It is only after the acceptance of an offer that there arises a contract and then both the parties become bound by their respective promises. Before the offer has been accepted, it can be revoked. After the offer has been accepted it ripens into a contract and then it cannot be revoked.
An offer should be accepted before it lapses (i.e. comes to an end). An offer may come to an end in any of the following ways stated in Section 6 of the Indian Contract Act:
It may be revoked at any time before it is accepted. The proposal may be revoked by the communication of notice of revocation which has to be communicated by the proposer or his agent and not by anybody else. In India, the notice of revocation has to be communicated by the proposer only, whereas in England the offer stands revoked even though the offeree comes to know about the revocation of the offer through some other source and not by a notice by the offeror himself.
A proposal is revoked by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is prescribed, by the lapse of a reasonable time. Sometimes the party may expressly fix the time up to which the offer will remain open. An offeror, who has mentioned that his offer is open until a particular time, is not debarred from revoking the offer earlier than that time, if he so likes. For eg. if A has made an offer to sell his property to B for certain price, also stating that the offer is open till 12th June, 9:00 a.m. the offer would be revoked on 11th June if on that date A disposes of the property to somebody else with notice to B. An attempt on part of B to accept this offer on 12th June (before 9:00 a.m.) will be of no avail as the offer has already been revoked. Similarly, expressly rejecting an offer even before the lapse of a fixed or reasonable time makes the offer to lapse.
When the offer is subject to some conditions precedent, such a condition has got to be fulfilled by the acceptor before making the acceptance. If the acceptor fails to fulfill the condition precedent to acceptance, the offer stands revoked. For example, if the offer requires the deposit of some earnest money, or the execution of some document, etc, this condition must be fulfilled. In State of M.P. v. Goberdhan Nath, Tenders for the sale of certain goods were invited subject to the condition that 25% amount was to be paid when the tender was accepted. A’s tender was the highest and the same was accepted, but he failed to fulfill this condition. It was held that no contract had arisen merely because A’s tender was accepted. Therefore, if A failed to take the goods and pay for them, he could not be made liable for the breach of contract.
An offer is revoked by the death or insanity of the offeror, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. In India, the death or insanity of the offeror does not automatically make the offer to lapse. The offer stands revoked if the fact of death or insanity comes to the knowledge of the acceptor before acceptance. It means if the fact of death or insanity has not come to the knowledge of the offeree while he accepts the offer, it is valid acceptance giving rise to a contractual obligation. Under English Law, death of the offeror revokes an offer even if acceptance is made in ignorance of the death.
Where, a counter–offer is made by the offeree, and then the original offer automatically comes to an end, as the counter–offer amounts to rejections of the original offer.
Where some manner of acceptance is prescribed in the offer, the offeror can revoke the offer if it is not accepted according to the prescribed manner.
Where, the offeree rejects the offer, the offer comes to an end. Once the offeree rejects the offer, he cannot revive the offer by subsequently attempting to accept it. The rejection of offer may be express or implied.
Sometimes, there is a change in law which makes the offer illegal or incapable of performance. In such cases also, the offer comes to an end.
S.5 “An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards”. It has already been noted above that when the contract is created through post, according to S.4, by the posting of the letter of acceptance:
Since the acceptor does not become bound immediately on posting his letter of acceptance, he is free to revoke the acceptance by adopting speedier mode of communication, whereby his communication of revocation of acceptance may reach earlier than his letter of acceptance.