Business Law Complete Notes for BBS TU/ Offer & Acceptance
Chapter-4 Offer and Acceptance
3. What is the revocation of the offer? What
are the grounds for the validity of the revocation of offer?
Answer
In the law of contract or in business the offeror or
the offeree may revoke or withdraw their offer and acceptance if they choose
so. The revocation of an offer is complete when it comes to the knowledge of the
offeree.
There are a number of ways for an offer to be
terminated. They are events that may occur after an offer has been made which
bring it to an end so that it can no longer be accepted. The term lapse of the offer
refers to a condition under which the offer automatically goes terminated. In the case of lapse of an offer, communication may or may not be necessary.
Revocation of the offer means taking back of the offer
made by the offerer himself before the offer is accepted. In both of the above
cases, an offer generally gets terminated and as a result, an offer comes to an
end.
Once the offer comes to an end and such is communicated to the offeree, it
cannot be accepted. The Civil Code
under Section 509 and 510 deal
with various modes of revocation of the offer.
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| Revocation of Offer and Communication of Offer & Acceptance |
By revocation notice (Section 509(1))
The offeror has got the right to revoke his/her offer at
any time by giving the notice of revocation to the offeree party. But, such
notice must be given to the offeree before his acceptance comes to the
knowledge of the offeree. If it is so, a contract is deemed concluded.
There is
only condition that the notice of revocation must be served before acceptance. For
example, A of Dhangadhi offers
by a letter dated July 10 sent by post to sell his house to B of Biratnagar for
Rs. 1,500,000. B accepts the offer on July 15 by a letter sent by post.
Here, A may revoke this offer at any time before he has received notice of
acceptance. But revocation of an offer must also be communicated to the offeree,
otherwise, the revocation does not prevent acceptance.
By
expiry of prescribed time (Sec. 510 (a))
When the offeror
prescribes time limitation to get the acceptance from the offeree upon the
offer at the time of making it and he does not get the acceptance within that
stipulated time, the offer shall be deemed revoked or lapsed automatically.
A
offers to B to sell his mobile for Rs. 50,000 and condition are that the
acceptance should be made within 3 days. In this case, the acceptance should be
made within the prescribed date, i.e., within 3 days. If B fails to accept the
offer within 3 days, the offer has lapsed.
By
expiry of reasonable time (Sec. 510(b))
If the time limit is not
specified in the offer by the offeror in order to do or not to do any work, the
offer shall be deemed revoked after the expiry of the reasonable time limit as
required by the nature of that work. A offers B to supply flowers selling at
festival time. If B does not accept the offer before the festival is over, then
the offer is lapsed ipso facto (automatically).
By
death or insanity of the offeror (Sec. 510 (c))
Before receiving the
acceptance notice if the offerer dies or becomes insane, the offer is terminated.
Section 510(c) of the Civil Code, 2074 states; the offer comes to an end if,
after the offer and before the acceptance of it, the offerer dies or becomes insane.
In this respect, the provision of the Indian Contract Act, 1872 is
differing in some context. According to the Indian law, if the offeree accepts
the offer in ignorance of the
death or insanity of the offerer, the acceptance is valid as against the heirs
of the offerer. So as per the law of India, the notice of death or
insanity is also necessary to the offeree to revoke the offer but not required
in Nepal.
By death or insanity of the offeree (Sec. 510)
As per Section 510 of Civil Code, 2074; after
the acceptance given by the offeree and before the offerer comes to the
knowledge of the acceptance if the offeree dies or becomes insane, the offer
comes to an end or terminates, whether such is informed to the offerer or not.
By
making the counteroffer (Sec 510(f))
A counteroffer is the
rejection of the original offer made by the offerer. In such a case, an offer is
terminated, that is to say, a counteroffer terminates the original offer. For
example, A offers to B to sell his car for Rs. 450,000 and B say that he will
purchase the car at Rs 350, 000. This is a counteroffer from B, which terminates
the original offer.
By
non-fulfillment of conditions (Sec. 520 (g))
If there is any condition
in the offer placed by the offeree that offeree has to fulfill firstly but the
offeree accepts it without fulfilling the condition placed so, the offer is
deemed revoked. For example, A offers to Z to sell his laptop for Rs. 10000
subject to the condition that Z should pay an advance of Rs. 3000 before a certain
date Z accepts the offer but fails an advance of Rs. 3000. In this case, the
offer is revoked because of the failure of paying an advance.
By
not being accepted in the prescribed mode
An acceptance must be
made by the offeree according to the mode prescribed by the offeror. If the
mode has not been prescribed in the offer, the acceptance has to make in usual
mode or reasonable mode. Otherwise, the offer gets termination.
By
rejection of an offer by the offeree
When an offer is rejected by the offeree
then the offer is regarded as terminated. Rejection of offer must be
communicated to the offeror or it must be known to the offeror and is only
effective from the moment it is communicated. But reacceptance is also
possible. It means, according to the law of Nepal, the offeree can re-accept
the rejected offer by sending its notice to the offeror even thought the offeree
had rejected the offer.
By
subsequent illegality of subject-matter
At the time of making the offer, it was valid, and later on, it becomes illegal due to the change in the law. In such cases the
subject-matter becomes illegal and consequently, the offer has lapsed.
By
destruction of subject matter
If the subject-matter of the offer Iis
destroyed by any cause like fire, flood, other natural calamities, before the offer
is accepted by the offeree, it becomes lapses.
Hence, by these methods or
modes offer once made gets termination or revocation and no contract is
possible to form between the parties.
4. Explain the rules related to
communication of offer and acceptance and their revocation.
Answer
Communication of offer
Simply,
communication is a process of transforming opinion, ideas, etc. from one
person to another. Communication of
offer refers to a process of giving notice of an offer from the offeror to
the offeree. Therefore, the offered thing must reach the offeree and he must
have the knowledge of such a thing.
Communication of offer is completed only when
the offeree is informed about it. According to Section 4 of the Indian Contract
Act, communication of an offer is complete when it comes to the knowledge of
the person to whom it is made. The similar provision is made in section 508(1)
of the Civil Code, 2074.
According to this Section, ‘Once the offeree comes to
the knowledge of an offer, the act of making the offer shall be deemed to be
completed.’ So communication is essential and must. In case of an offer is made
by post, the communication of an offer is complete when the letter of offer
reaches the offeree.
For
example, A makes an offer by post. Posts the letter on Baisakh 5. It reaches
B on Baisakh 11. Here, communication of offer is complete when B receives the
letter. i.e., on Baisakh 11. The time when communication of an offer is not ascertained, it depends on the
nature of the contract, the distance of telecommunication between the parties, etc.
in this sense, to communicate or give notice is important than the time period
of completing communication.
For example,
M, nephew of N absconded from home. Z (the uncle of M) sent his servant in
search of the boy. After the servant had left, Z announced a reward of Rs.50, 000
to anybody giving information relating to the boy. The servant, before seeing the
announcement or knowing about the announcement, had traced the boy and informed
to Z. Later, on reading the notice of reward, the servant claimed it. His claim
was dismissed by the court based on the ground that he could not accept the
offer unless he had knowledge of it.
Therefore communication of offer is
necessary to conclude the contractual relation. The major rules relating to
communication of offer can be briefly discussed as below:
- An offer must be communicated
An offer to be
effective, it must be communicated to the offeree. Unless the offer is made
known to the person to whom it is to be offered, there is no acceptance and no
contract. So it is necessary.
- Communication of special terms
Regarding communication of special
terms of the contract as contained in a ticket, receipt, or standard form documents,
the more important rules adopted by the courts are as follows:
(I) if the accepter or offeree had no knowledge
of special terms, before or at the time of contract, they are not binding upon
the accepter.
For example, X
purchased a ticket for a musical show from Music Nepal Company, and on the back of
the ticket certain special terms were printed one of which excluded the liability
of the company for loss, injury, or any delay or the stuff of the audience.
The
plaintiff (X) never looked at the back of the ticket and no one told him to do
so, and the front of the ticket bore no reference to the back. The plaintiff’s
bag was lost in this show caused by the fault of the company’s servants. He claimed
damages for his loss.
It was held that the plaintiff was entitled to recover
his loss from the company as there was not sufficient communication of the
terms and conditions contained on the back of the ticket.
(II) If the accepter
of the promise had the knowledge or may be presumed to have the knowledge;
because a reasonably sufficient notice has been given to him by the suitable
words on the documents; of the special terms, before or at the time of the
contract, the terms are binding upon the acceptor whether he has read them or
not it's immaterial.
For example, J deposited his bag at the cloak-room at a
railway station and received a ticket containing on its face the words, ‘see back’.
On the back of the ticket, there was a condition that ‘the company will not
responsible for any package exceeding the value of Rs.10, 000 unless the extra charge was paid.’
Notice to the same effect was hung up in the cloak-room. J’s
bag was lost and he claimed the actual value of the lost bag, Rs.50, 000
admitting the knowledge of the printed matter on the ticket, but denied having read
it. It was held that, even though he had not read the exemption clause, he was
bound by it as the company had done what was reasonably sufficient to give him
notice of its existence, and therefore J was entitled to recover only Rs.
10,000.
Again
when the terms are printed in such a language that the offeree does not
understand, he cannot set up this fact as a reason for not being bound by the
terms provided his attention is drawn to them by suitable words on the
documents. It is acceptor's duty to ask for a translation of the terms before he
actually accepts the offer and if he did not ask, he must suffer for his
ignorance.
Similarly, the acceptor cannot plead that he was illiterate or
blind, provided the notice is reasonable sufficient for the class of persons to
which he belongs. Therefore, it is important to note that the special terms and
conditions become binding as a part of the contract only if they are brought to
the notice of the acceptor before or at the time of contract. A succeeding
communication will not bind the contracting party unless he has assented
thereto.
- Means of communication of offer
The communication of
offer may be made by various means of media like telephone, telegram, internet,
fax etc. of by post or by correspondence or from the presence of the offerer
himself or by talking face to face or by sending an authorized agent or by holding
out the offer from conduct as well.
Communication of Acceptance
Communication of acceptance
refers to a process of transmission of notice of sending acceptance by the
offeree to the offeror. The main propose of communication of acceptance is to
inform the offerer about whether his offer is accepted or not.
Section 508 (2) of the Civil Code, 2074 states; for
offerer, the communication of acceptance is completed if he receives such
communication of acceptance made by the offeree, and for offeree, the communication of acceptance is
completed if the offeror knows of the
acceptance from offeree(when the letter of acceptance is received by the
offerer). The major rules are as below:
- Communication of acceptance is necessary
A mere
acceptance or mental acceptance not evident by words or conduct in the eye of
law no acceptance. So acceptance should be communicated to the offeror.
- The completion of communication of acceptance
According to Section 4 of the
Indian Contract Act, 1872 communication of acceptance is completed in two ways:
the first is as against the offerer when it is sent into a course of
transmission to him so as to be out of the power of the offerer, and second, as
against the offeree when it comes to the knowledge of the offerer.
For example, A
offers a letter to supply some furniture at a certain price. The letter is
posted on 5th of Bhadra which reaches to B on 15th
Bhadra. B accepts the offer made by A letter sent by post on 20th
Bhadra which reaches A on 25th. The communication of acceptance
is complete as against A, when the letter is posted, i.e. 20th and
as against B when the letter is received by A and comes to know on 25th.
- Means of communication of acceptance
The offeree can communicate his acceptance
through different means of communication and ways such as by telephone, fax,
telex, internet, wire, e-mail, or by post. Moreover, he can communicate acceptance
by sending his authorized agent on his behalf or by conduct or by face to face
talking with the offeror. Whatever means of communication or ways are adopted
for this purpose, the offerer must know whether his offer has been accepted or
not. Acceptance is not complete if it is not communicated to the offerer.
Case of No need for communication of acceptance
In the case of a unilateral
contract or an offer made to the world at large acceptance is not necessary to
be communicated. This is because the offeree may think that performance of the
act is better than the communication of it.
In such a case, the fulfillment of
obligation without communication of acceptance of the offer is an adequate
ground to create legal relations between the parties. Where an offer of a reward is made for finding the lost bag, the offer is accepted by finding out
the bag. It is not necessary before initiating of search of the bag to give
notice of acceptance to the offerer.
Communication of Revocation
There
should be actual communication of the revocation of an offer to be legally effective. For
the legal validity, it must be communicated, or at least brought to the
knowledge of the offeree.
It is
clearly understood that posting the letter of revocation cannot be complete but
it must be reached to the offeree and must come to a knowledge of the offeree.
Hence offer may be revoked at any time before acceptance. Similarly, the offeree
may revoke his acceptance as legally came into effect. Revocation of acceptance may be made by giving notice to the offeror at
any time before it comes to knowledge of the offeror.
Section 509 (1) of the Civil Code, 2074 states:
offeror, by giving notice shall revoke his offer, but if the offeree before the
knowledge of revocation of offer gives his acceptance and the offeror receives
the same, the offer cannot be revoked.
Similarly, Section 509(2) of the Civil Code, 2074 sates: the offeree by giving notice shall revoke
his acceptance; but it shall not be revoked if the offeror receives the notice
of acceptance before the communication of revocation of acceptance.
For example; A
offers to B by a letter sent by post to sell his house. The letter is posted on
5th March at 1:00 PM. B receives the letter on the 6th
and sends his letter of acceptance on the same day at 3:30 PM.
The letter
reaches A on the 8th at 9:45PM. Here A may revoke his offer at any
time before the letter of acceptance reaches A and post his letter of
acceptance, i.e. on the 6th at 3:30 PM, but not afterward. Similarly
B may revoke his acceptance at any time before the letter of acceptance
reaches A, i.e. 8th at 9; 45, but not afterward.
In
such way, the communication of offer, acceptance, and communication of
revocation of offer and acceptance has a greater role in the formation of the contractual
relationship between the parties.
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