Key Takeaways

  1. Revocation of an offer must occur before acceptance and must be effectively communicated.
  2. Offers with specified time periods can still be revoked unless consideration is provided to keep them open.
  3. Unilateral offers cannot be revoked once the offeree begins performance, ensuring fairness and reliance protection.
  4. Counter-offers terminate the original offer, but information requests do not.
  5. Understanding revocation rules ensures clarity in negotiations and prevents legal disputes.

In contract law, an offer represents the willingness of one party to enter into a binding agreement upon acceptance by the other party. However, offers are not eternal; they can be withdrawn under specific conditions. This withdrawal is referred to as the revocation of an offer, and understanding the rules and implications surrounding it is essential for both offerors and offerees.

In this guide, we explore the legal framework of offer revocation, including the circumstances under which it is valid, its communication requirements, and notable case laws that clarify this critical aspect of contract law.

When Is a Revocation of Offer Valid?

An offer can be revoked anytime before acceptance, but the revocation must meet specific legal criteria to be valid. The general principle is that revocation must be effectively communicated to the offeree for it to take effect. This communication must occur before the offeree accepts the offer. Below are some real-world cases where we see that an offer can be revoked before it is accepted and becomes a legally binding contract.

Payne v. Cave (1789)

In this foundational case, the court ruled that an offer can be revoked anytime before acceptance. In Payne v. Cave, a bidder at an auction withdrew their bid before the hammer fell. 

The court upheld that the bid was merely an offer, and until it was accepted by the auctioneer, the bidder had the right to revoke it. This case established the fundamental rule that offers are revocable before acceptance.

Byrne v. Van Tienhoven (1880)

This case highlighted the importance of communication in revocation. In Byrne, the offeror sent a revocation letter after initially making an offer. However, the offeree accepted the offer before receiving the revocation. 

The court ruled that the revocation was invalid because it had not been effectively communicated before acceptance. This case underscores that revocation is ineffective until the offeree is made aware of it.

What Happens If an Offer Has a Specified Period?

An offer may specify a time frame for acceptance, but this does not make it irrevocable unless additional consideration is provided to keep the offer open. This distinction ensures that the offeror retains the right to revoke the offer unless legally bound to keep it open.

Some key case laws that set the precedence for offers being revocable even after a specified time for acceptance has passed are given below. 

Routledge v. Grant (1828)

In this case, the offeror made an offer to sell a property and stated it would remain open for six weeks. However, the offeror revoked the offer before the six-week period ended. The court held that the offeror had the right to withdraw the offer, as no consideration had been provided by the offeree to keep the offer open. This case highlights that an offeror’s promise to hold an offer open is not binding without consideration.

The Postal Rule and Timing of Acceptance

The postal rule adds nuance to offers with specified periods. If the offeree posts their acceptance before the revocation is communicated, the acceptance is valid. For example, in cases where an offer is mailed with a time limit, the offeree’s response via post is considered binding once dispatched, even if the revocation is in transit.

This principle underscores that an offeror’s ability to revoke an offer during a specified period depends on the absence of legal consideration or a binding agreement.

Revocation in Cases of Unilateral Offers

Unilateral offers are distinct because they involve promises made in exchange for performance rather than a reciprocal promise. Revoking such offers can be challenging, particularly once the offeree has begun fulfilling the terms of the offer, as we can see in the example below.

Errington v. Errington (1952)

This landmark case established that unilateral offers cannot be revoked once performance has begun, provided the offeree continues their performance. In this case, a father promised his son and daughter-in-law that they could own a house if they paid off the mortgage. The court ruled that the offer could not be withdrawn once they started making payments, as doing so would be unfair to the offerees who had acted in reliance on the offer.

The Role of Counter-Offers in Revocation

Counter-offers occur when an offeree responds to an offer with different terms, effectively rejecting the original offer. This principle ensures that negotiations are clear and prevents overlapping obligations. Below are some examples where we see this principle in action.

Hyde v. Wrench (1840)

In this foundational case, Wrench offered to sell a farm for £1,000. Hyde counter-offered £950, which Wrench rejected. Hyde then tried to accept the original £1,000 offer, but the court held that the original offer was no longer valid due to the counter-offer. This case underscores that counter-offers terminate the original offer, preventing the offeree from later accepting it.

Jacques v. McLean (1880)

This case distinguished counter-offers from requests for more information. A query regarding payment terms was not considered a counter-offer and did not revoke the original offer. The court clarified that merely seeking clarification or additional details does not invalidate the initial offer.

Understanding the nuances between counter-offers and information requests is crucial in ensuring effective communication during contract negotiations.

How Is a Revocation Communicated?

For a revocation to take legal effect, it must be effectively communicated to the offeree. The communication can be direct or indirect, but it must leave no ambiguity.

  1. Direct Communication: Verbally informing the offeree or delivering a written notice of revocation.
  2. Indirect Communication: Revocation can occur through a reliable third party if the offeree becomes aware of the withdrawal.
  3. Publication Revocation: In cases where the offer was made to the public (e.g., a newspaper advertisement), the revocation must be published in the same medium.

Failure to communicate the revocation properly can lead to legal disputes, as seen in Byrne v. Van Tienhoven.

When Are Offers Irrevocable?

While most offers can be revoked before acceptance, certain conditions make an offer irrevocable:

  1. Consideration: When the offeree provides something of value to keep the offer open (e.g., an option contract).
  2. Detrimental Reliance: If the offeree relies on the offer and incurs costs or obligations, the offeror may be stopped from revoking the offer.
  3. Unilateral Contracts Underway: Once performance begins, revocation is typically not allowed.
  4. Firm Offers: In commercial settings governed by the Uniform Commercial Code (UCC), written offers stating they will remain open are binding for a reasonable time.

These exceptions balance the interests of both parties and provide fairness in contract negotiations.

Final Thoughts on Revocation of Offers

The rules surrounding the revocation of offers ensure clarity and fairness in contract law. Whether you are making or receiving an offer, understanding when and how an offer can be withdrawn is crucial to protecting your legal rights. Effective communication, timing, and adherence to established principles like consideration and detrimental reliance are key to navigating offer revocation without disputes.

To get a consultation from legal professionals, you can reach out to contract lawyers through UpCounsel and learn how to safeguard your interests.


FAQs

What happens if a revocation is not communicated directly to the offeree? The revocation is invalid if it does not reach the offeree. Offers remain open until the revocation is effectively communicated.

Can an offer be revoked if the offeree has already started fulfilling the contract terms in a unilateral agreement? No, once performance begins in a unilateral offer, the offeror cannot revoke the offer.

What is the difference between revocation and rejection of an offer? Revocation is the withdrawal of an offer by the offeror, while rejection occurs when the offeree declines the offer.

How does revocation of an offer differ under common law versus the Uniform Commercial Code (UCC)?Common law allows revocation before acceptance, while the UCC introduces provisions for firm offers that remain open for a set period.