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A Brief Overview of lapse of Offer

The Indian Contact Act, 1872, defines the term contract under Section 2(h) as follows:
An agreement enforceable by law is a contract. For a better understanding it can be bifurcated into two parts:
  1. There should be an agreement, and
  2. that agreement must be enforceable by law. The term agreement is defined in section 2(e) of The Indian Contract Act as:
    Every promise and every set of promises forming the consideration for each other.

The process of definition can be stated in a succinct way as follows: A contract is an agreement; an agreement is a promise and a promise is an accepted proposal. Hence every agreement, is the product of a proposal from one side and its acceptance by the other.

The term Revocation has been defined as annulment or cancellation of a statement, document, or offer not yet accepted, or cancellation of a contract by the parties to it[1]. For example, a person can revoke a will an offer to enter into a contract. In the law of contract, a contract is entered into between two or more parties when one party makes an offer to another with a view to obtaining the assent of the other party to the offer and a binding contract is entered into after the offer of the individual has been accepted.

However, the parties to the contract are free to withdraw both the offer and the approval at a later stage. The procedure and the rules of revocation are laid down in Section 5 and Section 6 of The Indian Contract Act,1872.

There are four ways of termination of an offer and they are:
  1. Notice of revocation
  2. Lapse of time
  3. By failure to accept condition precedent
  4. By death or insanity of offeror

It is stated in Section 5 that "a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards". It implies, therefore, that the communication of revocation, in order to be successful, must reach the offeree before he sends his acceptance by mail and removes it from his control. Revocation is successful only if it is brought to the knowledge of the person to whom the offer is made.

In Henthorn V. Fraser[2], The secretary of a society handed over to the plaintiff in the society's office an offer to sell the property at �750, granting him the right to accept the property within fourteen days. The plaintiff stayed in another town and took the offer to that city with him. The next day, about 3.50 p.m. He submitted his letter of acceptance by mail. This letter was received at 8.30 p.m. in the company's office. But before that at about 1.00 p.m. The company sent a letter revoking its proposal. The plaintiff obtained the letter of revocation at 5.30 p.m. The revocation was found to be unsuccessful.

The principle is then fixed that the offeror should apply a notice of revocation to the offeree before entering into the transmission that is then out of its control. It is not approved. The example attached to Section 5 demonstrates the above law. 'A' offers by letter 'B' his selling home. B approves the proposal through a postal office by way of approval. In that case, A can at any time withdraw his offer before or when B posts his acceptance letter.

Section 5 of the Indian Contract Act provides for rules on the revocation and approval of proposals. The Section says that it would be possible to withdraw the proposal at any time before the correspondence of approval is complete, but not thereafter. While revoking of acceptance can be done at any time before the acceptance against the acceptor can be completed, this cannot be done thereafter.

Withdrawal before expiry of fixed period.
In the event that the offeror prescribes to the offeree a certain period of time during which the offeree can accept the offer. The offeror has the authority to withdraw the offer even before the time limit has expired.

In Alfred Schonlank and Anr. V. A. Muthunayana Chetti[3], The defendant made an offer to sell the Indigo to the complainant and told the complainant he ought, in eight days' time, to respond to his proposal. The defendant also revoked the plan on the fourth day after its presentation. On the fifth day following the date of the proposal, the plaintiff approved the motion. In the eyes of the law, the High Court held that acceptance may be of no use because it can be claimed, on principle as well as on the authority, that where the commitment to open the offer is not considered, nothing exists but a nudum pact or a pure promise.

In Tenax Steamship Co v Owners of the Motor Vessel Brimnes[4], The ship named Brimnes was owned by the defendants, the owners of the Brimnes Motor Vessel. They agreed to sell it to the plaintiff, provided that the ship was returned to them on time. The hire invoice was later than agreed on several occasions. The plaintiff demanded that the vessel be withdrawn from service via the Telex letter. During normal business hours, this telex message was sent.

However, the defendant read it just the next day and paid for it already It was held that when the message Telex was sent, the withdrawal was successful, not when the message was read. The staff forgot to give due attention to the Telex system because the Telex employee left the office only later. It has been submitted in the course of normal working hours. So, this case became a matter of logic whether the other party might have read it, rather than whether it had been actually read, if any withdrawal of the offer would have been effective by immediate communication such as Telex. In this case the defendant should have read the Telex letter, but this was not done by himself.

Acceptance of proposal under the voluntary retirement scheme
Under this scheme, the employees were given the right to apply this scheme and the authorities were given absolute power in the matter of accepting or rejecting the request of any employee. This scheme was to be treated as an invitation to offer. An employee's application was to treated as an offer. The employee being the offeror can withdraw the offer at any time before the offeree accepts the offer. The term of the scheme prohibiting the employee from withdrawing the request was deemed to be non-binding.

In K. Appa Rao v. M/s Tungabhadra Steel Products Ltd. & Others[5], his resignation, approved on 31 March 2003, was presented by the claimant. However, on 23 June 2003 and after the completion of three months of the duration of notice, the resignation offer had to enter into effect. The court issue was what date the effective date of withdrawal should be known. The Court held that the day the employee was released and not the day the employee accepted the appeal was the effective day of the dismissal. The employee is in the meantime free to revoke his resignation.

In Visakhapatnam Port Trust & Others v/s T.S.N. Raju & Other[6], a significant number of the business employees submitted a voluntary withdrawal proposal. The organization decided, however, that the sum of pensions the company could afford had been depleted, not approving all the applications. The Court held that the employer did not in fact have to consider all resignation demands.

Agreement to keep the offer open for specified period
Where an agreement to hold the offer open for a certain period of time is for some consideration, it would not be cancelled by the offeror before the expiry of that period.

In Mountford and Another V. Scott[7], The plaintiff paid a pound for the opportunity to purchase land in London. The option allowed the applicant to purchase the property at the agreed price at any time within six months. The defendant learned shortly after the option was given that he had not been willing to sell.

The complainant accepted the offer as an option after the alleged withdrawal and ordered that the contract constituting the option agreement and the exercise of the choice should be conducted in a particular manner. The choice was held to be expressly exercised and to enforce the resulting contract. The option's grant offered a reasonable interest in the land as soon as it was created.

In State Of Haryana & Ors vs M/S Malik Traders, The bid was secured by a clause that in the event of withdrawal of the bid before its validity expired the bids' protection cannot be forfeited by the bidders. Nevertheless, by keeping the bid as null the conditions set by the authorities rejected the bid and ruled that the withdrawal, even before the bid is accepted, did not end the bidder' s right to waive the security of the bid.

Communication of revocation should be from offeror himself
In India it is compulsory by Section 6(1) of Indian Contract Act,1872 that the revocation can only be made by the proposer and no one else.

Revocation of general offers
When a general offer is made via a channel it can be withdrawn by the publishing about the revocation in the same channel. Even though a man performs its terms in ignorance of withdrawal cannot file a claim.

In Shuey v. United States[8], an announcement was made in the newspaper announcing a reward for the individual reporting those offenders. However, this announcement was subsequently removed by the publication of a corresponding notice. The complainant reported in this case, after the cancelation of the notice, reported about the perpetrators, unconscious of the subsequent journal publication. As the advertisement is retracted from the same channel through which it was made available, the person reporting the crime was deemed not liable for the award price.

Superseding proposal by fresh proposal
If the proposal is reinvigorated in full, except in some parts, before the original bid is accepted and the latter seems to be replacement for the earlier proposal. The offeree no longer qualifies for such a proposal for acceptance. Only the renewed section that replaced the earlier or the original proposal should be approved.

Cancellation of allotment of land
In Rochees Hotels Pvt. Ltd. And Anr. vs Jaipur Development Authority A land distribution has been rendered under the order of the Planning Authority. The individuals who obtained the allocation deposited the money and signed the document, which led to the entering into operation of the agreement between the entities allocated and the allocation authority. In this situation the accused parties opposed the resulting cancelation by the authorities. The court found that the refund was insufficient and random following cancelation. The authorities were found to be constrained by their responsibility of accepting land construction projects.. The criminal inquiries pending in relation to land allocation is insignificant.

Revocation of bid
If the arrangement is completed by an auction. Agreement approval means that the seller can knock the hammer down. Before the seller knocks down, the bid is withdrawn. In The Rajah Of Bobbili vs Akella Suryanarayana Rao Garu[9], The highest bid was made by the auction petitioner. But before the hammer dropped, he retired his attempt to find out the land was mortgaged. However, even after the offeror retracted, the auctioneer reversed the offer to affirm the offer made by the offeror. The landlord sued the bidder later. In the case at hand, the court held that the plaintiff's offer was nothing but a suggestion and that before the auctioneer had accepted it it was possible to withdraw the same offer.

In Union of India and Ors vs. M/S. Bhim Sen Walaiti Ram[10],The plaintiff made the largest bid at the public auction and he thus had the liquor store for auction there. Bhim Sen Walaiti Ram. This offer was subject to scrutiny by the Chief Commissioner, who had the task of reviewing the bidder's financial condition before the licensing of the bidder was granted. The bidder had to pay the sixth price of the liquor shop instantly under the rules of the auction.

If the government defaulted on the payment of the said number, it had the right to make such a bid and to resell the store. In the same situation, the applicant could not pay the prescribed sum which resulted in a resale order from the Chief Commissinor. The resale was a loss on the part of the government because the price bidding in resale was much lower than the initial offer.

The courts have decided to hold the defendant liable to the authorities for the harm sustained. In this case, the Court held that, because the Chief Commissioner dismissed the offense submitted by the defendant, the accused was not liable for any damages incurred by the re-sale of the store.

In Haridwar Singh vs. Bagun Sumbrui[11], the bidder obtained a forest even below its floor rate via an Auction. The bill was still verified while the bidder agreed to pay the minimum value. The authorities holding the bill approved it and, by telegram, sent forest officials to consider it for further dealings. The foreign officer never received the telegram for certain reasons. Meanwhile, the auction authorities allowed another person to give a higher price for the forest, as well as the same.

Then the forest officials were informed by the authorities of the agreement's approval. This time, the forestry officer was approved and the offer was passed on to the new applicant. The original bidder challenged the contract's passage. The Court held that no contract had been entered into by the initial offer, as an arrangement was considered to remain within the authorities by the authorities of the former offering, as no contact had ever been made with the previous bidder about the approval of the agreement.

Where time is prescribed:
When a stimulated period of time is given for the promisee to give notice of acceptance, the promisee is obliged to accept the bid in that given fixed time, as given, since the offer lapses after the expiry of the fixed period of time. In relation to this aspect of contract law, the High Court of Calcutta has indicated that in a situation where the offeree has to communicate his acceptance within a specified period of time and submits his acceptance within a specified period of time, a binding contract would be concluded between the parties. The validity of the bid by the offeree would not be compromised if the letter of approval issued within the stated time had been issued by the offeror at the end of the specified time.

In the case of Bruner v. Moore[12], there was a arrangement to last until 31 of March. On 28 March the offeree sent the offeror message of his acceptance, which arrived at the offeree on 30 March. The Court found that the authorization was valid in this case.

In the case of R. Vinoth Kumar vs. Secretary[13],The institution has invited applications to be admitted to the institution for a given period of time by sending them to the institution either by post or in person. The applicant submitted the application by mail within four days of the last stated time, but reached the Institute on the same date after the expiry of the stipulated period. The court found in this case that the complainant was too late to apply the document.

The justification of the majority of the two judges in the case was that, where the mode of communication can be decided by the acceptor on its own initiative, the agency chosen by the acceptor shall act as the sender's representative, while in situations where the delivery is carried out in the manner specified by the person to whom the delivery is addressed, the agency shall be so prescribed by the sender. In the former case, the delivery to the Agency does not amount to the delivery to the addressee. However, in the latter case, the transition to the Organization is equal to the distribution to the addressee.

Where no time is prescribed
When there is case where no fix time period has been prescribed during which the proposal can be accepted, then the proposal can be accepted within a reasonable period of time.
In Shree Jaya Mahal Co-operative Housing Society Ltd. v. Zenith Chemical Works Pvt. Ltd. and others[14], it was observed that the decision of what would be designated a fair period can be determined by any court, which may vary time to time, considering the changing gist of each case . The concept of a "reasonable period" is a matter of fact that relies on the conditions and the situation in which the arrangement was entered into.

Where the bid is subject to the previous terms, certain preconditions must be fulfilled before it is approved. If approval is rendered without the satisfaction of the previous provision, the deal lapses.

In the State of West Bengal v. Mahendra Chandra Das[15], saltlake was provided via the method of a lease with a pre-existing provision requiring the individual taking the lease to deposit a certain amount of money within a given period of time. In this situation, the respondent who had been the designated lessee could not deposit the sum of the money until the time given had expired. The Court ruled that the actions of the appellant have obviously indicated that the mission had been cancelled.

If an offer has been made and after making that offer, the offeror dies or gets insane and this comes to the knowledge of offeror consenting his acceptance, then the offer lapses. However, there are n no given provisions in the Act regarding the effect of the death of the offeree. But as it is as an accepted fact that an offer can be accepted by offeree and offeree himself and not even by offeree's executor.

The Indian Contract Act is the country's sole law dealing with contractual obligations among the parties. The Act not only includes the regulations concerning the fulfillment of the contracts, but also the laws concerning the termination by the parties of the contract. The parties to the agreement are entitled at a later date to withdraw both the offer and the acceptance. Section 5 of the Contract Act sets out the procedure and principles of repeal. The revocation of the contract is a way of cancelation. In the Indian Contract Act there are four ways of revoking a bid.

  1. Revocation, available at:
  2. (1892) 2 Ch 27.
  3. (1892) 2 MLJ 57
  4. (1974) EWCA Civ 15
  5. ILR 2006 KAR. 3978.
  6. (2006) 7 SCC 664.
  7. 1975 Ch 258: (1975) 2 WLR 114 (CA).
  8. 23LEd697: (1875) 92US 73.
  9. ILR (1917) 42 Mad 776
  10. (1969) 3 see 146
  11. AIR 1972 SC 1242.
  12. (1904) 1 Ch 305
  13. (1995) ILW 351.
  14. AIR 1991 Bom 211
  15. (1990) 2 Cal LJ 1.

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