Revocation of an Offer under Sections 5 and 6 of the Indian Contract Act, 1872: Notice of Revocation, Death or Insanity of the Offeror, Failure of a Condition Precedent and Rejection

Section 6 lists four modes by which a proposal is revoked, and Section 5 fixes the moment beyond which revocation is no longer possible. Two of the modes involve a deliberate act by a party: notice of revocation by the offeror, and rejection by the offeree. Two operate without anyone intending them: the failure of a condition precedent, and the death or insanity of the offeror. The Indian provisions differ from English law at three points, and each difference works to the acceptor's advantage.

1. The Statutory Scheme

Sections 5 and 6, Indian Contract Act, 1872

5. Revocation of proposals and acceptances. A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

6. Revocation how made. A proposal is revoked:

(1) by the communication of notice of revocation by the proposer to the other party;

(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;

(3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or

(4) by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

2. Revocation by Notice

2.1 The Indian time limit

Section 5 must be read with Section 4. The communication of an acceptance is complete as against the proposer when it is put in a course of transmission to him so as to be out of the power of the acceptor. It follows that a proposal may be revoked only until the acceptor posts, telegraphs or otherwise despatches his acceptance. After that instant the proposer is bound, even though he knows nothing of it.

This is a materially shorter window than English law allows, and the asymmetry it creates is deliberate. Once the acceptance is despatched the proposer can no longer withdraw, while the acceptor may still revoke under the second paragraph of Section 5 at any time before his acceptance reaches the proposer, provided his revocation arrives first or together with it. The acceptor therefore enjoys a period during which he is free and the proposer is bound.

2.2 Revocation must be communicated

A revocation has no effect until it comes to the knowledge of the offeree. A mental decision to withdraw, a note in the offeror's file, or a letter of revocation posted but not yet delivered leaves the offer standing. The rule that treats despatch as sufficient applies to acceptance alone and is not extended to revocation, as Byrne & Co. v. Leon Van Tienhoven & Co., (1880) 5 CPD 344 decided. Section 4 states the same rule for India: the communication of a revocation is complete as against the person to whom it is made when it comes to his knowledge.

2.3 Who may give the notice

📖 Dickinson v. Dodds, (1876) 2 Ch D 463 (CA)

Facts: The defendant gave the plaintiff a written offer to sell houses, adding that the offer would be left open until nine in the morning of the following Friday. On the Thursday the plaintiff learned from a third party that the defendant had been offering or agreeing to sell the property to someone else. The plaintiff delivered a formal acceptance before the deadline and sued for specific performance.

Held: The Court of Appeal refused relief. The promise to keep the offer open until Friday was itself unsupported by consideration and was therefore not binding, so the defendant was free to withdraw at any time before acceptance. Further, it was not necessary that the withdrawal be communicated by the offeror himself; it was enough that the plaintiff knew, from a reliable source, that the offeror no longer intended to sell. There was accordingly no offer in existence when the acceptance was tendered.

Ratio: A promise to keep an offer open is not binding without consideration. Knowledge acquired from a reliable third party that the offeror has withdrawn is sufficient revocation, since what matters is that the offeree knows the offer is no longer intended to stand.

⚠ The Indian position on notice by a third party is not settled in the same terms

Section 6(1) speaks of revocation by the communication of notice by the proposer to the other party, which is narrower language than the rule in Dickinson v. Dodds. Section 3, however, defines communication broadly to include any act or omission of the party revoking which has the effect of communicating the revocation. The safer view is that reliable knowledge derived from the offeror's own conduct, such as his publicly selling the subject matter, will suffice, while mere rumour will not. An offeror who wishes to be certain should give notice himself.

3. Failure of a Condition Precedent

Section 6(3) provides that a proposal is revoked by the failure of the acceptor to fulfil a condition precedent to acceptance. The offeror is entitled to stipulate what must be done before his offer can be accepted, and if the stipulation is not satisfied, the offer falls without any further act on his part. Common conditions are the payment of earnest money or a deposit within a stated period, the furnishing of security or a bank guarantee, the production of a licence or clearance, and approval by a named authority.

📖 Union of India v. Bhim Sen Walaiti Ram, AIR 1971 SC 2295

Facts: A licence for a country liquor shop was auctioned. The conditions of auction provided that all final bids were subject to confirmation by the Chief Commissioner, who might reject any bid without assigning reasons, and the rules required the successful bidder to deposit one sixth of the price within seven days. The respondent made the highest bid but did not make the deposit. The Chief Commissioner declined to confirm the bid and ordered a resale, which fetched a much lower price. The Union sued the respondent for the difference.

Held: The Supreme Court held that there was no concluded contract and the claim failed. Acceptance of an offer may be absolute or conditional; where it is conditional, no contract arises until absolute acceptance is given, and until then the bidder is entitled to withdraw his bid. The bid having been accepted only provisionally and subject to confirmation that was never given, no contract came into existence and no liability for the shortfall on resale could attach.

Ratio: A provisional acceptance subject to confirmation is not an acceptance within Section 7. The offer remains open and revocable until the condition is satisfied, and the failure of the condition brings the offer to an end without a contract.

Two related propositions should be kept distinct. Where the condition is one the acceptor must fulfil, Section 6(3) applies directly and the offer is revoked by his failure. Where the condition is one the offeror or a third party must fulfil, such as confirmation by a superior authority, the analysis is that no absolute acceptance has yet been given, so the offer survives and remains revocable until confirmation.

4. Death or Insanity of the Offeror

Section 6(4) revokes a proposal by the death or insanity of the proposer, but only if the fact comes to the knowledge of the acceptor before acceptance. The qualification is the important part of the provision and distinguishes Indian law from the English position, under which the death of the offeror generally terminates the offer whether or not the offeree knows.

Acceptance in ignorance of the death is effective. A contract comes into existence and binds the deceased's estate. Section 37 supports this by providing that promises bind the representatives of the promisor in case of his death before performance, unless a contrary intention appears from the contract.
Acceptance with knowledge of the death is ineffective. The offer stands revoked from the moment the acceptor learns of it, and nothing he does afterwards can accept it.
Contracts of a personal nature are an exception to the estate's liability. Where the promise involves personal skill or qualification, the obligation cannot be performed by representatives, and Section 37 preserves that limit through the words about a contrary intention appearing from the contract.
Death or insanity of the offeree ends the offer in every case. A proposal is addressed to a particular person and cannot be accepted by his heirs or representatives, because Section 2(b) requires the person to whom the proposal is made to signify assent.

5. Rejection by the Offeree

Rejection is not listed in Section 6, but it terminates an offer as a matter of general principle: once the offeree has declined, there is nothing left for him to accept. Rejection may take three forms.

Express rejection, which takes effect when it is communicated to the offeror and not when it is despatched. An offeree who posts a rejection and then changes his mind may still accept, provided his acceptance reaches the offeror before the rejection does.
Counter offer, which introduces new or varied terms. Because Section 7 requires an acceptance to be absolute and unqualified, a qualified reply is not an acceptance at all but a fresh proposal, and it destroys the original offer. This is treated in the dedicated topic.
Conditional or qualified acceptance, such as an acceptance subject to a formal contract being drawn up where the parties intended the formal document to be the point of commitment, or an acceptance subject to approval. The reasoning in Bhim Sen Walaiti Ram applies: a conditional acceptance leaves the offer alive rather than concluding a contract.

A mere inquiry is not a rejection. A question whether the offeror would consider a different price, or a request for information about delivery, credit or specification, leaves the offer standing and may be followed by a valid acceptance of the original terms.

6. The Modes Compared

Mode	Provision	When it takes effect
Notice of revocation by the offeror	Section 6(1), read with Sections 3, 4 and 5	When the notice comes to the knowledge of the offeree, and only if that happens before the acceptance is put in a course of transmission
Lapse of time	Section 6(2)	Automatically on expiry of the prescribed period or of a reasonable time; no communication is needed
Failure of a condition precedent	Section 6(3)	On the failure itself. No act by the offeror is required, and no contract ever comes into existence
Death or insanity of the offeror	Section 6(4)	Only when the fact comes to the acceptor's knowledge before acceptance; an acceptance in ignorance binds the estate
Rejection by the offeree	General principle, with Section 7 for counter offers	When the rejection is communicated to the offeror; a counter offer destroys the offer at once

7. The Position Stated Shortly

Section 5 permits revocation of a proposal only until the acceptance is put in a course of transmission, which is a shorter window than English law allows.
The acceptor may still revoke his acceptance until it reaches the proposer, so there is a period in which the proposer is bound and the acceptor is not.
Revocation takes effect on communication and not on despatch.
Dickinson v. Dodds: a promise to keep an offer open is not binding without consideration, and reliable knowledge of withdrawal from a third party suffices in English law; Section 6(1) is framed more narrowly.
Section 6(3) revokes a proposal on the failure of a condition precedent to acceptance.
Bhim Sen Walaiti Ram: a bid accepted provisionally subject to confirmation is not accepted at all, and the bidder may withdraw until confirmation.
Section 6(4) revokes a proposal on the offeror's death or insanity only if the acceptor knows before accepting; acceptance in ignorance binds the estate, subject to Section 37.
Death or insanity of the offeree terminates the offer in every case.
Rejection ends the offer on communication; a counter offer destroys it; a mere inquiry does not.

8. Related Topics and Provisions

Topic or provision	Connection
Offer to the World at Large, and the Lapse of an Offer	Lapse under Section 6(2), the fifth mode of termination
Counter Offer and the Destruction of the Original Offer	Rejection by way of a counter offer, treated in full
General Offer and Performance of the Condition	Why a unilateral offer cannot be revoked once performance has begun
Offer vs Invitation to Offer, Lapse and Revocation	The overview of Sections 5 and 6 and the commercial situations
Section 3, Indian Contract Act	What amounts to communication
Section 4, Indian Contract Act	Completion of communication of acceptance and revocation
Section 5, Indian Contract Act	The time limits for revoking a proposal and an acceptance
Section 7, Indian Contract Act	Acceptance must be absolute and unqualified
Section 37, Indian Contract Act	Promises binding the representatives of a deceased promisor