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Introduction:

In this lesson you will be able to discuss how revocation of offer is made and its modes
of revocation beside this the time of revocation. Communication of revocation to be
effective must be from the offeror or his authorized agents.

Revocation of offer: Section 3 of the Indian Contract Act says that the communication
of revocation of proposals, is deemed to be made by any act or omission of the party
revoking by which he intends to communicate such revocation or which has the effect of
communicating it.

Communication of Revocation when complete: According to Section 4 of the Contract

Act a communication as against the person who makes it, the communication of a
revocation is complete, 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, the communication of revocation is complete, when it
comes to his knowledge.

For example, A revokes proposal by telegram. The revocation is complete as against A

when the telegram is dispatched and against B it is complete when he receives the
telegram.

When can proposal be revoked?

According to section 5 “A proposal may be revoked at any time before the

communication of its acceptance is complete as against the proposer but not
afterwards.”

The following illustration will explain it:

A, proposes, by letter sent by post, to sell his house to B. B, accepts the proposals by a
letter send by post. A, may revoke his proposal at any time before or at any moment
when B, posts his letter of acceptance, but not afterwards.
In Rajendra Kumar Verma v. State of Madhya Pradesh, AIR1972 M.P. 131, it has been
held that a person who makes an offer is entitled to withdraw his offer or tender before
its acceptance is intimated to him. The Government by merely providing a clause to the
contrary in the tender notice could not take away the legal right of a person.

In case of an auction it has been held, in Payne v. Cave (1789)3 T.R.148 that the bidder
is entitled to revoke his bid at any time before the fall of the hammer or before the
property is finally knocked down. The rule in this case has been followed in a Madras
case Joravar Mull Champalal v. Jvegopaldas Ganshsmdas (1922) 43 Mad. LJ 132, in
this case, before the property was finally knocked, the bidder discovered that the
property was subject to a mortgage. Consequently, he revoked his bid. An auction
brought against him by the owner of the property was dismissed by the Court. The
Court held that bid of the plaintiff being simply an offer, he was entitled to revoke it
before it was accepted by knocking down the property in his favour.

In Nutakki Sesharataman V. Sub Inspector, Land Acquisition Vijaywada, AIR 1992 SC

131, the appellant was the owner of the plot. The government of Andhra Pradesh
sought to acquire about 1 acre and 89 cents out of the aforesaid land for a public
purpose. Necessary notification was published in the Gazette. An inquiry was
conducted regarding the fixation of compensation to be awarded to the appellant and
others whose land were acquired under the notification. During the course of the said
enquiry the appellant stated to the Land Acquisition Officer concerned that he was
willing to the land being acquired provided he was given compensation in a lump sum.
The said offer was never accepted by the land Acquisition officer to whom it was made
leave alone, making award of a lump sum compensation no award at all was made by
the said officer awarding compensation to the appellant till Nov.9, 1979, when the
aforesaid offer was withdrawn by the appellant or even till the writ petition was filed. The
Division Bench of the Andhra Pradesh High Court dismissed the writ petition of the
petitioner. In the present appeal by special leave, the Supreme Court allowed the
appeal with costs. Delivering the judgment Kania, J. held: “till the offer was accepted
there was no contract between the parties and the appellant was entitled to withdraw his
offer. There was nothing inequitable or improper in withdrawing the offer, as the
appellant was in no way bound to keep the offer open indefinitely.” The writ petition,
therefore, ought not to have been dismissed on the ground of appellant having made a
statement or consented as aforesaid before the land Acquisition Officer. In M/s J.K
Enterprise V. state of M.P., AIR 1997MP 68,70 it was held where the communication of
revocation is send by fax message on wrong number, the revocation would not be
effective.

The valid modes of revocation of offer are as under: -

A proposal is revoked-

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

2. By the lapse of the time prescribed 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.
3. By the failure of the acceptor to fulfill condition precedent to acceptance.
4. By the death or insanity of the proposal of the fact of his death or insanity comes
to the knowledge of the acceptor before acceptance.

1. By notice of revocation: An offer becomes contract when it is accepted, before

it has been accepted it creates no legal obligation and, therefore, it may be revoked at
any time before it is accepted.

This can be illustration as: -

On April 10, 1990, A offered B to sell his car for sixty thousand rupees B was asked to
signify his acceptance by April 18, 1990. On April 12, 1990 A sold his car to C for
seventy thousand rupees. This he did without revoking his offer to B. However, B came
to know of this fact through his resources on April 14, 1990; still he signified his
acceptance to the offer on April 16, 1990. Has this resulted into a binding contract
between A and B?
It was true that on April 14, 1990, come to know of the sale of car to C and thus A was
not willing to sell his car to him. Under English law there can be no binding contract
under these circumstances. But under Indian Law the rule is different. Under Section
6(1) of the Contract Act, a proposal is revoked by the communication of notice by the
proposer to the other party. Since the notice of revocation was not communicated by A
to B, the offer was not revoked. Hence, the acceptance by B was valid and such there
was a binding contract between A and B.
Thus to be effective the notice of revocation has to be communicated by the proposer
(or his agent) and not by anybody else. On this point English law is different from Indian
law. In India, notice of revocation has to be communicated by the proposer only,
whereas in England the offer stands revoked even though the offeree comes to know
about the revocation of offer through some other source and not by notice by the offeror
himself.
2. By lapse of time: A proposal is revoked by the lapse of time prescribed 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. .” This was also held in Jaya Mahal
Coporation Housing Society Ltd. V.M/s Zenith Chemical Works Ltd., AIR 1991 SC 1037.
What is reasonable time will depend upon the fact and circumstance of each case. For
instance where the subject matter of the contract is an article, like gold, the price of
which rapidly fluctuate in the market, very short period will be regarded as reasonable,
but not so in reference to land.
Sometimes the parties may expressly fix the time upto, which the offer will remain open.
For example, it may be stated that the offer is open till 15th January, 5:00 P.M Such an
offer lapses automatically if it remains unaccepted till the stipulated time and the same
cannot be accepted further thereafter.
Even if no time has been prescribed within which the acceptance can be made, the offer
stands revoked on the lapse of a reasonable time. Non-acceptance within reasonable
time means an implied refusal by the offeree to accept the offer.
3. By the failure to fulfill a 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 year, it was held
that this entailed cancellation of the allotment held in State of W.B V. Mahendra
Chandra Das,(1990)2 Cal LJ1.
4. By the death or insanity of the offeror: An offer also lapse on the death or
insanity of the offeror. Anson’s explains it as, “The death of either party before
acceptance may cause an offer to lapse.” It would seem that, in principle, an offeree
cannot accept after he is informed of the death of the offeror. An acceptance
communicated to the offeror’s personal representatives will not bind them, unless the
offer is one, which could not have been revoked by the offeror during his lifetime held in
Erington v. Erington, (1952) 1 KB 290 at p. 295. But the position is not clear, under
English Law, where the offeree accepts without knowing the fact of death of the offeror.
In India, however, the position is quite clear. That an offer lapse by the death or insanity
of the offeror only if the fact of his death or insanity comes to the knowledge of the
acceptor before acceptance Section 6(4) of the contract Act.

Time of revocation:

An offer can be revoked at any time before the communication of acceptance is posted
but not afterwards. After the Pyane v. Cave, (1789) 3 Tr.148 it has now been
established that revocation is possible and effective at any time before acceptance and till
that moment no legal obligation exists. This principle has been further explained in
Henthorn v. Fraser, (1892) 2 Ch. 27. Wherein the defendant offered to sell a certain
property at a certain price and gave 14 days for acceptance. The next day at 1 p.m. he
posted a letter of revocation, which reached the plaintiff at 5:30 p.m. It was held that the
acceptance was complete and the contract concluded and consequently the defendant
could not revoke it Herschell observed “ a person who has made an offer must be
considered as continuously making it until he has brought to the knowledge of the
person to whom it was made that it is withdrawn.” Thus, the notice of revocation must
reach the other party before he had completed acceptance. Section 5 of the Indian
Contract Act provides: “A proposal may revoke at any time before the communication of
its acceptance is complete as against the proposer, but not afterwards.
In Baroda Oil Cakes Traders v. Prashottam Narain Dass Bagulia, AIR 1954 Bom. 491
Gajendragadkar, J (who later on become Chief Justice of the Supreme Court) of the
Bombay High Court held as under:-

“But so far as the making of the contract is concerned the proposer is bound as soon as
the acceptance is posted and, subject to the right to the acceptor to revoke his
acceptance, the contract is complete as soon as the acceptance is posted”.

This was later on approved by the Supreme Court in Bhagwandas v. Girdharilal, AIR
1966 SC 543 at p58.The above observation was also quoted with approval and followed
by the Allahabad High Court in Sadhoo Motilal v. State of M.P, AIR 1972 All 137. In this
case, a tender submitted by the Plaintiff was accepted by the government and
acceptance was communicated to them through a letter. The Plaintiff sent a telegram
revoking their tender but the telegram reached the government after it has posted the
letter of acceptance. It was held the contract was complete between that plaintiff and
government as soon as the letter of acceptance was posted and the attempted
revocation by the plaintiffs was therefore, ineffective.

Communication of revocation must be from the offeror or his authorized Agents:

A communication of revocation must be from offeror of his authorized agent. In

England, however, a different rule has been laid down. In Dickinson v Dodds, (1872)2
Ch.D 463. It has been held that it will suffice if the offeree comes to know that the offer
has been withdrawn. In this case, the defendant offered to sell a certain property at a
certain price to the plaintiff requiring the plaintiff to accept the offer “until Friday, 9
O’clock, a.m., 12th June.” A day before the lapse of the said time, the plaintiff came to
know through a third person (one Mr. Berry) that the property in question had already
been sold to some other person. Despite this, the plaintiff before 9 a.m. of 12th June
handed over to the defendant a notice of acceptance and sued the defendant for
specific performance of the contract. The Court held that a sale to third person was “an
effectual withdrawal of the offer the plaintiff knew the Dodds was no longer interested to
sell the property to him as plainly and clearly as if Dodds has told him in so many words.
“ I withdraw the offer. It is to my mind quite clear that before there was any attempt at
acceptance by the plaintiff, he was perfectly well aware that Dodds has changed his
mind, and that he had in fact agreed to sell the property to Allan. It is impossible,
therefore, to say there was ever that existence of the same mind between the two
parties, which is essential in point of law at the making of an agreement. “Mellish, L. J.,
also observed:” just as when a man who has made an offer dies before it is accepted it
is impossible that it can be accepted, so when the person to whom the offer was made
known that the property has been sold to someone else, it is too late for him to accept
the offer, and on that ground I am clearly of the opinion that there was no binding
contract for sale of this property by Dodds to Dickinson.” But as pointed out by Pollock
and Mulla, “ the reason given for the decision in Dickinson v. Dodds have been freely
criticized in England, but as the decision itself is not of positive authority in India in a
matter covered by the terms of the Contract Act. Thus, the rule laid down in Dickinson v.
Dodds is not applicable in India. It may be noted that Section 6 (1) provides:

“a proposal is revoked by the communication of notice of revocation by the proposer to

other party.” In accordance with this provision, it is clear that in India, the notice of
revocation must be given by the proposer himself, a notice by a third person will not
suffice.

Distinction between offer and invitation

An offer and invitation to offer are not one and the same. The difference between the
two must be appreciated. An offer is definite. It is an intention towards a contract. An
invitation to offer is an act precedent to making an offer. It is done with intend to
generally to induce and negotiate. An invitation to offer gives rise to an offer due
negotiates. It is not capable of being accepted.

In an invitation to offer there is no expression of willingness by the offeror to be bound

by his offer. It is only a proposal of certain terms on which he is willing to negotiate. It is
not capable of being accepted as it is.

When there is advertisement by a person he has a stock of books for sale, it is an

invitation to offer and not an offer. This advertisement is made to receive offer and to
further negotiate. In terms of Section 2(a) of the Act, it is very clear that an offer is the
final expression of willingness by the offeror to be bound y the offer if the other party
accepts it. Hence the only thing that is required is the willingness of the offeree to abide
by the terms of offer. The test to decide whether a statement is an ‘offer’ or ‘invitation to
offer’ is to see the ‘intention’. If a person who makes the statement has the intention to
be bound by it as soon as the other accepts, he is making an offer. Thus the intention to
be bound is the important thing, which is to be seen. In Harvey v. Facie (1893) AC 552
Privy Council succinctly explained the distinction between an offer and an invitation to
offer. In the given case, the plaintiff through a telegram asked the defendants two
questions namely. Will you sell us Bumper Hall Pen? And Telegraph lowest cash price.

The defendants replied through telegram that the “lowest price for Bumper Hall Pen is
£900. The plaintiffs send another telegram stating “we agree to buy Bumper Hall Pen at
£ 900…. However the defendants refused to sell the property at the price. The plaintiff
sued the defendant contending that they had made an offer to sell the property at £ 900
and therefore they are bound by the offer. However the Privy Council did not agree with
the plaintiff on the ground that while plaintiffs asked two questions, the defendant
replied only second question by quoting the price but did not answer the first question
but reserved their answer with regard to their willingness to sell. Thus they made no
offer at all. Their lordships held that the mere statement of the lowest price at which the
vendor would sell contained no implied contract to sell to the person who had enquired
about the price. The above decision was followed in Mac Phesson v. Appanna (1951)
A.S.C. 184. The plaintiff offered to purchase a lodge owned by the defendants for Rs.
6000. He wrote the defendant agent asking whether his offer had been accepted and
saying that he was prepared to accept any higher price if found reasonable. The agent
replied: won’t accept less than rupees ten thousand. The plaintiff accepted this and
brought a suit for specific performance. It was held that the defendant did not make any
offer or counter offer in his letter but was merely inviting offers. There was no assent to
the plaintiffs offer to buy at Rs. 10000 and therefore no concluded contract.

In Bank of India V. O.P Swarankar, AIR 2003 SC 853, it was held that voluntary
retirement scheme of the Bank is not proposal or offer but merely an invitation to treat
and the application filed by the Bank employees constitute an offer. Not only that the
Bank has power to accept or reject such an application but it can also amend or rescind
the scheme. The scheme cannot be said to be an offer, which on the acceptance by the
employee fructifies in a concluded contract. The proposal of the employee when
accepted by the Bank constitutes a promise within the meaning of section 2(b) of the
Indian Contract Act. Also in case of Bank of Patiala V. Romesh Chander Kanoj, AIR
2004 SC, 2016, voluntary retirement scheme is an invitation to treat or offer, Bank
employee who applies for such a scheme simply makes an offer. An offer can be
withdrawn at any time before it has been accepted. On acceptance it fructifies into a
concluded contract. Thus when the Bank of Bandia in its subsidiary Bank gave 15 days
time to employees to opt for scheme and provided that application once made cannot
be withdrawn, withdrawal of the application after the date of the closure of the scheme
would not be permissible.

Similarly when the goods are sold through auction, auctioneer doesn’t contract with
anyone who attends the sale. The auction is only an advertisement to sell but the items
are not put for sale through persons who have come to the auction may have the
intension to purchase. Following are instances of invitation to offer to buy or sell;

1) An invitation by a company to the public to subscribe for its sales: For

increasing sales companies usually invites subscription from the public. The invitation of
subscription is not an offer but invitation to treat. For instance For example, a
prospectus issued by a company for subscription of its shares by the members of the
public is only an invitation to offer. When a person fills up the form and deposits it with
the bank along with the application money, he simply makes an offer to buy shares.
Now it is for the company to accept his offer in full or partially or reject it outright. In
shop the price tag attached on each article is only an invitation to offer and not an offer
itself.

2) Display of goods for sale in shop windows: when the goods are displayed either
in a shop-window or inside a case is invitation to treat held in Pharmaceutical Society of
Great Britain V. Boot Cash Chemist Ltd, lord Goddard CJ said: “it would be wrong to
say that the shopkeeper is making an offer to sell every article in the shop to any person
who might come in and that person can insist on buying any article by saying ‘I accept
your offer’…. In most bookshops customers are invited to go in and pick up books and
look at them even if they do not actually buy them. There is no contract by the
shopkeeper to sell until the customer has taken the book to the shopkeeper or his
assistant and said; ‘I want to buy this book’ and the shopkeeper says ‘yes’. That would
not prevent the shopkeeper, seeing the book picked up, saying, I am sorry I cannot let
you have that book; it is the only copy I have got and I have already promised it to
another customer.’ Therefore, I am of opinion, the mere fact that a customer picks up a
bottle of medicine from the shelves in this case does not amount to an acceptance of an
offer to sell. It is an offer by the customer to buy, and there is no sale affected until the
buyer’s offer to buy is accepted by the acceptance of the price.”

3) Advertising auction sale: An advertisement by the auctioneer to sell goods by an

auction being an invitation to treat rather than an offer, he does not incur any liability by
not accepting the offer which is in the form of a bid. An auctioneer is free to cancel an
auction sale announced by him. In Harris V. Nickerson (1873) L.R 8 Q.B. 286, the
defendant advertised a sale by auction. The plaintiff travelled to the advertised place of
auction to find that the defendant had cancelled the auction sale. He brought an action
against the defendant to recover the expenses of his travel. It was held that he was not
entitled to the same as there was as yet no contract between parties, which could make
the defendant liable.

4) Quotation of prices sent in reply to a query regarding price: the quotation of the
price was held not to be an offer but invitation to treat. In Badri Prasad V. State of
Madhya Pradesh, the divisional Forest Officer wrote to the plaintiff: Kindly inform
whether you are ready to pay further Rs. 17,000 for the contract of big trees… Which
(contract) is under dispute at present. The contract can be given to you on this
compromise only…on the receipt of your reply the State Government will be informed.”
In reply to the above letter the plaintiff wrote back, “I am ready to pay Rs. 17,000
provided my claim to have the refund of Rs. 17,000 already paid, from the owner of the
village or any other relief consequential to the judgment of that case remains
unaffected… Subject to those conditions I shall pay Rs.17, 000 as required in your
referred letter.” The Supreme Court held that those letters had concluded no contract
between the plaintiff and the Government. The letter from the Divisional Forest Officer
seemed to be merely invitation to offer rather than offer. The letter in reply from the
plaintiff was an offer. It was further observed that even if the letter from Divisional Forest
Officer to the plaintiff is treated as an offer, there is no unconditional acceptance from
the plaintiff and such there is no contract in any case.