Lapse of Offer

Acceptance should be made before the offer lapses. An offer lapses in the
circumstances provided for in Section 6.

Section 6. Revocation how made – A proposal is revoked –

1. by the communication of notice of revocation by the proposer to the other party;

2. by the lapse of the time prescribed in such proposal for its acceptance or, if no
time is prescribed, by the lapse of a reasonable time, without communication of the
acceptance;

3. by the failure of the acceptor to fulfil a condition precedent to acceptance; or

4. by the death or insanity of the proposer, if the fact of his death or insanity comes
to the knowledge of the acceptor before aceeptance.

1. Notice of revocation

Section 5 provides that “a proposal may be revoked at any time before the
communication of its acceptance is complete as against the proposer, but not
afterwards.” It has been already been seen that as against the proposer, the
communication of acceptance is complete “when it is put in a course of
transmission to him, so as to be out of the power of the acceptor.” It means,
therefore, that the communication of revocation to be effective must reach the
offeree before he mails his acceptance and makes it out of his power. A revocation
is effective only when it is brought to the mind of the person to whom the offer is
made. This was laid down in the case of Henthorn v. Fraser, 1892.

The secretary of a building society handed to the plaintiff in the office of the
society an offer to sell a property at 750 pounds giving him the right to accept
within 14 days. The plaintiff resided in a different town and took away with him
the offer to that town. The next day at about 3.50 p.m. he sent by post his letter of
acceptance. This letter was received at the society’s office at 8.30 p.m. But before
that at about 1.00 p.m. the society had posted a letter revoking its offer. The
revocation and the acceptance crossed in the course of post. The plaintiff received
the letter of revocation at 5.30 p.m. The revocation was held to be ineffective.
Thus the communication of revocation should reach the offeree before the
acceptance is out of his power. An illustration to Section 5 explains the matter. ‘A’
proposes by 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. The provisions
relating to communication of proposal, acceptance and revocation are to be found
in Section 4 and 5. These sections are as follows:

Section 4. Communication when complete. – The communication of a proposal

is complete when it comes to the knowledge of the person to whom it is made.

The communication of an acceptance is complete, -

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;

As against the acceptor, when it comes to the knowledge of the proposer.

The communication of a revocation is complete, -

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 to be out of the power of the person who
makes it;

as against the person to whom it is made, when it comes to his knowledge.

Section 5. Revocation of proposals and acceptances. – A proposal may be

revoked at any time before the communication of its acceptance is complete as
against the proposer, but not afterwards.

An acceptance may be revoked at any time before the communication of the

acceptance is complete as against the acceptor, but not afterwards.

Withdrawal before expiry of fixed period

Where an offeror gives the offeree an option to accept within a fixed period, he
may withdraw it even before the expiry of that period. The decision of the Madras
High Court in Alfred Schonlank v. Muthunyna Chetti, 1892 is an illustration in
point. The defendant left an offer to sell a qauantity of indigo at the plaintiff’s
office allowing him eight days’ time to give his answer. On the 4th day however the
defendant revoked his proposal. The plaintiff accepted it on the 5th day.

Holding the acceptance to be useless, the court said: “Both on principle and on
authority it is clear that in the absence of consideration for the promise to keep the
offer open for a time, the promise is mere nudum pactum.”

Notice of revocation shall be deemed to have been served when it reaches the
offeree’s address. A notice for the withdrawal of a ship from the charterers’
services was sent by telex and was received by the plaintiff’s telex machine during
normal business hours, but the plaintiff read the message the next day. He was,
however, held bound by the notice when his machine received it. The court said:
“If a notice arrives at the address of a person to be notified, at such a time and by
such a means of communication that it would in the natural course of business
come to the attention of that person on its arrival, that person cannot rely on some
failure of himself or his servants to act in a normal businesslike manner in respect
of talking cognizance of the communication, so as to postpone the effective time of
the notice until some later time when it in fact came to his attention.”

Where the question was whether the notice for withdrawal of a ship under a
charterer-party for default in payment of hire was effective when it was recorded
on the telex machine of the charterer or on the opening of the office on the next
working day when the message was actually read, the court upheld the decision of
the arbitral tribunal that the message was deemed to have been delivered when it
was read on the machine on the next working day.

Agreement to keep Offer open for Special Period

Where the agreement to keep the offer open for a certain period of time is for some
consideration, the offeror cannot cancel it before the expiry of that period. The
owner of the house agreed, in consideration of the sum of one pound, to give the
plaintiff an option to purchase the house for ten thousand pounds within a stated
period. He was not allowed to revoke the proposal within that time.

Communication of Revocation should be from Offerer Himself

It is, of course, necessary that the communication of revocation should be from the
offeror or from his duly authorized agent. But it has been held in England in the
case of Dickinson v. Dodds, 1876 that it is enough if the offeree knows reliably
that the offer has been withdrawn. The facts were:

The defendant signed and delivered to the plaintiff an offer to sell a property at a
price fixed and added a postscript saying: ‘This offer to be left open until Friday 9
o’clock, a.m., 12th June.’ A day before the expiry of this period the plaintiff was
informed by a third person that the property had already been sold to another.
However, the plaintiff, before 9 a.m. of 12th June, found defendant entering a
railway carriage and handed him the notice of acceptance.

The court held “that the document amounted only to an offer, which might be
withdrawn at any time before the acceptance, and that a sale to a thirdperson which
came to the knowledge of the person to whom the offer was made was an effectual
withdrawal of the offer.”

Revocation of General Offers

Where an offer of a general nature is published through newspapers, it can be

withdrawn by the same media and the revocation will be effective even if a
particular person, subsequent to the withdrawal, happened to perform its terms in
ignorance of the withdrawal. In an American case, the announcement through
newspapers of a reward for reporting certain criminals was withdrawn by a
subsequent notification. But a person who was working on the track of the
criminals detected and reported them. He was absolutely unaware of the
revocation. He could not recover. “It was withdrawn through the same channel in
which it was made. The same notoriety was given to the revocation that was given
to the offer.”

Superseding Proposal by Fresh Proposal

Where, before acceptance, a proposal is renewed in some parts of it and not in its
entirety as proposed earlier and the letter purports to supersede the earlier
communication, such proposal is no longer available for acceptance. The
acceptance can be only for the renewed part.

Revocation of Bid
In the case of an auction, “the assent is signified on the part of the seller by
knocking down the hammer.” “A bid may be retracted before the hammer is
down.” In a Madras Case:

The appellant made a bid at an auction (the highest bid was made) but before the
property was knocked down, he discovered that the property was subject to a
mortgage and retracted his bid. But even so the auctioneer knocked down the
property to him. The owner of the property sued him.

The court held that “the plaintiff’s bid was no more than an offer and he was
entitled to withdraw the same before it was accepted by the property being
knocked down to him by the auctioneer.

2. Lapse of time

An offer lapses on the expiry of the time, if any, fixed for acceptance. Where an
offer says that it shall remain open for acceptance upto a certain date, it has to be
accepted within that date. It has been suggested by the Calcutta High Court that in
such a case it is enough if the acceptor has “posted the acceptance within the
stipulated time”, even if it reaches the offeror after the stipulated date. The court
said, “that an effective date on which the option of acceptance is exercised by a
party is to be ascertained from the date when the acceptance is put in transmission
and the letter is posted.”

Where an offer was to last until the end of March and the offeree sent a telegram
accepting the offer on 28th March which was received by the offeror on 30th March,
it was held that the option was duly exercised.

Where an application for admission to an institution had to be filed within the

prescribed time by sending it either by registered post or in person and the
candidate sent it by registered post some four days before the last date but it
reached after the expiry of time, it was held that the application was too late. A
majority of two judges were of the view that where delivery can be made at the
option of the sender, the agency through whom delivery is made acts as the agent
of the sender, whereas if the delivery is made in a mode prescribed by the
addressee, the agency acts as the agent of the addressee. In the first case, delivery
to the agency is not delivery to the addressee, but in the later case it is. The
dissenting judge was of the view that if the candidate selected one of the two
modes prescribed by the addressee, the prescribed agency, i.e., post office, would
be agent of the addressee.

Where no time for acceptance is prescribed, the offer has to be accepted within a
reasonable period of time. What is “reasonable time” will depend upon the facts
and circumstances of each case. The definition of “a reasonable period” is a
question of fact depending on the surrounding circumstances in which the
agreement was made. Where the subject-matter of the contract is an article, like
gold, the prices of which rapidly fluctuate in the market, very short period will be
regarded as reasonable, but not so in reference to land.

An offer for sale of shares allowed a month in which to accept, but both the parties
agreed that a reasonable period for acceptance was an implied term. The offeree
felt that he could not make an informed decision within one-month time and
argued that a reasonable period in this context would be one that would allow an
informed decision as to whether the acceptance was in their best financial interest.
The court did not agree with this contention. The offer was made at an uncertain
time. Yet the offeree wanted that he should be allowed to accept after the
uncertainties were over. This would be unusual in this type of commercial
agreement.

3. By failure to accept condition precedent

Where the offer is subject to a condition precedent, it lapses if it is accepted

without fulfilling the condition. Where a salt lake was offered by way of lease on
deposit of a sum of money within a specified period, and the intended lessee did
not deposit the amount for 3 long years, it was held that this entailed cancellation
of the allotment.

4. By death or insanity of offeror

An offer lapses on the death or insanity of the offeror, provided that the fact comes
to the knowledge of the offeree before he makes his acceptance.

In England it was felt at one time that an offer terminates at once on the death of
the offeror, whether or not the fact has come to the notice of the offeree. Melish LJ
suggested that an offer cannot be accepted after the death of the offeror. But in an
earlier case, where a creditor continued to act on guarantee without the knowledge
of the surety’s death, the court pointed out that an offer is not necessarily
terminated with the death of the offeror. It may remain open until the offeree
comes to know of death.

There is no provision in the Act about the effect of the death of an offeree. But as
an offer can be accepted only by an offeree and not by any other person, it should
not be capable of being accepted by the offeree’s executor also.

Revocation of Acceptance

According to English law an acceptance once made is irrevocable. This rule is

obviously confined in its operation only to postal acceptance. It is suggested that
an acceptance can be revoked at any time before acceptance is complete, provided,
of course, that the revocation itself is communicated before the acceptance arrives.

In India, on the other hand, acceptance is generally revocable. An acceptor may

cancel his acceptance by a speedier mode of communication which will reach
earlier than the acceptance itself. Section 5 is the relevant position:

An acceptance can be revoked at any time before the communication of the

acceptance is complete as against the acceptor, but not afterwards.

Now, what will be the result if both, the acceptance and the revocation of the
acceptance, will reach together. The following illustration will explain this:

“ ‘A’ proposes, by letter sent by post, to sell his house to ‘B’. ‘B’ accepts the
proposal by a letter sent by post. ‘B’ make revoke his acceptance at any time
before or at the moment when the letter communicating it reaches ‘A’, but not
afterwards.

Case law: Countess of Dunmore v. Alexander, 1830

A proposal of service made by a letter was sent through an agent. The agent
received the acceptance and forwarded it to the principal, but the principal was
away that day. The next day the agent received the revocation and forwarded it to
the principal, who received the two letters together.
The revocation was held to be effective, the court saying that “the admission that
the two letters were received together puts an end to the case.”

Jurisdiction

In a suit for recovery of damages on account of breach of contract, the notice

terminating the contract was received by the plaintiff at a place in Hyderabad. It
was held that a part of the cause of action could be said to have arisen at that place.
The suit filed at that place was maintainable.