A contract becomes valid when there is an offer and acceptance of that offer. And there are various other requirements which are to be fulfilled , as free consent, competency lawful consideration. Consensus ad idem which means meeting of the minds for the formation of a contract is also an essential. But, there is an important intermediary element in between that are important and could result in the change in the course of events. The contract can be terminated before attaining the finality between promise and promisor, his is called revocation.
Revocation basically means an act of annulment. Section 5 of the Indian Contract Act, 1872 states the rules of Revocation of Proposal. According to section 5 of Indian Contract Act a contract can be revoked any time before the communication of acceptance is made to the proposer and not afterwards. Contract cannot be revoked once the communication of acceptance is made.
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 received before the offer is accepted.
In Payne v. Cave (1789), the defendant withdrew his bid which was the highest in the action sale, before the fall of the auctioneer’s hammer. It was held that the defendant was not bound to purchase the goods. His bid amounted to an offer which he was entitled to withdraw at any time before the auctioneer signified acceptance by knocking down the hammer.
The methods by which a revocation of proposal is made are given under section 6 of the Indian Contract Act, 1872.
Methods of Revocation (Section 6 Indian Contracts Act,1872)
Notice of revocation
Revocation of a proposal by communication of notice is the first method of revocation . An offer or proposal can be revoked by the offeror or proposer. This can be done by providing notice to the offeree before it is gets accepted. The notice of revocation takes effect when it comes in the knowledge of the offeree before the communication of acceptance is done.
For Example: X offers Y his bike for INR 50,000 and communicates the same through letter. Before Y accepts the proposal and communicates its acceptance to X, X withdraws his offer by informing Y. There will be no contract as the proposal has been revoked by X before the acceptance of the proposal.
In Sadhoo Lal Motilal v. The State of M.P., AIR 1972 All 137, the tender that was presented by the party to the respective Government was accepted later. But, a telegram was subsequently sent to that respective Government withdrawing the acceptance. The court found the strong evidence of the conclusion of the contract and could not find any reason to revoke the contract. The reason is that as soon as the letter of acceptance was posted, the tender contract was concluded. Thus, revocation could not be made.
Lapse of Time
Revocation of proposal by lapse of time period is the second method of revocation. If any particular time period is prescribed for the acceptance, then the proposal will get revoked if the acceptance not gets communicated before the expiry of prescribed time.
In Airfred Schontank V. Muthurayna Chetty, (1892) 2 Mad LJ 57, the court held when an offer gives the offeror an option to accept within a fixed period, it may be withdrawn even before the expiry of that period unless there is some consideration for keeping it open
Death or Insanity of Proposer
The death or insanity of the proposer leads to the revocation of the proposal. A proposal can only be revoked if the knowledge of death or insanity of the proposer come to the knowledge of the proposee before the communication of the acceptance.
Rejection of Proposal
A proposal gets rejected when it is not accepted by the offeree. If the proposal gets rejected it can again be revived by the offeree.
Death of Offeree in revocation
A proposal can also be revoked by the death of the offeree. A proposal that gets communicated for the acceptance can be revoked if the offeree dies before the communication of acceptance of proposal is done.
If a counter offer is made to a proposal it gets revoked. The offer is accepted after modifications and variations are made in the original offer, so the proposal that is made by the offeree is called a counter offer. The original offer gets revoked as soon as the acceptance of counter offer is made.