Indian Legal System > Civil Laws > Indian Contract Act, 1872 > Revocation of Acceptance
In contract proposal and acceptance of proposal are important ingredient. In last few articles, we have discussed, proposal, types of proposal, revocation of proposal and acceptance. In this article, we shall discuss revocation of acceptance in details.
Section 3: Communication, acceptance and revocation of proposals:
The communication of proposals the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.
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.
Illustrations:
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.
The word ‘revocation’ means “taking back”. The Indian Contract Act lays out the rules of revocation of an offer and acceptance in Section 5. It says an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. . Once the proposer receives communication of acceptance, revocation of the acceptance is not possible. In England, once letter of acceptance is posted, it binds both the parties and there appears to be no scope of revocation of acceptance by sending a telegram or through a phone call.
Section 3 of the Act, lays down that the communication of proposal, acceptance, and revocation is must. It may be expressed or implied. The express communication can be written, through emails, telegraphic, telephonic, minutes of a meeting, words of mouth or conduct. Thus revocation acceptance may be communicated in any way which has the effect of laying before the offeror that there is revocation of the acceptance but it should satisfy the criteria given in the Act.
Section 5 para 2 lays down that an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards..
While Section 4 provides the time at which communication of acceptance and revocation of proposal and acceptance is complete, Section 5 first provides that both proposal and acceptance can be revoked, and secondly gives time before which the right of revocation should be exercised. Section 5 must be read along with Section 4.
Understanding Time Line of Revocation of Offer:
If the post is the correct method of acceptance, then acceptance takes place as soon as the letter is posted and not when it arrives. Provided the letter is properly stamped and addressed. Posted means put in control of post office, or one of its employees authorized to receive letters.
‘A’ offers by a letter dated April 2, sent by post, to sell his house to B at a certain price. B accepts the offer on April 6 by a letter sent by post. The letter reaches A on April 8 at 2 p.m. Here B may revoke his acceptance at any time before 2 p.m. on April 8, but not afterwards.
Sometimes, an interesting situation may arise. The letter of acceptance and the telegram containing revocation of acceptance may be delivered to the offeror at the same time. In such a situation the formation of a contract is a matter of chance. Which one is opened first by the offeror will decide the issue. Generally it is presumed that a man of ordinary prudence will first read the telegram. Hence, the revocation will be quite effective. When the parties at distant places communicate over telephone or telex, the question of revocation does not arise because there is instantaneous communication of the offer and its acceptance. The offer is made and accepted at the same time. In brief you should remember that an offer can be revoked at any time before the letter of acceptance’ is posted and an acceptance can be revoked before it reaches the offeror.
In Entores Ltd v Miles Far East Corporation, [1955] 2 QB 327 case, the Plaintiffs (Entores) were an English Company and the Defendants (Miles Far East Co) were an American corporation with agents in various locations, including Amsterdam. An offer and acceptance in relation to a contract for Japanese cathodes was made between the companies in London and Amsterdam. Specifically:
- the Plaintiffs (in London) sent an offer by telex to the Defendants (in Amsterdam).
- the Defendants (in Amsterdam) sent an acceptance by telex to the Plaintiffs (in London)
The issue was when the contract entered into force, as this would determine whether Dutch or English law would apply to the contract. Specifically, the Court was required to determine whether the postal rule (providing that acceptance occurs when and where the letter is sent) applied to telex communications.
The court held that the contract and damages were to be decided by English law. It was stated that the postal rule did not apply for instantaneous communications. Since Telex was a form of instant messaging, the normal postal rule of acceptance would not apply and instead, acceptance would be when the message by Telex was received. Thus, the contract was created in London. This general principle on acceptance was held to apply to all forms of instantaneous communication methods. Acceptance via these forms of communication had to be clear before any contract is created.
Conclusion:
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 England, once letter of acceptance is posted, it binds both the parties and there appears to be no scope of revocation of acceptance by sending a telegram or through a phone call.
Under the Indian Contract act, 1872, an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. Once the proposer receives communication of acceptance, revocation of the acceptance is not possible.