The party who makes the offer is known as the offeror, and the party who accepts the offer is known as the offeree. Termination of offer is where the offer is terminated before the other side(offeree) has the opportunity to accept or reject it.  There are a number of ways for an offer to be terminated. An offer is terminated in the following circumstances:

• Revocation
• Rejection
• Lapse of time
• Conditional Offer
• Operation of law
• Death
• Acceptance
• Illegality

Termination of Offer by Revocation:

The word ‘revocation’ means “taking back”. The Indian Contract Act lays out the rules of revocation of an offer in Section 5. It says the offer may be revoked anytime before the communication of the acceptance is complete against the proposer/offeror. Once the acceptance is communicated to the proposer, revocation of the offer is not possible. An offer can be revoked at any time before acceptance takes place. However, the revocation must be communicated effectively directly or indirectly to the offeree before acceptance.

In Payne v Cave, (1789) 3 TR 148 case, the claimant put his goods up for sale at a public auction. The defendant made the highest bid, but then changed his mind. He purported to withdraw the bid before the auctioneer’s hammer fell. The claimant argued that there was a completed contract and the defendant had to pay for the goods. The Court held in favour of the defendant. The defendant’s bid was an offer, which had been withdrawn before it was accepted. As such, there was no contract.

In Byrne v Van Tien hoven, [1880] 5 CPD 344 case, Van Tien hoven offered to sell goods to Byrne by letter dated 1st October. Byrne received the letter on 11th October and telegraphed an acceptance on the same day. On 8th October Van Tien hoven posted a letter revoking the offer. This letter was received by Byrne on 20th October. Van Tien hoven refused to go through with the sale. The Court held that to be effective revocation must be communicated. Where post is used for acceptance, acceptance occurs when and where sent (provided it is contemplated as a means of acceptance) (the ‘postal rule’). However, this rule does not apply in relation to revocation of offers – if post is used for revocation, communication is only effective if and when it is received by the offeree. In this case receipt of the revocation occurred after acceptance with the result that there was a contract formed in this case.

Termination of Offer by Rejection:

The refusal of an offer by the offeree is called rejection. An offer is terminated when the offeree communicates his rejection to the offeror. Once an offer has been rejected, it cannot subsequently be accepted by the offeree. A counter-offer ranks as a rejection, but a mere inquiry as to the possibility of varying some term does not.

In Hyde v. Wrench, (1840) 49 ER 132 case, the defendant(offeror) offered to sell his farm for £1000 but the Plaintiff(offeree) offered him £950 and subsequently rejected the offer. So, the offeree filed the case as the offeror was bind by the contract but it was held that as soon as offeree put the condition the first offer becomes void which means that the offeror is not bounded by the contract as the original offer was rejected by the offeree.

In Stevenson, Jacques v McLean, (1880) 5 QBD 346 case, the defendant possessed several warrants for iron. He wrote the claimant in London asking them if they could find him a buyer. After negotiations, the defendant stated that 40s per ton was the lowest price he was willing to sell for. He told the claimant that this offer was open until the following Monday. The claimants sent a telegram on Monday morning asking if the defendant agreed to delivery over two months, and if not, how long he could give. The defendant did not respond, and sold the warrants to a third-party later that day. Before he informed the claimant of this, they sent another telegram in the afternoon accepting the defendant’s offer. The claimant sued the defendant for damages for non-delivery of the iron. The defendant argued that the claimant’s first telegram was a counter-offer, and therefore that his original offer had been revoked. The Court held in favour of the claimant. The first telegram was merely an inquiry for information, not a counter-offer. While the defendant could have revoked his offer at any time on Monday, he failed to do so before the offer was accepted. There was therefore a completed contract between the parties. A mere inquiry would not be considered as rejection.

Termination of Offer by Lapse of Time:

Where in a contract, a fixed time has been prescribed to the offeree to communicate the acceptance, the offeree is bound to accept the offer within the fixed time so prescribed because after the expiry of the fixed time the offer lapses. The validity of the offer by the offeree would not be affected if the letter of acceptance so posted within the stipulated time reaches the offeror after the completion of the specified time (Postal Rule). Where there is no express time limit, an offer is normally open only for a reasonable time. The length for a reasonable time will depend on the circumstances of the case with respect to offers involving other types of subject matter, definition of a reasonable time depends upon the demand for the subject matters and upon the volatility of its price.

In Ramsgate Victoria Hotel v Montefiore, case, the defendant, Montefiore wanted to buy shares in the complainant’s hotel (Ramsgate Victoria Hotel). He communicated his offer to the complainant that he wanted to buy shares in the hotel at a certain price. After six months, the complainant accepted the offer. However, by this time, the value of shares had gone down and Mr. Montefiore was no longer interested in buying shares. The defendant did not formally revoke the offer, but he did not proceed with the sale. The Complainant brought an action against the defendant for specific performance of contract. The Court passed an order in favour of the defendant. The Court held the company’s claim for specific performance was not successful because the Company had sufficient time to accept the defendant’s offer. Six months was sufficient time to accept an offer. The company accepted the offer after six months so, it was no longer valid due to expiry / lapses of a reasonable period of time. The Court was of the view that an offer must be accepted within the prescribed time and if a time is not prescribed, then it must be accepted within a reasonable period of time.

In Dickinson v Dodds, case, on 10th June Dodds offered to sell house to Dickinson, stating: this offer to remain open until 9.00am on 12th June. Dickinson decided to accept on 11th June but did not advise Dodds immediately. Later on the 11th, Dickinson was informed by a third party that Dodds had sold to someone else. Dickinson then purported to accept the offer. Dodds replied that it was too late – the property had already been sold. The Court held that no particular form of revocation is required. All that is required is that the offeror in some way conveys (directly or indirectly) to the offeree that s/he had changed his or her mind about the offer. There was no question that this had occurred here – Dickinson knew Dodds was no longer prepared to sell before purporting to accept. The promise to keep the offer open was not binding because it was not supported by consideration.

Termination of Offer by Condition:

An offer which expressly provides that it is to terminate on the occurrence of some condition cannot be accepted after that condition has occurred; and such a provision may also be implied. In other words, termination of an offer may also occur due to a condition not being met.

In Financings Ltd v Stimson, [1962] 3 All ER 386 case, the parties entered into a hire-purchase agreement for a car. The claimant, a finance company, gave the dealer authority to draw up the agreement on its behalf. That agreement stated that it would only be binding on the claimant once the claimant had signed and accepted it. Two days later, before the claimant signed the agreement, the defendant informed the dealer that he no longer wanted to go through with the agreement. The night before the claimant signed the agreement, the car was stolen from the dealer. By the time the car was found, it had been damaged. The claimant sued the defendant for the price of the car, minus a deduction for the value of the damage. The defendant then argued that he was not obliged to pay, because he had revoked his offer before the claimant signed the agreement. The Court of Appeal held in favour of the defendant. The dealer acted as the claimant’s agent. In that capacity, he had ostensible authority to accept the defendant’s revocation of the offer. Since the claimant had to sign the contract to accept the offer, and they had not done so before the offer was revoked. Therefore, there was no contract. Additionally, the Court held that the offer was conditional on the car being in the condition it was when the offer was made. As such, even if the offer had not already been revoked, it was no longer capable of being accepted once the car was damaged.

Termination of Offer by Operation of Law

If there is no option contract, death or incapacitation of either party prior to acceptance will terminate the offer. It does not need to be communicated to the other party either. Death and incapacity do not terminate irrevocable offers. If the laws change prior to acceptance of the offer, the law will terminate the offer because it would become a void contract. In the event that the subject matter of the offer is destroyed prior to acceptance, this constitutes termination of the offer as well.

Termination of Offer by Death or Mental Incapacity:

The right to accept an ordinary offer is not transferable. Thus, the death of either the offeror or the offeree will cause termination of the offer. The unaccepted offer of a deceased person cannot be converted into a contract binding upon his estate.

In Raja of Bobbili v. A. Suryanarayana Rao, (1919) 42 Mad 776 case, an auction sale was held by the Court, the bid was subject to its sanction or acceptance by the Court but before the Court could accept it, the bidder died and it was held that on the death of the bidder his bid stood revoked.

In Reynolds v Atherton, (1922) 127 LT 189 case, the claimant were a firm of cotton brokers. They acted under a brokerage contract with the defendant, a cotton spinning company. In order to renew their contract, the claimant purchased various shares in the defendant. In 1911, the claimant wrote the company a letter addressed to the directors. It stated that the claimants were willing to transfer their shares, while they remained the defendant’s broker. The defendant acknowledged the letter but did not respond until 1918. By that time, the shares had risen considerably in value and the composition of the defendant’s board of directors had changed. Three directors had also died. The defendant sent a letter purporting to accept the claimant’s offer on behalf of the directors who had run the company in 1911 (including the estates of those who had died). The claimant sought a declaration that there was no enforceable contract. The House of Lords held in favour of the claimant. The claimant had made their offer to the board of directors as an entity, whose composition might change. They had not made the offer to the particular directors who ran the company in 1911. The defendant’s letter had therefore not properly accepted the offer.

Termination of Offer by Acceptance:

Once the offer was accepted by the offeree, the contract is formed and brought the offer to an end. It can be made either orally, in writing, or by the implication of conduct when they are received by the offeror.

In Felthouse v Bindley, (1862) EWHC CP J35 case, the complainant, Paul Felthouse, had a conversation with his nephew, John Felthouse, about buying his horse. After their discussion, the uncle replied by letter stating that if he didn’t hear anymore from his nephew concerning the horse, he would consider acceptance of the order done and he would own the horse. His nephew did not reply to this letter and was busy at auctions. The defendant, Mr Bindley, ran the auctions and the nephew advised him not to sell the horse. However, by accident he ended up selling the horse to someone else. The Court held that there was no contract for the horse between the complainant and his nephew. There had not been an acceptance of the offer; silence did not amount to acceptance and an obligation cannot be imposed by another. Any acceptance of an offer must be communicated clearly. Although the nephew had intended to sell the horse to the complainant and showed this interest, there was no contract of sale. Thus, the nephew’s failure to respond to the complainant did not amount to an acceptance of his offer.

Illegality:

Finally, a change in the law which makes a potential contract illegal will terminate an offer, since courts will not enforce an illegal contract.

Conclusion:

Termination of an offer is not the same as contract termination. In the case of termination of an offer, the contract was not fully formed. Termination of an offer ends the power of the offeror to perform. A termination of offer can only be terminated prior to the offeree accepting it. It can happen by one of the party’s actions or operation of law.

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A proposal is main ingredient of a valid contract. The term “proposal” of the Indian Contract Act is synonymous to the term “Offer” in English law. Section 2(a)of the Indian Contract Act, 1872 defines proposal as “when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal”. The person making proposal/offer is called the proposer/offeror and the person to which the proposal is made is called propose or offeree. In this article, we shall discuss types of offer. Section 9 talks of an express offer, express acceptance, implied offer, and implied acceptance. in this article, we shall study communication of offer.

Communication means imparting or exchanging information by speaking, writing, or using some other medium. Chapter I of the Act deals with the communication, acceptance, and revocation of Proposal. An offer and its acceptance, to be valid must be communicated to the other party. Similarly, the revocation offer should be communicated to the offeree by the offeror.

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 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.

Illustrations

a) A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter.

(b) B accepts A‟s proposal by a letter sent by post. The communication of the acceptance is complete, as against A when the letter is post; as against B, when the letter is received by A.

(c) A revokes his proposal by telegram. The revocation is complete as against A when the telegram is dispatched. It is complete as against B when B receives it. B revokes his acceptance by telegram. B‟s revocation is complete as against B when the telegram is dispatched, and as against A when it reaches him.

Communication of Offer:

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 proposal may be communicated in any way which has the effect of laying before the offeree the willingness to do or abstain.

Section 4 para 1 of the Act lays down that the communication of an offer is complete when it comes to the knowledge of the person to whom it is made. When an offer is made by post, its communication will be complete when the offeree receives the letter. In face to face or telephonic conversation, the instant the offeree listens to the offer by the offeror, the communication is complete.

Thus when the offeree (in case of a specific offer) or any member of the public (in case of a general offer) becomes aware of the offer, the communication of the offer is said to be complete.

Understanding the TimeLine of Communication of Proposal:

• A and B are sitting together on a coffee table. A offers his Car for ₹ 2,00,000 to B. The offer reaches the ears of B, the offer of A is complete.
• A calls B on a telephone and offers his Car for ₹ 2,00,000 to B. The offer reaches the ears of B, the offer of A is complete.
• A of Agra by a letter to B of Bhatinda offers his car for ₹ 2,00,000 through by a letter dated on 15^th August 2017. B receives the offer letter on 17^th August 2017. Now the communication of offer is complete on 17^th August 2017 for B (Offeree) and on 15^th August 2017 for A (Offeror).

Case Laws:

In Ram Krishan Singhal v. Executive Engineer, ILR v(1991) 1 Del 275 case, the Court held that a contract can come into existence between the parties by the exchange of letters.

In SBI v. Aditya Finance & Leasing Co. Pvt. Ltd. AIR 1999 Del 18 the Court inferred a lease contract from the correspondence and minutes of the meeting between the parties.

In P. Syamala v. R. Gopinathan (2004) 1 CTC 117 case, there was an oral agreement of sale of property and seller received cheques for the price and encashed them. Court held that in this case, the oral agreement is valid because there was the conclusion of the oral contract and subsequent sale of the property by the seller to subsequent buyer is invalid.

In T. Jayram Naidu v. Yashodha, AIR 2008 NOC 972 (Mad) case, the Court held that an oral agreement for sale is valid and enforceable, proving such agreement may be difficult, but when proved, valid.

In Lalman Shukla v. Gauri Datt (1913) All LJ 489 case A’s nephew has absconded from his home. He sent his servant to trace his missing
nephew. When the servant had left, A then announced that anybody who has discovered the missing boy would be given the reward of Rs.500. The servant discovered the missing boy without knowing the reward. When the servant came to know about the reward, he asked for the same from A. A refused to give the reward. The servant brought an action against A in the court of law to recover the same. But the court held that when the servant discovered the boy, he was not aware of the reward. Thus the offer was not communicated to him. Hence he is not liable to get the reward from A.

In Taylor v. Laird, 25 L.J. Ex. 329 case, the plaintiff was employed as the captain of a ship which was owned by the defendant. Whilst in a foreign port during the course of the voyage, he voluntarily gave up his position as a captain and worked as an ordinary crew member during his passage back to Britain. The defendant was not made aware of this change of position. Upon his return, he sought to claim wages from the defendant for his work as a crew member during this journey. The court held that the plaintiff has not communicated his offer to work as a crew to the defendant and hence he had not entered into any contractual agreement with the defendant for the performance of his work as an ordinary crew member.  hence the plaintiff is not entitled to wages for the return journey.

In Felthouse v Bindley, (1862) EWHC CP J35 case, the complainant, Paul Felthouse, had a conversation with his nephew, John Felthouse, about buying his horse. After their discussion, the uncle replied by letter stating that if he didn’t hear anymore from his nephew concerning the horse, he would consider acceptance of the order done and he would own the horse. His nephew did not reply to this letter and was busy at auctions. The defendant, Mr Bindley, ran the auctions and the nephew advised him not to sell the horse. However, by accident he ended up selling the horse to someone else. The Court held that there was no contract for the horse between the complainant and his nephew. There had not been an acceptance of the offer; silence did not amount to acceptance and an obligation cannot be imposed by another. Any acceptance of an offer must be communicated clearly. Although the nephew had intended to sell the horse to the complainant and showed this interest, there was no contract of sale. Thus, the nephew’s failure to respond to the complainant did not amount to an acceptance of his offer.

Postal Acceptance Rule:

Adams v Lindsell, decided two centuries ago, is well-known as a source of what we now call the ‘postal acceptance rule’: the rule that a contract entered through postal correspondence is concluded when the offeree posts his letter of acceptance, rather than when the offeror receives the letter. This rule is often thought to be an exception to the more general principle that a contractual agreement is concluded when the offeree’s acceptance is communicated to the offeror.

In Adams v. Lindsell, 106 ER 250 (KB) case, on September 2, 1817, Lindsell (defendant), a dealer in wool, sent a letter to Adams (plaintiff), a manufacturer of wool, offering to sell Adams a certain amount of wool. The offer provided for acceptance by written notice sent through regular mail (“in course of post”). Based on the timing of sending the letter, Lindsell expected to receive a response from Adams by September 7th. However, Lindsell sent the letter to the wrong address, and Adams did not receive the letter until September 5th. That evening, Adams wrote an acceptance of the offer and mailed it back to Lindsell. Lindsell received Adams’s acceptance on September 9th. However, because Lindsell had not received a response from Adams as expected on September 7th, Lindsell sold the wool it had originally offered to Adams to a third party on September 8th. Adams brought suit against Lindsell for breach of contract. The trial court held that Adams’s acceptance was valid when placed by Adams in the mail, and that any delay in receiving the acceptance was caused by Lindsell’s failure to send the initial offer to the correct address. The trial court entered judgment for Adams, and Lindsell moved for a new trial.

Instant Communication:

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:

Communication means imparting or exchanging information by speaking, writing, or using some other medium.  A communication is the building block of any contract, without this there cannot be a contract. An offer and its acceptance, to be valid must be communicated to the other party. Similarly, the revocation offer should be communicated to the offeree by the offeror.

Effective communication of the offer and a clear understanding of it is important to avoid misunderstanding between all the parties. When the parties are talking face-to-face the communication takes place in real-time and on spot. Hence there is almost no confusion. For other forms of communication, the communication should be clear and unambiguous. At the same time, the timeline of communication is important.

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