Introduction:
The Indian Contract Act defines a contract as a legally binding agreement. Deconstructing the phrase agreement reveals that it necessitates both parties' voluntary permission to fulfill a promise, competent to contract with each other, in exchange for a lawful value and a lawful goal. To enter into a contract or agreement, one side must make an offer or proposition, and the other must accept it explicitly or implicitly. However, either party may seek to revoke the contract at any time. The person making the offer or the party receiving the offer can rescind the offer.
The other party must accept a proposal to constitute a legally binding contract. Suppose the other party accepts a proposal and properly conveys it to the party who proposed. In that case, it becomes a legally binding contract, as long as the object and consideration are legal and the parties want to form a legal relationship. The parties cannot back out of their respective promises once the contract becomes binding.
An offer is made when one person indicates his desire to perform or refrain from performing something in exchange for the other's acceptance. Acceptance is irrevocable in English contract law; nevertheless, acceptance is often revocable in Indian contract law. The Revocation of acceptance is mainly addressed in Section 5 of the Indian Contract Act.
According to contract law, an acceptance may be retracted at any moment before it is complete as against the acceptor, that is before the offeror receives the notification of the acceptance or has knowledge of it. As a result, the offeror must receive the cancellation of the acceptance before the original acceptance.
Acceptance:
The definition of acceptance is found in Section 2(b) of the Indian Contract Act. The proposal or offer is said to be accepted by a person to whom the proposal has been made when that party has shown consent to accept the offer or proposal.
When the proposal is approved, the two parties enter into legal relations. Effective communication and a clear understanding of it are critical to avoid misunderstandings between all parties. When the parties converse face to face, communication occurs in real-time, and the offer and acceptance can be made on the spot, avoiding any misunderstanding. However, letters, emails, and other forms of communication are frequently used in business. In this instance, the communication timeframe is critical.
If the offeror gives the option of accepting within a specific time frame, he has the right to revoke the offer before that time frame expires. One could argue that it is valid as long as the revocation is made before acceptance. This is supported by the Madras High Court's decision in Alfred Scholank vs Muthunyna Chettii, which held that in the lack of consideration for the promise to keep the offer available for a while, the promise is only a promise.
Communication of Acceptance:
In contract law, an offer is only complete when communicated to the other party and accepted by them. The offer can be sent via any standard method, such as mail, email, phone, or word of mouth.
Furthermore, because an offer only becomes a contract if the individual to whom it was delivered grants their agreement, a notice of acceptance of an offer is also required.
There are two elements to consider when communicating acceptance: the form of acceptance and the moment of acceptance. Acceptance can take the form of a spoken or written communication (through phone, letters, e-mails, fax, etc.) or a behavior such as boarding a bus.
Revocation of Acceptance:
When a proposer makes an offer, and the acceptor accepts it and informs the proposer. The acceptor can rescind this acceptance before the proposer receives the notification of acceptance. That is before the acceptance communication to the acceptor is complete. There can be a legal revocation of acceptance if the revocations of acceptance reach the proposer before the acceptance comes to the proposer's awareness. The Revocation of Acceptance is complete only before the acceptance transmission is complete against the acceptor and not after.
A unique circ*mstance may develop from time to time. The offeror may get both the acceptance letter and the telegram with the retraction of acceptance at the same time. Establishing a contract in such a situation is a question of luck. The issue will be decided by which one the offeror opens first. It is assumed that a prudent man will read the telegram first in most cases.
As a result, the revocation will be pretty effective. At the same time, the offer is made and accepted. In summary, an offer can be canceled at any time before the mailing of the letter of acceptance, and an acceptance can be rescinded before it reaches the offeror.
Revocation of acceptance will be subject to the same communication regulations as revocation of the offer. When it comes to knowledge, the communication is entirely against the proposer.
Acceptance can also be rescinded until the acceptance is communicated to the acceptor, according to Section 5. After that date, there will be no withdrawal of acceptance.
Communication of Revocation of Acceptance:
As against the person who makes it, the communication of a revocation is complete when it is put into a channel of transmission to the person to whom it is made so that it is out of the person's power; as against the person to whom it is made when it comes to his knowledge.
A proposal can be canceled by the offeror or at any moment until the offeree sends the acceptance communication, but not after that.
On the other hand, the offeree has the right to rescind his acceptance at any point before or after the post transmitting it reaches the offeror.
Once an offer has been disclosed to the offeree, it can be regarded legitimate. In contract law, an offer is only complete when communicated to the other party and accepted by them. The offer can be sent via any standard method, such as postal, email, phone, or word of mouth.
Furthermore, because an offer only becomes a contract if the individual to whom it was delivered grants their agreement, a notice of acceptance of an offer is also required.
Difference Between Revocation of Acceptance and Revocation of
offer:
It should be remembered that either the offer or the acceptance must be revoked before the contract can be formed. However, there is a distinction between the point at which the offeror and the acceptance commence their contractual obligations. The moment the acceptor posts the acceptance, i.e., the acceptance leaves the acceptor's hands, the offeror is considered to be bound by the contract. As a result, the proposer must cancel the contract before the acceptance is posted against him.
When the acceptance is brought to the proposer's attention, the acceptor is bound by the contract. As a result, he may cancel the acceptance before or after the offeror receives the notification of the acceptance
Case Law:
1. Cave vs. Payneii:
The respondent made the highest bid for the plaintiff party's merchandise at an auction, but he withdrew his offer before the auctioneer's final call. The respondent was found not to be obligated to purchase the products. His offer totaled an offer that he could withdraw at any time until the auctioneer indicated acceptance by hammering down the mallet.
Note: The customary law rule for this case is now codified in Section 57(2) of the Sale of Goods Act 1979.
2. Charles Miles v. Martin Walfordiii:
Dickinson accepted Dodds' offer to sell a property for £800. According to Dodd's offer letter, the offer was to be open until June 12th, 9 a.m.. Dodds offered the house to the third party on June 11 morning, and Dickinson was told of the sale later that day. Dickinson needed to acknowledge Dodds' offer by June 12 at 9 a.m. on Friday, so he wrote a formal letter.
It was decided that there was no acknowledgment. The offeree realized that Dodds’ had not yet rejected him providing property to him. Therefore the offer was withdrawn completely.
3. Countess of Dunmore v Alexanderiv:
The revocation was allowed in this circ*mstance since the two messages arrived simultaneously. The case is frequently referenced in favor of the idea that an acceptance can still be rescinded by a letter sent to the offer or before the acceptance letter is sent.
Conclusion:
By accepting the contract's terms and conditions, both parties enter into a legal partnership to perform the deal. An invalid acceptance cannot bind the parties in a legal relationship. If the offer is not adequately accepted, the parties cannot initiate a lawsuit in a court of law. Even though the other party has breached the contract, you can still sue the other party will not be obligated to pay any money. Always make an acceptance that complies with the Indian Contract Act's standards for acceptable acceptance.
To summarise, both the proposal and the acceptance can be revoked, before a legal contract is formed. To create a binding contract, a proposal can be rescinded at any point until the acceptance is full against the proposer. And an acceptance can be canceled at any moment before the acceptance is fully communicated to the acceptor.
References:
Bibliography:
• Indian Contract Act, 1872
• Sales Good Act, 1979.
Citation:
i. Alfred Scholank vs. Muthunyna Chetti - (1892) 2 MLJ 57
ii. Cave vs. Payne - (1789) 3 TR 148
iii. Charles Miles v. Martin Walford - [1992] ADR.L.R. 01/23
iv. Countess of Dunmore v Alexander - (1830) 9 S. 190
This article is written by R.A.Aswin Krishna of IFIM Law School.