receiving the
revocation, a contract was formed.
6. Henthorn v. Fraser (1892)
Facts: Henthorn received an offer from Fraser, and Fraser later sent a
letter revoking it. Henthorn, however, had already posted his acceptance
before receiving the revocation.
Held: The court held that acceptance is effective when posted (the "postal
rule"), whereas revocation is only effective upon receipt. Thus, Henthorn’s
acceptance was valid.
Conclusion :
To put in a nutshell a proposal and acceptance can be revoked at any time
before it creates a binding contract. A proposal can be revoked anytime before
the acceptance is complete against the proposer so as to create a binding
contract. And an acceptance can be revoked anytime before the
communication of acceptance is complete against the acceptor. The mode of
communication should be as prescribed. In the light of the developments in e-
commerce and use of e-contracts the traditional rules of contract should be
revisited s as to cater to the modern modes of communication to create
binding contract.