Revocation of Offer. What happens when the offeror decides he is no longer interested in the contract?
How does he terminate his offer? Or does an offer remain forever after it is made? To put it simple, an offer can become terminated if the offeree hasn’t accepted it.
Although this is simple enough, like in all things related to law, there is more involved in the termination of an offer.
An offer once made can be terminated in four ways. These are:
- By revocation;
- By lapse of time;
- By the death of the offeror or offeree; and
- By rejection.
An offer may be revoked anytime before acceptance. The revocation of an offer before acceptance involves no liability on the part of the offeror and this is so even if he promises to keep the offer open for a specific period of time and nevertheless revokes the offer before the expiration of that period of time. For such a promise, not being supported by any consideration from the offeree, is not binding.
Thus, in Routledge V. Grant, the defendant offered to buy a house from the plaintiff and he gave the letter six weeks in which to accept the defendant withdrew the offer three weeks later whilst the plaintiff purported to accept it at the end of six weeks.
It was held by the court that there was no contract because the offer having been effectively withdrawn after three weeks, the subsequent purported acceptance was invalid. There was nothing to accept.
The position would have been different if the promise to keep the offer open had been met by some consideration moving from the offeree. For example, if the offeree had paid some money to the offeror to keep the offer open for a specific period of time, the offeror would have been bound to do so.
In Mountford V. Scott, Scott granted Mountford an option to purchase his (Scott’s) house for £10,000, exercisable within six months, in return for payment of €1 to him by Mountford. Within the six months period, and before the option was exercised, Scott purported to withdraw the option. Mountford then exercised the option.
It was held that scott’s purported withdrawal was void and that Mountford had validly exercised his option. Even though the consideration £1 was small, the offer was irrevocable. In short, there was a separate binding contract to keep the offer open for six months.
In order to be valid, revocation must be communicated to the offeree. In other words, notice of the revocation must reach the offeree before he accepts it. Once acceptance has occurred, any purported revocation would be invalid. See the case of Byrne V. Van Tien Hoven.
It appears that once it is desirable that the offeror should himself communicate his revocation to the offeree, revocation would nevertheless be valid if notice of it reaches the offeree through a reliable third party before acceptance.
In Dickinson V. Dodds (1876) 2 Ch. D. 463, C.A., the defendants offered to sell some houses to the plaintiff, giving the plaintiff two days in which to accept. A day later, one Berry told the plaintiff that the defendant was negotiating to sell the houses to a third party, Alan. Shortly after that, the plaintiff purported to accept the offer. However, the defendant had already sold the house to Alan before the plaintiff’s acceptance.
It was held that once a person to whom an offer to sell property is made knows that the property has been sold to someone else, it is too late to accept the offer. “the plaintiff knew that Dodds was no longer minded to sell the property to him as plainly and clearly as if Dodd had told him in so many words “I withdraw the offer”
The problem, however, remains that an offeree in the plaintiffs position in this case will be faced, with the dilemma of having to decide whether indirect information reaching him about the offeror’s change of mind is reliable or not. Presumably, the offeree must contact the offeror to check the veracity of such information. Revocation of Offer. Revocation of Offer.
Revocation of Unilateral contract – Revocation of Offer
The revocation of unilateral contracts raises peculiar problems – those of conflict between logic or doctrine on the one side, and convenience, hardship, and justice on the other side. It would be recalled that in unilateral contracts, the acceptance takes the form of performance. Thus, acceptance is not complete until the offeree completes performance. If this is followed to its logical conclusion, it means that even though the offeree has commenced performance, the offeror can revoke the offer any time before it’s complete.
The problem can thus be illustrated:
If I lose my dog and place an advertisement in newspapers offering a reward to anyone who can find it and return it to my house, can I revoke the offer, on seeing James leading the dog towards my house but still about half a kilometre from it? If I promise same ₦100 if he can walk from Benin City to Warri. Can I overtake him after he has walked halfway and tell him, “Offer revoked”? if the police were to advertise that they would offer a reward to anyone who could bring them information leading to the arrest and conviction of a dangerous criminal, can they publish a notice revoking this offer, even after some people have started seeking the required information?
There have been various schools of thought proposing different solutions to the problem. Basically, there are four views:
a. That there is no acceptance until performance is complete and, therefore, revocation is possible in any of the three situations above.
b. That unilateral contracts contain collateral or preliminary contracts – at least notionally. Every unilateral contract is presumed to contain an implied promise by the offeror not to revoke the offer once the offeree has commenced performance; the consideration for this promise being the commencement of performance by the offeree. See the case of Abbot V. Lance, Legge’s Supreme Court cases 1283, (N.S.W. Australia).
c. That where the offeror revokes after the offeree has commenced performance, the latter is entitled to quantum meruit, i.e., a reward based on the stage of performance already reached. Per Viscount Haldane, L.C., in Morrison Shipping Co. Ltd. V. R. (1924) 20 L1.L.R.283 at p.287.
d. That once performance commences, acceptance is taken to have been made, and although the offeree is not entitled to the reward until he completes the performance, the offeror no longer has power to revoke. See the case of Errington V. Errington (1952) 1 K.B. 290; Luxor (Eastbourne)Ltd V. Cooper (1941) A.C.108.
In Errington V. Errington, the English Court of Appeal appeared to favour this fourth view. In that case, a father bought a house for his daughter and his son-in-law to live in. the house was acquired by a mortgage arrangement. He has paid £250 in cash, and borrowed €500 from a building society which was to be repaid by installments over a period of time. He told his daughter and son-in-law that the £250 was a gift to them, and that if they repaid the loan of £500 by installments of 15 shillings a week back to the building society, the house would be their.
They accordingly commenced payment of the installments, and a substantial part of the loan had been thus repaid before the father died/ after his death, his widow, acting as his personal representative, purported to revoke the father’s promise and revert the house to the father’s estate.
It was held that the father’s promise was a unilateral contract-
“…a promise of the house in return for their act of paying the instalments. It could not be revoked by him once the couple entered on performance of the act, but it would cease to bind him if they left it incomplete and unperformed, which they have not done.
It was, therefore, held that the widow could not revoke, since the father could not have revoked were he to be alive.
However, the scope of this case appears to be limited to cases in which an implied promise can be inferred from the offeror’s words of conduct, or from the circumstances of the case, that as long as the offeree is performing, the offeror will not revoke:
“…it is clear that the father expressly promised the couple that the property should belong to them as soon as the mortgage was paid, and impliedly promised that so long as they paid the installments to the building society, they should be allowed to remain in possession…”
Thus, the court in such cases must conduct an enquiry in each case to determine whether there is an implied promise of non-revocation in each case. As some learned authors have proposed:
“…neither reason, nor justice competes a choice between the stark alternatives of making such offers revocable until performance is complete, or irrevocable until performance is complete, or irrevocable once performance is commenced. Much must depend on the nature of the offer…in some cases, the parties may well understand that the offeror reserves a right to revoke at any time until performance is complete, while in others it may be proper to hold that he cannot revoke once the promise has started performance.
It is safe to assume, however, that when a unilateral contract is made inter praesentes, i.e., where the parties make the contract in each other’s presence, as against those made by performance in direct response to an advertised offer, the right to revoke is terminated once performance commences.
Lapse of Time – Revocation of Offer
An offer may be terminated if there is no acceptance after an appropriate lapse of time. Where the offeror states that the offer is open for a specific period of time then the offer will be terminated after the passage of that period of time. If no specific period is prescribed by the offeror the offer will nevertheless terminate after a reasonable lapse of time.
What constitute a reasonable lapse of time will depend on the nature of the offer, the subject-matter of the contract and the peculiar circumstances of each case. Thus, an offer to sell perishable goods, or goods subject to frequent price fluctuations would lapse after a short time.
In Ramsgate Victoria Hotel V. Montifore, the defendant by letter offered to buy shares in the plaintiffs company on June 8. He received no answer until November 23 when he was informed that shares had been allotted to him. He rejected them.
It was held that the defendant’s offer had lapsed be reason of the company’s delay in accepting it. For contracts involving shares in a company, the interval between June and November was excessive.
By contrast, in Loring V. City of Boston, (1844) 7 Metcalf 409., an offer of reward for information leading to the arrest and conviction of incendiaries published in a newspaper was held to have lapsed after a period of three years.
Death – Revocation of Offer
Where the offeree has notice of the death of an offeror before acceptance, he cannot validly accept the offer. That was the decision of the Queen’s Bench in the case of Coulthart V. Clementson (1879) 5 Q.B.D.42.
Where, however, the offeree accepts without notice of the offeror’s death, whether the acceptance will lead to a contract depends on the nature of the contract itself. If the contract is such that can be performed from the offeror’s estate, the offer will not lapse.
Thus, in Bradbury V. Morgan, (1862) 1 H & C. 249, 158 E.R.877., J.M. Leigh wrote to the plaintiffs requesting them to give credit to a third party, promising to guarantee the repayment of credit given in this way. After Leigh died, the plaintiff who were ignorant of this development, continued to give credit to the third party. The executors of Leigh’s estate refused to repay any debts resulting from, credits given to the third party Leigh’s death.
It was held that since this was not a contract requiring personal performance from Leigh, it could be performed from his estate. This means that if it was a contract requiring personal performance by the dead offeror. E.g., a contract to sing, act, or write a book, the offer would have lapsed with the death of the offeror, and acceptance in ignorance or the offeror’s death would have made no difference.
With regards to the death of the offeree, an offer lapses if the offeree dies before he accepts it. See the case of Reynolds V. Artherton (1921)125 L.T.690.
In Kennedy V. Thomassen (1929) 1 Ch.426., an offer to buy annuities was accepted by the solicitors of the annuitant in ignorance of the fact that the annuitant had died.
It was held that the acceptance was invalid on the ground that the solicitors authority was terminated by their client’s death. The reason behind this rule was given by Warrington, L.J., in Reynolds V. Atherton:
“…I think…that the offer having been made to a living person who ceases to be a living person before the offer is accepted, there is no longer an offer after all. The offer is not intended to be made to a dead person, or to his executors, and the offer ceases to be an offer capable of acceptance.
An offer is terminated if rejected by the offeree. We have also seen above that a purported acceptance which involves a variation or modification of the offer is also a rejection of the offer or counter-offer.
However, a rejection does not terminate the offer until it is communicated to the offeror. Thus, if the offeree changes his mind before the notice of rejection reaches the offeror, he can still validly accept provided his acceptance reaches the offeror before his rejection.
Thus, if Bill makes an offer to Dodd and Dodd were to post a letter to Bill rejecting the offer, if Dodd changes his mind, he can still accept the offer if he conveys the acceptance by a faster means such as by telegram or telephone. In this type of situation, it is generally believed that the rule of acceptance by post cannot apply.
Acceptance after the initial rejection must actually reach the offeror before it can take effect, otherwise the offeror will be put in an invidious position of being bound by an acceptance, posted, but not yet received whilst under the belief that his offer has been rejected.
Revocation of Offer. Revocation of Offer. Revocation of Offer. Revocation of Offer.