Revocation of Offer and Acceptance

Sections 4 to 6 of the Indian Contract Act, 1872; sections 10A and 13 of the Information Technology Act, 2000

In one minute

A proposal can be revoked (taken back) until the acceptance is put in a course of transmission to the proposer. An acceptance can be revoked until it reaches the proposer. After that, neither can be taken back.

Section 6 lists four ways in which a proposal ends. They are notice, lapse of time, failure of a condition, and the death or insanity of the proposer.

Emails and messages follow the same rules. The Information Technology Act, 2000 adds that a contract is not unenforceable only because it was made electronically.

Exam focus

Frequency: Occasionally asked
Usually asked as: Both (long answer and short answer)

Legal provision

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." An acceptance may be revoked at any time before its communication is complete as against the acceptor, but not afterwards.
Section 6: a proposal is revoked by (1) notice of revocation communicated by the proposer; (2) lapse of the prescribed time, or of a reasonable time if none is prescribed, without communication of the acceptance; (3) failure of the acceptor to fulfil a condition precedent to acceptance; (4) death or insanity of the proposer, if the fact comes to the acceptor's knowledge before acceptance.
Section 4, revocation: complete against the person who makes it when it is put into a course of transmission, out of that person's power. Complete against the person to whom it is made when it comes to that person's knowledge.
Section 10A, Information Technology Act, 2000: a contract is not unenforceable only because proposals, acceptances or revocations were expressed in electronic form.
Section 13, Information Technology Act, 2000: fixes the time and place of despatch and receipt of electronic records.

Meaning and definition

Revocation means taking back a proposal or an acceptance before it becomes binding. It is the offeror's power to change the mind, and the acceptor's power to do the same.

The law limits revocation for a reason. Once the other side has relied on a completed communication, taking it back would be unfair. So section 5 sets a last moment for each. For a proposal, the moment is the posting of the acceptance. For an acceptance, the moment is its arrival.

Can the proposal still be revoked by notice?How to read this: go down the boxes in order. A "No" answer sends you to the result beside the box.

1. Is the acceptance still not put in a course of transmission to the proposer? section 5
No: too late. The proposal cannot be revoked.
2. Has the proposer's notice of revocation come to the offeree's knowledge? sections 4, 6(1)
No: not revoked by notice. Check lapse, failed condition, and death or insanity (section 6(2) to 6(4)).
Both answers "Yes": the proposal is revoked. The offeree can no longer accept.

Detailed explanation

The four modes in section 6 are explained below, followed by the timing rule in section 5.

1. Notice of revocation (section 6(1))

The proposer may send notice of revocation to the other party. The notice works when it comes to the offeree's knowledge (section 4). It must reach the offeree before the offeree posts an acceptance.

Example. Anita offers her scooter to Bala for Rs 40,000. Next day she telephones Bala and says the offer is withdrawn. Bala has not accepted. The offer is revoked.

2. Lapse of time (section 6(2))

A proposal lapses if it is not accepted within the time it prescribes. If it prescribes none, it lapses after a reasonable time. What is reasonable depends on the subject matter. Ramsgate Victoria Hotel Co. Ltd. v. Montefiore shows this for company shares, where values change quickly.

Example. A trader in Vijayawada offers a lot of tomatoes at Rs 20 a kilo and states no time. Ten days later the buyer accepts. A court would say a reasonable time for a perishable item has passed, so the offer had lapsed.

3. Failure of a condition precedent (section 6(3))

If the proposal makes acceptance depend on a condition, and the acceptor does not fulfil it, the proposal ends.

Example. Meena offers her flat to Lata, on condition that Lata deposits Rs 1 lakh within a week. Lata does not deposit. The offer ends.

4. Death or insanity of the proposer (section 6(4))

The proposal ends only if the acceptor comes to know of the death or insanity before accepting. If the acceptor does not know, the section does not end the proposal.

Example. Sita offers her land to Hari and dies. Hari learns of her death and then writes his acceptance. The offer has ended. If Hari had accepted without knowing, section 6(4) would not end the proposal.

5. Revocation of an acceptance (section 5)

An acceptance can be revoked until its communication is complete against the acceptor, that is, until it comes to the knowledge of the proposer. The Act's illustration says the acceptor may revoke "at any time before or at the moment when the letter communicating it reaches" the proposer.

Example. Arjun posts an acceptance on 5 August. A courier carrying his revocation reaches Priya on 6 August, before his letter does. The revocation is effective.

6. State amendment in Uttar Pradesh

The Uttar Pradesh Act 57 of 1976 added an explanation to section 5 in that State. If an invitation to propose says that any proposal made in response must be kept open for a stated time, and a proposal is made accepting that condition, the proposal may not be revoked within that time.

Example. A Lucknow department invites bids and states that bids must stay open for 30 days. A contractor submits a bid on that condition. The contractor cannot revoke it within 30 days.

Revocation by electronic means

Sections 4 to 6 apply to emails and messages in the same way as to letters. Two questions arise for electronic modes. Is the contract valid, and when is communication complete?

Validity. Section 10A of the Information Technology Act, 2000 says a contract is not unenforceable only because the proposal, acceptance or revocation was in electronic form.
Timing. Section 13 decides when an electronic record is despatched and received, unless the parties agree otherwise. Despatch is when the record enters a computer resource outside the sender's control.
Completion of a revocation. Section 4 of the Contract Act still decides it. Against the sender, it is complete on despatch. Against the receiver, it is complete when it comes to the receiver's knowledge.

Example. A emails an offer to B and then emails a revocation at 9:55. B has not read it. At 10:00 B emails an acceptance. The revocation is not complete against B until it comes to B's knowledge. B's acceptance was complete against A when sent. So the revocation is too late, and a contract is formed.

Trimex International FZE Ltd. v. Vedanta Aluminium Ltd. shows a contract concluded by emails. The Supreme Court held that the acceptance sent by email was complete and unconditional, so a contract existed at once.

Don't confuse: revocation, lapse and counter-offer

All three end an offer, but in different ways. Students often mix them in answers.

Point	Revocation by notice	Lapse of time	Counter-offer
Who acts?	The proposer	Nobody. Time runs out	The offeree
Is notice needed?	Yes, it must reach the offeree	No	The reply itself rejects the offer
Section	6(1)	6(2)	7(1) and case law

Inside the concept. Kiran offers his bike and then tells Deepak on the phone that the offer is withdrawn. This is revocation by notice.

Just outside the concept. Kiran offers his bike "for three days". Deepak does not reply, and the offer ends on the fourth day. No notice was needed. This is lapse.

Common mistakes

Saying the proposer can revoke any time before the acceptance reaches him. The limit is the posting of the acceptance.
Forgetting that death or insanity ends a proposal only if the acceptor knows of it before accepting.
Ignoring lapse of time. An offer with no time limit still lapses after a reasonable time.
Treating an email as outside the Act. Sections 4 to 6 apply to emails.

Apply it

Problem

Kavya emails an offer to sell her laptop to Ravi for Rs 30,000. At 9:55 she emails a revocation. At 10:00 Ravi, who has not read the revocation, emails his acceptance. Is there a contract?

Issue. Was the proposal revoked before the acceptance was complete against Kavya?

Rule. A proposal may be revoked only before the acceptance is complete against the proposer (section 5). A revocation is complete against the receiver when it comes to the receiver's knowledge (section 4).

Application. Ravi had not read the revocation at 10:00. It was not yet complete against him. His acceptance was complete against Kavya when sent.

Conclusion. There is a contract, and the revocation is ineffective.

Leading case laws

Ramsgate Victoria Hotel Co. Ltd. v. Montefiore (1866)
Facts. Montefiore applied for 50 shares in a hotel company on 8 June 1864 and sent a deposit. The company allotted the shares on 23 November 1864. By then he had lost interest and refused to take them.

Principle. An offer with no time limit lapses after a reasonable time. Five months was too long for shares.

Why it matters. It is the standard case on lapse of time under section 6(2).
Trimex International FZE Ltd. v. Vedanta Aluminium Ltd. (2010)
Facts. Trimex made a commercial offer by email on 15 October 2007 for Australian bauxite. Vedanta confirmed five shipments by email at 3:06 p.m. on 16 October 2007. Vedanta later said there was no concluded contract.

Principle. The acceptance was complete and unconditional, and a later formal contract was not needed. The Supreme Court appointed an arbitrator.

Why it matters. It shows a contract concluded by an exchange of emails.

How to write this answer in the exam

5-mark answer

State section 5 in one line.
List the four modes in section 6.
Add one example with dates.
Cite Ramsgate Victoria Hotel Co. Ltd. v. Montefiore for lapse.

10-mark answer

Sections 4, 5 and 6, with the Act's illustration.
Each mode of revocation with an example.
Revocation of an acceptance.
Electronic modes: sections 10A and 13 of the Information Technology Act, 2000.
Cases: Ramsgate Victoria Hotel Co. Ltd. v. Montefiore, Trimex International FZE Ltd. v. Vedanta Aluminium Ltd..
A table of revocation, lapse and counter-offer.

Key points to remember

A proposal can be revoked until the acceptance is put in a course of transmission to the proposer (section 5).
An acceptance can be revoked until it comes to the proposer's knowledge (section 5).
Section 6 gives four modes: notice, lapse, failed condition, death or insanity known to the acceptor.
With no time limit, an offer lapses after a reasonable time (Ramsgate Victoria Hotel Co. Ltd. v. Montefiore).
A contract is not unenforceable only because it is electronic (section 10A, Information Technology Act, 2000).
Emails can conclude a contract (Trimex International FZE Ltd. v. Vedanta Aluminium Ltd.).

Quick self-test

1. Till when can a proposal be revoked?

Until the acceptance is put in a course of transmission to the proposer (section 5).

2. When does the death of the proposer end a proposal?

Only if the acceptor learns of it before accepting (section 6(4)).

3. Is a contract formed by email valid?

Yes. Section 10A of the Information Technology Act, 2000 says it is not unenforceable only for being electronic.