1. Introduction

Offer, acceptance and revocation are fundamental concepts of contract law. They determine when negotiations become a legally binding agreement, whether a party can withdraw from a proposed transaction, and who may be liable when an offer or acceptance is withdrawn improperly.

Under Indian law, these matters are primarily governed by the Indian Contract Act, 1872, particularly Sections 2(a), 2(b), 3, 4, 5, 6, 7, 8 and 10.

The central legal principle is that an offer does not ordinarily become a binding contract until it has been validly accepted, but the communication and timing of revocation can determine whether the parties are legally bound.

Offer and acceptance disputes arise in commercial transactions, employment contracts, recruitment, tenders, property sales, electronic communications, business acquisitions and settlement negotiations.

2. Meaning of offer, acceptance and revocation

A. Offer or proposal

Under Section 2(a) of the Indian Contract Act, 1872, a person makes a proposal when they signify to another their willingness to do or abstain from doing something, with a view to obtaining that person's assent.

Examples include:

An employer offering a candidate a job at a specified salary.

A seller offering to sell property for a stated price.

A company inviting bids for a procurement contract.

A business proposing settlement terms to resolve a dispute.

An offer must be sufficiently definite and communicated to the person to whom it is directed. A general advertisement or invitation to negotiate is not necessarily an offer capable of immediate acceptance.

B. Acceptance

Under Section 2(b), a proposal is accepted when the person to whom it is made signifies assent to it. An accepted proposal becomes a promise.

Section 7 requires acceptance to be absolute and unqualified. If the purported acceptance changes an essential term, it may instead amount to a counter-offer.

For example, if an employer offers a salary of ₹80,000 per month and the candidate responds by accepting only if the salary is ₹95,000, the response is ordinarily a counter-offer, not an unconditional acceptance.

C. Revocation

Revocation means withdrawing an offer or, where legally permitted, withdrawing an acceptance before it becomes binding under the applicable communication rules.

Section 5 provides that 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 its acceptance is complete as against the acceptor, but not afterwards.

Section 6 specifies recognised methods of revocation, including notice of revocation, expiry of prescribed or reasonable time, failure of a condition precedent, and the proposal-maker's death or insanity where the relevant fact becomes known to the acceptor before acceptance.

Important distinction: Withdrawal of an offer, withdrawal of an acceptance, termination of an already concluded contract and breach of a contract are four different legal events.

3. Statutory framework under the Indian Contract Act, 1872

A. Communication of an offer

An offer must be communicated to the person whose acceptance is sought. A person cannot ordinarily accept an offer of which they have no knowledge.

B. Communication of acceptance

Section 4 contains a special rule for communication by post: as against the proposer, acceptance is complete when it is put into a course of transmission to the proposer so as to be out of the acceptor's power; as against the acceptor, it is complete when it comes to the proposer's knowledge.

This distinction matters because Sections 4 and 5 can permit an acceptance to become binding against the proposer before it becomes complete against the acceptor.

The postal rule should not automatically be applied to telephone calls, instant messages, email or other electronic communications. The applicable law and the nature of the communication must be considered.

C. Revocation before acceptance

An offer may generally be withdrawn before acceptance becomes complete against the offeror, subject to any enforceable option, statutory restriction, tender condition or other binding commitment.

A statement that an offer will remain open for 30 days does not invariably make it irrevocable for those 30 days. A separate enforceable option or other binding arrangement may be required.

D. Acceptance by conduct

Under Section 8, performance of the conditions of a proposal or acceptance of consideration offered with a proposal may amount to acceptance.

This is particularly important in unilateral contracts, reward offers, tenders and commercial arrangements where the parties act without signing a formal document.

4. Important case laws

The following cases explain the formation of contracts, communication of acceptance, counter-offers, revocation and the liability arising from these events. English decisions are identified as persuasive comparative authorities, not as binding Indian Supreme Court precedents.

Case 1: Lalman Shukla v. Gauri Dutt (1913)

Court: Allahabad High Court

Facts: A servant was sent to search for his employer's missing nephew. The employer subsequently announced a reward. The servant found the nephew without knowledge of the reward announcement and later sought payment.

Issue: Can a person claim a reward by performing the requested act without knowing that the offer exists?

Judgment and principle: The court rejected the claim because the servant did not know of the offer when he performed the act. Knowledge of an offer is ordinarily necessary for a person to accept it by performance.

Legal significance:

An offer must be communicated to the intended acceptor.

Conduct performed independently of the offer does not ordinarily constitute acceptance of it.

A reward claimant must generally establish knowledge of the reward offer when performing the relevant act.

Application: If a company announces a bonus for completing a particular task but an employee completes the task without knowledge of the announcement, the employee cannot automatically claim that the task constituted acceptance of the offer.

Case 2: Carlill v. Carbolic Smoke Ball Co. (1893)

Court: Court of Appeal, England

Facts: A company advertised that it would pay £100 to anyone who used its smoke-ball product as directed and nevertheless contracted influenza. It stated that money had been deposited in a bank to demonstrate its sincerity. Mrs Carlill used the product as directed but became ill.

Issue: Was the advertisement an enforceable offer, and was separate notification of acceptance required?

Judgment and principle: The court held that the advertisement constituted a serious unilateral offer. Mrs Carlill accepted by performing its conditions, and separate advance notification of acceptance was unnecessary in the circumstances.

Legal significance:

An advertisement can constitute an offer when its wording demonstrates a clear intention to be bound.

Acceptance may occur through performance where the offer permits that method.

A separate notice of acceptance is not always necessary for a unilateral offer.

Application: A public reward or incentive scheme can create contractual liability if the terms establish a sufficiently definite offer and a person performs the stated conditions.

Case 3: Hyde v. Wrench (1840)

Court: Court of Chancery, England

Facts: A seller offered to sell property for £1,000. The buyer proposed £950 instead. The seller rejected that proposal, after which the buyer attempted to accept the original offer.

Issue: Could the buyer revive the original offer after making a counter-offer?

Judgment and principle: The court held that the counter-offer rejected the original offer. The buyer could not subsequently accept the original offer unless the seller renewed it.

Legal significance:

Acceptance must be absolute and unqualified.

A counter-offer generally terminates the original offer.

A subsequent purported acceptance cannot ordinarily revive an offer that has already been rejected.

Application: If a candidate responds to an employment offer by demanding a different salary or materially altered conditions, the employer's original offer may no longer remain available for acceptance.

Indian statutory connection: Section 7 of the Indian Contract Act, 1872.

Case 4: Felthouse v. Bindley (1862)

Court: Court of Common Pleas, England

Facts: An uncle offered to purchase his nephew's horse and stated that if he heard nothing further, he would consider the horse his. The nephew intended to sell the horse but did not communicate his acceptance. The horse was subsequently sold at auction by mistake.

Issue: Could the offeror impose acceptance through silence?

Judgment and principle: The court held that the uncle had not acquired ownership because acceptance had not been communicated.

Legal significance:

Silence does not ordinarily amount to acceptance.

An offeror cannot generally impose a contractual obligation by declaring that failure to respond will constitute assent.

Acceptance must be communicated unless an established legal rule or the nature of the offer permits another method.

Application: An employer cannot ordinarily assume that an employee has accepted a revised employment contract merely because the employee did not object to an email, subject to any legally effective acceptance by conduct in the circumstances.

Case 5: Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co. (1966)

Court: Supreme Court of India

Facts: The dispute involved a contract concluded through telephone communications and raised the question of where the contract was formed.

Issue: When and where is acceptance through instantaneous communication legally effective?

Judgment and principle: The Supreme Court distinguished instantaneous communications from acceptance by post. In telephone contracting, acceptance becomes effective when it is received by the offeror, rather than merely when the acceptor speaks the words of acceptance.

Legal significance:

Telephone acceptance differs from the postal rule.

The place where acceptance is received can determine the jurisdiction in which a contract is formed.

The timing of receipt can determine whether an offer was still open when acceptance occurred.

Application: If a company withdraws an offer during telephone negotiations, the precise sequence of the withdrawal and communicated acceptance may determine whether a contract was concluded.

Indian statutory connection: Sections 3, 4 and 5 of the Indian Contract Act, 1872.

Case 6: Byrne & Co. v. Leon Van Tienhoven & Co. (1880)

Court: Court of Appeal, England

Facts: The defendants sent an offer by post. They later posted a letter revoking the offer. Before the revocation reached the plaintiffs, the plaintiffs accepted the original offer by telegram.

Issue: Is a revocation effective merely because it has been dispatched?

Judgment and principle: The court held that revocation was effective only when communicated to the offeree. Posting the revocation letter did not itself terminate the offer.

Legal significance:

Dispatch and communication of revocation are distinct events.

An offeror cannot ordinarily rely on an undisclosed intention to withdraw an offer.

An acceptance made before effective communication of revocation may create a binding contract.

Application: If an employer emails a job offer withdrawal but the candidate accepts before the withdrawal is effectively communicated under the applicable rules, a dispute may arise about whether the contract was formed.

Indian statutory connection: Sections 3, 4 and 5, read together.

Case 7: Dickinson v. Dodds (1876)

Court: Court of Appeal, England

Facts: Dodds offered to sell property to Dickinson and indicated that the offer would remain open until a specified time. Before Dickinson accepted, he learned from a reliable third party that Dodds had sold or agreed to sell the property to another person.

Issue: Could the original offer still be accepted after the offeree learned that the offeror had acted inconsistently with it?

Judgment and principle: The court held that the offer was no longer open for acceptance. The circumstances established that the offer had been withdrawn, and the offeree had reliable knowledge of that withdrawal.

Legal significance:

An offer may be revoked before acceptance becomes binding.

Revocation need not invariably be communicated directly by the offeror; sufficiently reliable notice through another source may be effective under the applicable principles.

A promise to keep an offer open is not necessarily binding without consideration or another enforceable basis for an option.

Application: A buyer who learns reliably that the seller has withdrawn the offer or disposed of the property cannot simply assume that the original offer remains available.

Qualification: The precise effect of third-party notice under Indian law must be assessed against Section 4, Section 6 and the facts of the dispute.

Case 8: Trimex International FZE Ltd., Dubai v. Vedanta Aluminium Ltd. (2010)

Court: Supreme Court of India

Facts: The parties negotiated a commercial transaction through email correspondence. Although a formal agreement was contemplated, the correspondence reflected agreement on the essential commercial terms. One party subsequently disputed that a concluded contract existed.

Issue: Can electronic correspondence create a binding contract even when a formal agreement has not been signed?

Judgment and principle: The Supreme Court recognised that a binding commercial contract may arise through electronic communications where the parties have agreed on the essential terms and demonstrated an intention to be bound.

Legal significance:

A signed paper agreement is not invariably necessary for contract formation.

Email correspondence must be assessed as a whole to determine whether offer and acceptance have occurred.

A contemplated formal document does not automatically prevent an earlier binding agreement from arising.

Application: In recruitment, procurement and business transactions, a clear email acceptance may create contractual obligations even where the parties expected to sign a fuller document later.

Important distinction: If the parties expressly make signature, board approval or another event a condition of contract formation, the legal effect may be different.

5. When does liability arise?

Liability depends on whether the parties have entered into a binding contract, whether a valid withdrawal occurred, and whether a party's conduct caused a legally recognised loss.

A. Liability for wrongful revocation

An offeror who withdraws an offer after a binding contract has been formed may be liable for breach of contract.

However, withdrawing an offer before effective acceptance is ordinarily lawful, even if the other party has spent time negotiating or preparing to accept. Liability may differ if there is an enforceable option, a binding tender undertaking, a statutory restriction or an independent actionable wrong.

B. Liability for wrongful rejection of acceptance

Suppose a seller offers goods for ₹5 lakh. The buyer accepts the offer without changing its terms, and that acceptance becomes legally effective. If the seller then refuses to deliver the goods, the seller may be liable for breach of contract.

The buyer must still establish the contract's terms, the breach, and the legal basis and amount of the claimed loss.

C. Liability for premature acceptance

If an offer is revoked effectively before acceptance, a later purported acceptance generally cannot create a contract on the original terms.

The key evidence is often the exact sequence of events: when the offer was communicated, when revocation was communicated, and when acceptance became legally effective.

D. Liability in employment offers

Employment disputes may arise when:

An employer withdraws a job offer after the candidate accepts.

A candidate accepts an offer and subsequently withdraws before joining.

A recruiter communicates an offer without the required authority.

A conditional offer is withdrawn because a stated condition was not satisfied.

An employer changes salary, location or other material terms after acceptance.

The outcome depends on whether a contract was formed, whether conditions remained outstanding, the wording of the offer, the authority of the person making it, and any applicable employment legislation.

A candidate's acceptance does not necessarily guarantee a particular remedy in every case, and a pre-joining withdrawal does not automatically entitle either party to all anticipated earnings.

6. Remedies available under Indian law

A. Damages for breach of contract

Section 73 of the Indian Contract Act, 1872, provides for compensation for loss or damage caused by a breach, subject to its requirements and limitations.

The claimant generally needs to establish:

A valid and enforceable contract.

A breach by the other party.

A causal connection between the breach and the loss.

Loss that is legally recoverable under the applicable rules.

Compensation is not automatically equal to the entire expected value of the transaction. The court considers the applicable rules of causation, remoteness, mitigation and proof.

B. Compensation for specified contractual consequences

Section 74 deals with compensation where a contract names a sum payable in case of breach or contains a stipulation by way of penalty. The court awards reasonable compensation subject to the statutory limits; the named amount is not automatically recoverable in full.

C. Rescission and restitution

Where a contract is voidable and has been validly rescinded, Sections 64 and 65 may become relevant to restoration of benefits, depending on the circumstances and the nature of the transaction.

These provisions should not be treated