In contract law, a proposal (offer) is the first step toward forming a valid agreement. However, a proposal does not remain open indefinitely and can be withdrawn under certain conditions. This process is known as revocation of proposal. Along with this, understanding how a proposal is communicated and when such communication becomes complete is essential to determine the legal rights of both parties.
What is Revocation of Proposal
Revocation of proposal means the cancellation or withdrawal of an offer by the proposer. When the proposer takes back the offer before it becomes binding, the proposal is said to be revoked.
According to Section 5(a) of the Contract Act, a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterward.
In simple terms, once the acceptor sends the acceptance and it is out of their control, the proposer can no longer revoke the proposal.
When Revocation of Proposal is Possible
A proposal can be revoked only before the acceptance becomes complete against the proposer. The moment the acceptance is dispatched by the acceptor, the proposer loses the right to withdraw the offer.
For example, if A makes an offer to B and B sends acceptance by letter, A can revoke the offer only before B posts the letter. Once the letter is posted, the proposal cannot be revoked.
Revocation of Proposal When Complete
The communication of revocation of a proposal becomes complete at different times for the proposer and the offeree.
1. As Against the Proposer
The revocation of the proposal is complete as against the proposer when the message of revocation is put into the course of transmission to the offeree, so that it is out of the control of the proposer.
This means that once the proposer sends the revocation, such as by posting a letter or sending a telegram, the revocation is complete on their part.
2. As Against the Offeree
The revocation of the proposal is complete as against the offeree when it comes to their knowledge. In other words, the revocation becomes effective when the offeree receives and reads the message.
For example, if a telegram of revocation is sent, it is complete as against the proposer when it is dispatched and as against the offeree when it is received and understood.
what is Communication of Proposal
Communication of proposal means bringing the offer to the knowledge of the offeree. Unless the proposal is communicated, it cannot be accepted, and no contract can be formed.
A proposal may be communicated in different ways, such as:
- In writing
- Orally
- Through conduct of the parties
However, the key requirement is that the offeree must be aware of the proposal.
Communication of Proposal When Complete
According to Section 4 of the Contract Act, the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
This means the proposal becomes effective only when the offeree receives and understands it. Until then, the offeree cannot accept the offer.
Illustration: If A offers by letter to sell his car to B for $200,000, the communication of the proposal is complete only when B receives and reads the letter.
Conclusion
Revocation and communication of proposal are key concepts that determine the formation of a valid contract. A proposal can be withdrawn only before acceptance becomes complete, and communication plays a critical role in this process. By understanding these rules, parties can manage their offers effectively and avoid legal disputes arising from miscommunication or timing issues.
See Also: What is Proposal
