Acceptance, Rejection & Revocation of Offer

Parties develop rights & obligations only when an offer is accepted. Every offer, however, may not be accepted.

Acceptance of an Offer

Case 1: Rajat was offered 50 shares of a company by Tarun at a very good price. It was a very good deal. Rajat told Tarun, “I am interested and accept the offer, but I will confirm this evening.” Rajat was concerned about mobilizing resources to buy the shares. Later in the day, he consulted a friend knowledgeable in stocks & shares. His friend told him that it was not a good time to buy shares. Believing his friend, Rajat changed his mind. He called Tarun in the evening and told him that he was no longer interested in buying the shares. Tarun managed to sell the shares next day for a price Rs.20,000 less than what he would have got from Rajat. Tarun is demanding Rs.20,000 as damages for breach of contract. Rajat says there never was any contract.

Exploration

The offer was put up by Tarun. Rajat made a communication in response to the offer. He did not reject the offer.

But, he did not accept it either. That is, Rajat did not commit to buy the shares.

The communication from Rajat in the evening could have been rejection or definite acceptance.

Thus, a provisional or qualified acceptance is NOT an acceptance. It only keeps the offer open.

Hence, there was no agreement formed between them. Rajat was not liable for any damages.

Case 2: Aquafine, a company making irrigation equipment had sought Tender from several parties for supplying components. In the Tender it had said that the names of persons whose Tenders were accepted would be put on its webpage. Rakesh was happy he saw his name on the webpage in list of successful candidates. He saved the page on his computer. Two days later, he received a letter from Aquafine informing him that he had not been able to secure the Tender with them. He visited the webpage and noted that the entire list was removed. Rakesh now contends that an agreement had been formed. On the other hand, the company claims that they have turned down the Tender-offer by their letter of rejection.

Exploration

It is part of the offer that communication of acceptance would be made by putting a list on the webpage.

The acceptance was communicated the moment the list was put on the webpage. A contract was made at that point of time.

A subsequent letter of rejection or taking the page off the webpage cannot change a contract which is already made.

Contracting parties can specify modality of communication. In absence of this, acceptance should be communicated to the person making the offer.

Case 3: It was one of the numerous pamphlets Seema had got along with her credit card statement. She glanced at it.

As Seema already had a digital camera, she was not interested in the offer. In the next statement, Rs.2000 was deducted from her account for the camera. She protested to the credit card company that she had never accepted the offer. The company sent another copy of the offer for her to read carefully. The offer had mentioned the following:

Dear Seema, Congratulations!You are the lucky winner in a draw by us with all our valued customers. You have won a Digital Camera worth Rs.5000 for just Rs.2000!...

If we do not hear from you within a month, we would understand that you have accepted the offer. We would go head to charge Rs.2000 in the next month’s Statement and deliver you the Digital Camera.

Seema insists that this is unjustified. Decide.

Exploration

Agreement arises with expression and communication. Silence, on the other hand, means disinterest and rejection.

The offer of the CC company, by deliberately (& wrongly) interpreting silence as acceptance, goes against the established understanding. This can only lead to mischief.

If allowed everyone would be flooded with all kinds of offers.

Silence can imply only rejection, not acceptance.

Rejection of an Offer

Case 4: Shailesh offers to sell a computer to Vishal for Rs.20,000. Vishal refuses to buy it. Later, he comes back and says, “I accept your offer.” In the meantime, Shailesh has sold the computer to another person.

Has an agreement been made between Shailesh and Vishal?

Exploration

By saying no to the offer, Vishal brought the offer to an end.

Therefore, Shailesh was freed of any future obligations arising from the offer.

In other words, much the way in which an Offer is ‘gunpowder’ which can be ignited by Acceptance, it can also be made ineffective by ‘pouring water’ over it, that is, by rejecting it.

Other Situations where an Offer Can be Rejected

An offer can get extinguished by implied rejection.

An offer can get extinguished by expiry of the time.

A long silence construes disinterest which can only mean rejection of an offer.

Revocation of an Offer

Case 5: Sunit offers to sell 10 shares of a company to Anand, as he needs money to buy a house. Anand is still considering the offer. In the meantime, Sunit manages to get loan for buying the house. He doesn’t need to sell the shares anymore. He calls Anand two days after having made the offer and tells him that the shares are not for sale anymore. Anand insists that Sunit has to sell the shares to him.

Exploration

Rights and obligations arise only when an agreement is formed.

Person to whom the offer is made is free to accept or reject it.

Person making the offer should also be free to pull it back.

To bind a person making the offer would be creating obligations before formation of an agreement. Thus, Sunit has no obligations to Anand. He is free to withdraw the offer.

This withdrawal is called revocation of offer.