This Article is written by Yogini Satam of Viva college of law, an Intern under Legal Vidhiya
ABSTRACT
An offer and its revocation remains a pivotal element of contract law, shaping the dynamics of creation, permanence, and enforceability of legal agreements. The journey towards a legally binding agreement starts with a structured model based on offer and acceptance where an offer signifies the readiness of one party to contract on specific terms, and acceptance is the approval from the other party. There is, however, an important and sometimes contentious problem when an offer is revoked by the offeror before the offeree accepts it. This paper explores the legal implications, statutory frameworks, and evolving judicial interpretations of offer revocation focusing on the critical boundaries of legally permitted revocation and the potential repercussions afterwards.
This article starts with the general overview of the contractual framework as envisioned in the Indian Contract Act of 1872, specifically considering sections 2, 4, 5, and 6 which provide the legal principles governing proposals and reveresals. This paper critically evaluates the “postal rule” and its rationale in English common law whereby acceptance is considered complete at the moment the acceptance letter is sent, regardless of when it is received.
Additionally, the study looks at the relationship between the concepts of revocation and public law contracts, particularly in regard to government tenders, where the offer’s revocation prior to its deadline raises questions of administrative fairness and public accountability.
Lastly, the abstract references cross-border commercial contracts which may lead to conflict of laws due to varying rules regarding revocation. These conflicts can be addressed through international arbitration clauses, choice of law provisions, and treaties such as CISG but also show the need for more uniformity.
As such, this abstract seeks to illustrate the multifaceted aspects concerning the revocation of contract offers. It is not simply an exercise in procedure; it is a substantive right that interfaces with equity, statutory interpretation, public policy, and advances in technology. The timeframe within which an offer may be revoked, and the consequences that follow, is critical for lawyers, researchers, and companies. This is a comprehensive study aimed at explaining the doctrine of revocation, analyzing the existing legal structures, and suggesting how the law needs to change to ensure balance, certainty, and contemporary business needs.
INTRODUCTION
In contract law, the creation of a contract rests on the classical doctrine of offer and acceptance. An offer is a proposal made by one party (the offeror) to another party to form a contract that can be enforced at law provided that certain conditions are met. Acceptance constitutes a contract when communicated without conditions by the other party (the offeree). However, there exists a legally delicate gap in time between making an offer and accepting it: the time during which offer is still revocable. This concept of revocation—when and how an offer can be legally withdrawn—remains central to the study of contract law and is important in establishing the limits of legally binding promises, the freedom of parties to contracts, and commercial equity.
STATUTORY AND DOCTRINAL ANALYSIS UNDER THE INDIAN CONTRACT LAW
The Indian Contract Act, 1872 is the foundation of contract law within India and has express provisions controlling the making, communication, and revocation of acceptances and offers. Knowledge of the statutory law, more so Sections 3 to 6, is critical for analyzing the legal time period and effect of revocation. This section will discuss those provisions at length and address how they work in theory and practice.
Section 2: Definitions of Proposal and Acceptance
Section 2 defines the following key terms: The term revocation of an offer means the withdrawal of a proposal by the offeror before the proposal is accepted. This might sound simple in principle, but in practice it is a complex matter of timing, communication, intention, and effect. The Indian Contract Act, 1872, encapsulates this with Sections 4 and 5, which permit revocation at any point before acceptance is complete in terms of consideration for the offer. The case law developed on these provisions has sparked a continuous legal and scholarly discussion concerning the actual point in time when an offer is genuinely becomes irreversible, and what becomes of it after it is revoked.
This query takes on added importance in today’s era of real-time communication, cross-border commerce, and electronic contracting, where the conventional doctrines grounded on postal and physical exchanges—can no longer be sufficient or fair. The revocation doctrine must, thus, be interpreted not merely from statutory semantics, but also from judicial reasoning, comparative law analysis, and theory that underpins the form and ideology of contract law.
Proposal [Section 2(a)]: When any person expresses to another his willingness to do or to forebear from doing anything, with a view to getting the assent of the other, he is said to make a proposal.
Acceptance [Section 2(b)]: When the person to whom the offer is made expresses his assent thereto, the offer is said to be accepted.
A contract comes into being only on the basis of valid acceptance of a valid offer. Until then, the offer may be withdrawn, subject to the other provisions of the Act.
Section 3: Communication of Offer, Acceptance, and Revocation
Section 3 stipulates that communication is effected by any act or omission on the part of one party with the intention of communicating a proposal, acceptance, or revocation, or where such act or omission has the effect of doing so. This covers:
- Oral or written communication:
- Conduct amounting to revocation or withdrawal.
- The most important point to note here is that revocation communication has to be intended and effective.
Section 4: Bringing Communication to an End
Section 4 is crucial to the determination of the timing of revocation. It states:
“The communication of a proposal is complete when it reaches the knowledge of the party to whom it is made.
The communication of an acceptance is complete—
-as against the proposer, when placed in a line of transmission to him, so as to be beyond the control of the acceptor;
-as against the acceptor, when it reaches the knowledge of the proposer.
The communication of a revocation is complete—
-as against the maker of it, when it is placed into a line of transmission to the person to whom it is made, so that it is out of the control of the person who makes it;
-as against the person to whom it is made, when it reaches his knowledge.
This section establishes a two-pronged rule:
Revocation by the offeror is only effective when it reaches the offeree;
Acceptance is valid once it has been sent, hence not possible to revoke after such time.
This is referred to as the “dispatch rule for acceptance” and “receipt rule for revocation.”
Example:
If A sends an offer to B, and on Day 3 posts a letter of acceptance, but on Day 2 posts a letter of revocation which reaches B on Day 4, the revocation will not be effective. The acceptance is complete against A as soon as it is posted by B on Day 3.
Section 5: Revocation of Proposals and Acceptances
It enacts the rule of revocation:
A proposal can be withdrawn at any time prior to the communication of its acceptance being complete as against the proposer, but not thereafter.”
This supports that the offeror can withdraw the proposal only up to the time when the acceptance has been set out for transmission by the offeree. Once that is done, the offeror is committed to the contract, even though they have not yet learned of the acceptance.
The second half of Section 5 also permits revocation of acceptance but only prior to complete communication of acceptance as against the acceptor, i.e., prior to its reaching the proposer.
Section 6: Modes of Revocation
Section 6 highlights different modes of revocation:
1. By notice of revocation through communication by the proposer to the other party.
2. By expiration of the stipulated time for acceptance.
3. By failure on the part of the acceptor to comply with a condition precedent.
4. By the death or insanity of the proposer, in case the offeree learns before acceptance.
Revocation of Continuing Offers
A continuing offer is an offer that stands open for acceptance during a period of time. For instance, tenders or advertisements requesting bids are offers which are continuing. They could usually be revoked prior to acceptance in each case, but the revocation must be made prior to acceptance in each case.
In Shree Hanuman Cotton Mills v. Tata Air Craft Ltd., it was held that where an offer is for a limited period, it can still be revoked earlier unless the offeror is under consideration (e.g., under an option contract).
Interplay with Section 25: Agreements Without Consideration
Section 25 of the Indian Contract Act renders agreements without consideration void, except under specific circumstances. This becomes relevant when considering option contracts or agreements to keep offers open. If the offeree pays consideration for the promise to keep an offer open, revocation is not allowed. Without such consideration, even promises to keep an offer open are not binding.
Doctrine of Promissory Estoppel (Equitable Exception)
Though not enshrined in the Contract Act, Indian law has evolved the doctrine of promissory estoppel whereby one can be estopped from withdrawing an offer if the other has acted on it to their prejudice.
In Motilal Padampat Sugar Mills v. State of Uttar Pradesh, the Supreme Court was of the view that even without a contract, a representation made and acted upon could give rise to binding obligations.
This is a bar to revocation in some cases, particularly government and commercial contracts.
Revocation in Unilateral Contracts
In unilateral contracts, where the offer is accepted by performance (e.g., “I will pay ₹1,000 to anyone who finds my lost dog”), the question of revocation becomes more difficult.
The prevailing opinion, fortified in Indian law, is that once performance has commenced, the offer cannot be withdrawn at will. Courts have become more inclined to adopt this fair approach to safeguard the offeree’s effort and reliance.Theoretical Framework
The philosophy underlying contract law is founded upon the freedom to contract, a principle permitting parties to negotiate the terms and conditions of their engagement. Freedom from the obligation to accept an offer once it has been made is perceived as a corollary of this freedom. This right is non-absolute and is subject to a number of exceptions based upon public policy, equity, and commercial certainty. For instance, where an offeree has started performance in accordance with a unilateral offer, the right to revoke may be restricted by the law in favor of justice and reliance.
In addition, contract law differentiates between bilateral and unilateral contracts, and the rules of revocation vary between them. Where bilateral contracts involve mutual promises by each party, revocation is usually allowed until the exchange of communication of acceptance. In unilateral contracts, acceptance is by performance, and once performance has commenced, courts have generally found the offeror not to be able to revoke. These theoretical differences point to the complexity of defining the exact legal time period during which revocation is valid or allowed.
STATUTORY FRAMEWORK IN INDIA
The Indian Contract Act, 1872, is still the basis of the law of contracts in India. It has a comprehensive scheme of how offers are made, accepted, and withdrawn. Section 4 of the Act defines communication of proposals, acceptance, and revocation as:
“The communication of a proposal is complete when it reaches the knowledge of the person to whom it is made. The communication of an acceptance is complete — as against the proposer, when it is placed in a course of transmission to him, so as to be out of the acceptor’s power; and as against the acceptor, when it reaches the knowledge of the proposer.”
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.”
This rule introduces the idea of a two-point of reference: one for the offeror and another for the offeree. The meaning of these rules has been the subject of judicial exposition, especially where there had been delay or interruption in communication.
COMPARATIVE PERSPECTIVE
The doctrine of revocation is not confined to Indian law. Common law countries like the United Kingdom, United States, and Australia have comparable structures, albeit with variations. In the UK, the postal rule emerged in the 1818 case of Adams v. Lindsell and still informs the law of acceptance. In the US, according to Restatement (Second) of Contracts, revocation of offer is allowed until acceptance is accepted, but cases like option contracts and promissory estoppel have been identified to avoid inequity.
Digital Age and Challenges
Revocation doctrine has faced fresh challenges with the advent of electronic communication. Email, SMS, online contracting sites, and blockchain-based smart contracts complicate when a communication is sent, received, and comprehended. The Information Technology Act, 2000 of India touches upon some of the areas of electronic records and attribution but does not provide elaborate directions on contract formation or revocation in the digital arena.
Additionally, in e-commerce settings, where terms are routinely presented to the public and accepted by clicking “I Agree,” the nature of offer and acceptance has changed. Whether these offers may be withdrawn, and when, is a question that courts will increasingly confront over the next several years. In these kinds of contexts, traditional models of communication completion may no longer guarantee certainty or fairness.
JUDICIAL INTERPRETATION: CASE LAW ANALYSIS IN INDIAN AND COMMON LAW JURISDICTIONS
The provisions under statute mentioned above provide the foundation of the doctrine of revocation of Indian contract law. Nonetheless, it is through judicial interpretation that the laws are explained, expanded, and sometimes redefined. Both Indian and common law courts have been instrumental in defining the parameters of offer revocation, especially with regard to timing, method of communication, exceptions, and enforceability.
This part will conduct a critical review of milestone judgments and how they assist in the understanding of revocation, covering English, American, as well as Indian case law.
1. Payne v. Cave (1789)
Principle: An offer may be revoked at any time prior to acceptance.
In this instance, Cave placed the highest bid at an auction but revoked it prior to the hammer being brought down. It was held by the court that revocation was effective, as no contract had been formed yet. This case formulated the fundamental rule: a proposal is not binding until accepted and can be withdrawn until then.
2. Haridwar Singh v. Bagun Sumbrui (1972 AIR 1242)
Principle: Revocation is impossible after acceptance is complete.
The petitioner had made an offer which was accepted by the other party. The offeror attempted revocation after acceptance. The Supreme Court held that the revocation was ineffective as acceptance was already complete according to Section 4.
This case reiterated the position of the Indian Contract Act: revocation is of no use once acceptance is sent by the offeree.
Case law not only construes the law but typically develops or restricts its application through judicial creativity—especially through the adoption of equity, reasonableness, and commercial realism. Such decisions create a critical bridge between theory and practice in contract law.
TIME FRAME AND EFFECT OF REVOCATION IN PRACTICE
Revocation of an offer is not a theoretical or procedural but it has real practical consequences in the formation of a contract. The legal timeframe in which revocation will have to take place, and the impact that it will have on the rights and duties of the parties, is important to ascertain whether or not there is a binding contract.
LEGAL TIME PERIOD FOR REVOCATION-
1. Statutory Rule in India (Section 5 of Indian Contract Act, 1872)
Section 5 provides:
“A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.”
According to Section 4: Communication of acceptance is complete as against the proposer where the acceptance is put into transmission by the acceptor.
Thus, as soon as the offeree sends a letter of acceptance or dispatches it online, **revocation is no longer possible.
2. Legal Effect of Revocation
Revocation of an offer, when done within the legal time period with propriety, leads to the offer lapsing. This implies:
i) The offeree may no longer accept the offer.
ii) Any later attempt at acceptance is ineffectual in law.
iii) Where the offeree suffers loss in reliance on the offer, estoppel or damages in tort (e.g., negligent misrepresentation) are potential remedies.
a. Valid Revocation – No Contract Formed
b. Invalid Revocation – Contract Formed
3. Medium and Mode of Revocation: Digital Challenges
As digital communication has emerged, the old postal vs. oral distinctions are no longer applicable. Courts have needed to rethink what constitutes dispatch, receipt, and communication.
i) Email Revocation- Courts generally follow that email revocation is effective only when received (i.e., available to the recipient).
ii) Messaging Apps (e.g., WhatsApp)- Revocation is ineffective just on sending a message.
Courts can review, read receipts, delivery status, or even timestamps.
iii) Electronic Tender Platforms- Government and corporate tenders are progressively using e-portals. Revocation in these scenarios has to be done prior to submission deadline and in prescribed electronic format. Portals tend to lock submissions, preventing revocation after submission.
4. Revocation in Special Contexts
i. Tenders and Government Contracts- Standing offers (e.g., tender lists) may be revoked prior to acceptance of a particular order. In certain instances, though, revocation would be viewed as bad faith, especially when:
a. Public interest is involved;
b. Bidders have made an investment of costs;
c. Retraction is sudden or discriminatory.
Case Example: Shree Hanuman Cotton Mills v. Tata Aircraft Ltd. – Revocation was permitted but only prior to individual orders being placed under the standing tender.
ii. Online Auctions (e.g., ebay)- Bids are binding according to site rules. Revocation may be impossible once a bid is made or if the auction period ends.
iii. Unilateral Contracts- Offer requiring performance (e.g., reward offers) cannot be withdrawn once performance has started.
5. Equitable Effects and Doctrines
i. Promissory Estoppel- Revocation is prohibited if;
a. The offeree acted in reliance upon the offer;
b. The offeror could expect this reliance to arise;
c. Injustice would ensue on revocation.
ii. Detrimental Reliance – Particularly in commercial situations, courts will insist on compensation for expenses incurred on the basis of the offer. This is increasingly accepted in construction contracts, job offers, etc.
CONCLUSION
The doctrine of revocation of offer is at a turning point in contemporary contract law. It is at the same time a necessary tool of flexibility and a potential instrument of unfairness in the wrong hands. Traditional contract theory, although precise about timing, is short on equity, digital realities, and commercial expectations. Courts and legislatures have to balance the interest in safeguarding the autonomy of the offeror with that of avoiding the frustration of the reliance and legitimate expectations of the offeree. The advent of e-contracts, real-time communication, and automated transactions requires a modern legal response that breaks free from postal-era assumptions. Ultimately, legal reform on revocation of offer is not about abandoning tradition but bringing doctrine into line with twenty-first-century realities—ensuring the law of contracts remains a predictable, fair, and flexible instrument for private ordering.
Disclaimer: The materials provided herein are intended solely for informational purposes. Accessing or using the site or the materials does not establish an attorney-client relationship. The information presented on this site is not to be construed as legal or professional advice, and it should not be relied upon for such purposes or used as a substitute for advice from a licensed attorney in your state. Additionally, the viewpoint presented by the author is personal.
0 Comments