The formation of a legally binding contract rests upon the fundamental pillars of offer and acceptance, inextricably linked by the crucial element of communication. A contract, in essence, is an agreement enforceable by law, and for such an agreement to materialize, there must be a clear and unambiguous manifestation of intention by one party to enter into a legal relationship, and an equally clear assent to those terms by the other party. The efficacy of this process is entirely dependent on the timely and proper communication of these intentions between the parties involved. Without effective communication, the minds of the parties cannot meet, and thus, no consensus ad idem, which is the bedrock of any contractual relationship, can be established.

The Indian Contract Act, 1872, meticulously lays down the principles governing the communication of offer, acceptance, and revocation, recognizing the paramount importance of clarity and certainty in commercial and personal dealings. These provisions are designed to determine precisely when the various stages of contract formation are complete, thereby establishing the moment a binding agreement comes into existence or ceases to exist. This elaborate framework ensures that parties are aware of their rights and obligations at each juncture, minimizing ambiguity and potential disputes regarding the existence or termination of a contractual relationship.

Communication of Offer

An “offer,” also known as a “proposal” under the Indian Contract Act, is defined in Section 2(a) as when “one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence.” For an offer to be valid and capable of acceptance, it must be communicated to the offeree. Section 4 of the Indian Contract Act, 1872, explicitly states, “The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.” This principle underscores the idea that an offeree cannot accept an offer of which they are unaware. There must be a conscious reception of the offer by the intended recipient for it to be legally effective.

The communication of an offer can be made in various ways. It can be express, meaning made by words spoken or written, such as a verbal proposal, a letter, an email, or an advertisement. It can also be implied, inferred from the conduct of the parties or the circumstances of the case. For example, if a bus company runs a bus on a particular route, it implies an offer to carry passengers for a certain fare. However, regardless of the mode, the critical point is that the offer must actually reach the offeree. A classic illustration of this principle is the case of Lalman Shukla v. Gauri Datt (1913). In this case, the defendant’s nephew ran away, and the defendant sent his servant, Lalman Shukla, to find him. While the servant was searching, the defendant issued a handbill offering a reward to anyone who found the boy. The servant, unaware of the reward, found the boy. When he later claimed the reward, the court held that he was not entitled to it because he was ignorant of the offer when he performed the act. The offer had not been communicated to him, and therefore, there could be no acceptance. This case perfectly encapsulates the requirement that communication of the offer is paramount for its validity. Until the offeree has knowledge of the offer, they cannot accept it, and no contract can arise.

Communication of Acceptance

Acceptance, as defined in Section 2(b) of the Indian Contract Act, occurs when “the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: a proposal when accepted becomes a promise.” For a valid contract to be formed, this acceptance must be absolute and unqualified, signifying a complete agreement to all the terms of the offer. Any deviation from the terms of the original offer constitutes a counter-offer, which effectively rejects the original offer and creates a new one. Like an offer, acceptance must also be communicated to the offeror. Mere mental acceptance, or acceptance that is not communicated, is insufficient to form a contract.

The complexity in the communication of acceptance lies in determining when it is considered complete. Section 4 of the Indian Contract Act provides a unique dual perspective for the completeness of communication of acceptance:

  1. As against the proposer (offeror): The communication of acceptance is complete when it is put into a course of transmission to him, so as to be out of the power of the acceptor.
  2. As against the acceptor (offeree): The communication of acceptance is complete when it comes to the knowledge of the proposer.

This bifurcated rule, particularly the first part, is a direct adoption of the “mailbox rule” or “postal rule” prevalent in English common law, which originated from cases like Adams v. Lindsell. Under this rule, when acceptance is sent by post, the contract is deemed to be formed at the moment the letter of acceptance is properly posted, irrespective of whether it reaches the offeror or not. This places the risk of delay or loss in transit on the offeror. For example, if A offers to sell a house to B, and B posts a letter of acceptance, the contract is complete against A the moment B posts the letter. However, against B (the acceptor), the contract is only complete when A receives and reads the letter. This dual completion point is crucial for understanding the window for revocation.

This rule primarily applies to non-instantaneous modes of communication, such as postal mail. For instantaneous modes of communication like telephone, telex, or email, the general principle established in cases like Entores Ltd. v. Miles Far East Corporation (1955), followed in India, is that the contract is formed when and where the acceptance is actually received by the offeror. In such cases, the communication is practically instantaneous, and the risk of non-receipt or miscommunication is minimal. If a person shouts an offer across a river and the acceptance is drowned out by an aircraft, there is no contract. The acceptor must ensure that their acceptance is heard or received by the offeror. Modern interpretations often extend this principle to email and other electronic communications, where acceptance is generally deemed complete when the email enters the offeror’s inbox and is accessible to them, rather than when it is sent.

Communication of Revocation

Revocation refers to the withdrawal of an offer or acceptance. Just as an offer or acceptance must be communicated, so too must their revocation. Section 5 of the Indian Contract Act deals with the timing of revocation: “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.” This section is critical as it establishes the precise window within which a party can unilaterally withdraw their proposal or acceptance.

Section 4 again provides the rules for when the communication of revocation is complete:

  1. As against the person who makes it: The communication of a revocation is complete when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it.
  2. As against the person to whom it is made: The communication of a revocation is complete when it comes to his knowledge.

Let’s illustrate this with an example concerning the revocation of an offer:

  • A proposes, by letter, to sell his house to B at a certain price.
  • A revokes his proposal by telegram.
  • The revocation of the proposal is complete as against A (the proposer) when the telegram is dispatched.
  • It is complete as against B (the offeree) when B receives the telegram.

Now, consider the revocation of acceptance:

  • B accepts A’s proposal by a letter sent by post.
  • B revokes his acceptance by telegram.
  • B’s acceptance is complete as against A when the letter is posted.
  • B’s revocation is complete as against B when the telegram is dispatched.
  • B’s revocation is complete as against A when A receives the telegram.

The critical timing issue under Section 5 dictates that for an offer to be effectively revoked, the notice of revocation must reach the offeree before the offeree’s communication of acceptance is complete as against the offeror. If the acceptance is sent via post, the moment the letter of acceptance is posted, the contract is formed (as against the offeror), and it is too late for the offeror to revoke their offer, even if their letter of revocation was dispatched earlier but reached the offeree after the acceptance was posted. Conversely, an acceptor can revoke their acceptance if their revocation reaches the offeror before or at the same time as their letter of acceptance. This is possible if the revocation is sent by a faster means (e.g., telegram or email) than the original acceptance (e.g., postal mail).

Section 6 of the Indian Contract Act outlines the various modes by which a proposal is revoked:

  1. By the communication of notice of revocation by the proposer to the other party: This is the most common method, requiring explicit notification.
  2. 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, without communication of the acceptance: This addresses offers with specific time limits or those that implicitly expire after a reasonable period.
  3. By the failure of the acceptor to fulfill a condition precedent to acceptance: If the offer is conditional upon the offeree performing a certain act, and they fail to do so, the offer stands revoked.
  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: An offer terminates automatically upon the death or insanity of the offeror, provided the offeree becomes aware of this fact before accepting the offer. If the offeree accepts without knowledge of the offeror’s death or insanity, a valid contract may still be formed, though this area can be complex in practice.

Time Limit for Revocation of Offer

The question of whether there is a limit of time after which an offer cannot be revoked directly relates to the principles enshrined in Section 5 and Section 6 of the Indian Contract Act. The answer is nuanced: an offer, in principle, can be revoked at any time before its acceptance is complete as against the proposer (Section 5). This means the offeror retains the power to revoke up until the moment the offeree dispatches their acceptance (in the case of non-instantaneous communication) or communicates it successfully (in the case of instantaneous communication). Once that point is reached, the offer can no longer be unilaterally revoked, because a binding contract has come into existence.

However, beyond this absolute legal window for revocation, an offer can also terminate or cease to be valid under various circumstances as stipulated in Section 6, which effectively places practical limits on its revocability:

  1. Lapse of Specified Time: If the offeror specifies a particular period within which the offer must be accepted, and the offeree fails to communicate acceptance within that timeframe, the offer automatically lapses. For instance, an offer stating “This offer is valid for 7 days” becomes incapable of acceptance and, consequently, incapable of revocation by the offeror, once the 7 days have passed without acceptance. The offer simply ceases to exist.

  2. Lapse of Reasonable Time: Where no specific time limit for acceptance is mentioned in the offer, the law implies that the offer will lapse after a “reasonable time” (Section 6(2)). What constitutes “reasonable time” is not fixed and depends entirely on the facts and circumstances of each case, including the nature of the goods or services, the usual course of business, and the urgency of the transaction. For example, an offer to sell perishable goods would have a much shorter reasonable time for acceptance than an offer to sell land. If acceptance is not communicated within this reasonable time, the offer stands revoked by operation of law, and the offeror can no longer effectively revoke it because it has already expired.

  3. Failure of a Condition Precedent: An offer may be made subject to certain conditions being fulfilled by the offeree before acceptance can be valid. If the offeree fails to fulfill these conditions, the offer automatically lapses (Section 6(3)). For example, an offer to sell a car at a specific price, conditional on the buyer securing financing by a certain date, would lapse if the financing is not secured. In such a scenario, the offer cannot be accepted, and therefore, cannot be revoked as it has ceased to be a live offer.

  4. Death or Insanity of the Proposer: An offer is terminated by the death or insanity of the proposer, provided that the fact of their death or insanity comes to the knowledge of the acceptor before acceptance (Section 6(4)). If the offeree accepts the offer without knowledge of the offeror’s death or insanity, the contract may still be valid. However, once the offeree becomes aware of the offeror’s demise or mental incapacitation, the offer is deemed revoked, and no subsequent acceptance can create a binding contract.

  5. Counter-Offer: When an offeree responds to an offer with a counter-offer, which introduces new terms or modifies the original terms, the original offer is automatically rejected and thereby terminated. The offeree cannot then revert to accept the original offer unless the offeror renews it. This acts as a ‘limit’ on the original offer’s ability to be accepted or revoked, as it no longer exists.

  6. Rejection by Offeree: An explicit rejection of the offer by the offeree terminates the offer. Once rejected, the offer cannot subsequently be accepted, even if the stipulated time for acceptance has not yet expired, unless the offeror chooses to re-issue the offer.

In essence, while the offeror has a right to revoke their offer at any point before acceptance is complete as against them (as per Section 5), the various mechanisms under Section 6 define situations where the offer itself ceases to exist or becomes incapable of acceptance, thus removing the very subject matter of revocation. Therefore, the “limit of time after which an offer cannot be revoked” is not a direct prohibition on the act of revocation but rather refers to the various circumstances (including the efflux of time or occurrence of specific events) under which an offer either transforms into a contract (rendering revocation impossible) or terminates, making revocation superfluous. An offer cannot be revoked if it has already been accepted (as per Section 5) or if it has lapsed or terminated due to one of the reasons specified in Section 6.

The foundational premise of contract law lies in the unequivocal communication of intentions between parties. The intricate rules governing the communication of offer, acceptance, and revocation, as enshrined in the Indian Contract Act, 1872, are meticulously designed to provide certainty and clarity in the formation and dissolution of contractual obligations. These provisions delineate the precise moments when legal rights and duties arise, protecting both the offeror and the offeree from ambiguity and potential disputes.

The dual-completion rule for acceptance, particularly the “mailbox rule” for non-instantaneous communications, creates a unique scenario where the offeror loses the power to revoke their offer the moment the acceptance is dispatched, even before they are aware of it. This places a significant burden on the offeror, yet balances it with the offeree’s ability to withdraw their acceptance before it reaches the offeror, provided a faster means of communication is employed. Furthermore, the various modes of revocation, including the lapse of time, underscore that an offer is not open indefinitely; it either culminates in a contract, is actively withdrawn, or expires due to the effluxion of time or the non-fulfillment of conditions.

Ultimately, the law does not impose a fixed “time limit” after which an offer cannot be revoked in the sense of an active prohibition. Rather, an offer can be revoked at any time before it ripens into a binding contract upon the completion of its acceptance as against the proposer. The various circumstances outlined in Section 6, such as the lapse of a specified or reasonable time, or the occurrence of specific events like death or failure of conditions, serve as statutory mechanisms through which an offer automatically terminates or ceases to be valid, thus rendering any subsequent revocation attempt moot because the offer itself is no longer in existence to be revoked. These provisions collectively ensure a structured and predictable environment for commercial transactions, emphasizing promptness and clear communication as cornerstones of contractual relationships.