Revocation of Offer: What It Is and How It Works

Have you ever heard of the term revocation of offer? 

If not, let’s take a deeper dive into what it is and what you need to know. 

A revocation of offer is the withdrawal of an offer that was previously made to engage in a legally binding contract. It is usually used when the offering party wishes to formally cancel an offer before the other party accepts it. Once the revocation is communicated to the other party, it is no longer considered valid or legally binding. The offer is considered revoked as soon as it is communicated to the relevant party. 

A Deeper Dive into Revocation of Offer

One of the most common reasons why a party may feel the need to revoke an offer could be a change in their circumstances, which makes the original offer less favourable for them. Another possibility is the discovery of new information, which has an impact on the terms of the contract or its value to the parties involved.  

Communication could play a major role in what happened: a misunderstanding, miscommunication, or mistake in the original offer. Lastly, if an approach was made under false pre-tenses, if facts and commitments were misrepresented, or if there was an element of fraud or duress, there could be a revocation of offer. Another situation when an offer can be revoked is if the offering party withdraws its proposal before the other party accepts it.  

Indeed, the simplest way an offer is revoked is when the other party refuses the proposition. As soon as the party rejects the offer, it is automatically revoked.  

A revocation of offer is considered valid if the other party has not formally accepted the bid. The revocation can even be communicated through a third party and will be considered valid as long as it is before acceptance by the other party. If the other party has already accepted the offer, it can no longer be revoked. An offer can also not be revoked if performance requirements are already in process, such as ongoing payments and delivery.  

Another form of revocation of an offer is when a counteroffer is made. This counter-bid can be considered a rejection of the original offer. 

Two Types of Revocation

Now, it should be noted that there are two types of revocation.  

First, an express revocation is when one party clearly communicates to the other party that it wishes to withdraw its offer or acceptance. The communication of this message is clear and is effectively transmitted to the relevant party.  

Second, an implied revocation is when an offer is revoked, but there is no direct communication from the party who revokes the proposal. It is only through the party’s actions or statements that the intent to withdraw the offer or not accept it is communicated to the other party.   

The most important criterion for a value revocation of an offer is that it is communicated to the other party before a bid is accepted. Even if a third party communicated the withdrawal of the offer, it should be communicated correctly, through a reliable source, and understandable to the other party. 

An offer is considered irrevocable based on a few things: 

• If it is kept open as part of consideration. 
• If the other party is relying on the offer being open. 
• If the offer has been partially completed or is already underway. 
• If the offer has been signed and both parties have agreed to the terms. 

Making an offer, accepting it, and revoking an offer are all part of a valid contract.  

As per contract law, as soon as an offer is made, it is a promise between the parties involved. The terms are specified, and the offering party and the other party are free to evaluate those terms and accept or reject the offer. If the other party accepts the offer, this is communicated to the offering party. For an offer to be valid, the communication of the acceptance is essential. If there is no acceptance, the offer remains invalid and can be revoked at any time. 

When discussing revocation, it is important to understand the difference between an offer and a proposal. Every proposal is not an offer. A proposal can qualify as an offer if there is an intent to contract. If there is no intent, there is no contract. A proposal also does not qualify as a contract if there is no definiteness of terms. If the party offering the contract does not state what they want to offer or what the party wants in return, it does not qualify as an offer. 

The Importance of Revocation

Revocation is an important part of contract law because it provides the parties involved in a contract the opportunity to cancel or change their mind before a contract becomes legally binding. In the end, it provides flexibility and allows people to respond to their changing circumstances.