“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 the acceptance is complete as against the acceptor, but not afterwards.”

A proposes, by a letter sent by post, to sell his house to B.

B accepts the proposal by a letter sent by post.

A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

Section 5 of the Indian Contract Act, 1872 deals with the revocation of proposals and acceptances. It establishes the point up to which a proposer or acceptor can withdraw their communication before it becomes legally binding.

Under Section 5, a proposal may be revoked at any time before the communication of its acceptance becomes complete as against the proposer. Once acceptance has reached the stage specified under the Act, the proposal can no longer be revoked. Similarly, an acceptance may be revoked before its communication becomes complete as against the acceptor.

For example, if A offers to sell a property to B by post and B posts a letter accepting the offer, A can revoke the proposal before or at the moment B posts the acceptance. However, B can revoke the acceptance only before or at the moment the acceptance reaches A. This rule operates together with Section 4, which determines when communication of acceptance and revocation becomes complete.

Important Judicial Decisions

In Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co. (1966), the Supreme Court examined Sections 3, 4 and 5 in relation to acceptance communicated by telephone. The Court explained the different stages at which communication becomes complete against the proposer and the acceptor and emphasized the importance of effective communication in determining when contractual obligations arise.

The decision is particularly important because it explains that Section 5 cannot be understood separately from Section 4. The timing of revocation depends upon whether acceptance has already become complete against the relevant party.

Therefore, Section 5 protects both parties by clearly defining the time limit for withdrawing an offer or acceptance. It also provides certainty in contractual negotiations and helps determine whether a legally enforceable agreement has already come into existence.