How is an Offer Terminated?

There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:

• Revocation
• Rejection
• Lapse of time
• Conditional Offer
• Operation of law
• Death
• Acceptance
• Illegality

REVOCATION

Revocation means an offer is withdrawn by the offerer. The general rule was established in Payne v Cave [1] that an offer can be revoked at any time before acceptance takes place. However, the revocation must be communicated effectively directly or indirectly to the offeree before acceptance [2] . This is supported by Byrne v Van Tienhoven [3] , where the withdrawal of an offer sent by telegram was held to be communicated only when the telegram was received. [4] Further, sufficient communication does not need to be made by the offeree personally but through a third party in Dickinson v Dodds [5] . In Routledge v Grant [6] , the offer may still be able to withdraw even if it specifically stated that it would remain open for a fixed period when such promise to leave an offer open was not supported by any consideration given by the offeree. [7] However, once the offeree accepted the offer by post, namely, letter, the postal rule would strictly apply and would not permit such withdrawal. Contrary, once the offer has been accepted and acted upon, it cannot be revoked, the incompliance of it would be a breach of contract. In Errington v Errington [8] , where a unilateral offer was made, the courts decided that so long as the repayments were being made by the son and daughter-in-law, the father’s offer could not be revoked. The rationale given by Lord Denning is that “…They have acted on the promise and neither the father nor his widow, his successor in title, can eject them in disregard of it.” In such scenario, once the offeree relied on the offer and embarked upon it, the offer cannot be terminated.

REJECTION

An offer is terminated when the offeree communicates his rejection to the offeror. Hence, the offeree making a counter-offer and introduces a new offer amounts to a rejection of the original offer. In Hyde v Wrench [9] , Lord Langdale held that the counter offer offered by the offeree terminated the original offer. Hence, “…thereby rejected the offer previously made by the defendant (the offerer).” However, this should be distinguished from the situation when the offeree merely seeks further information from the offeror, and does not make a counter-offer. In Stevenson, Jacques v McLean [10] a mere inquiry would not be considered as rejection.

LAPSE OF TIME

As it would be impracticable if an offer could be accepted after an unreasonable delay on the part of the offeree [11] , the court stated in Ramsgate Victoria Hotel v Montefiore [12] that an offer will lapse if it is open for a specific length of time and that time limit expires. Where there is no express time limit, an offer is normally open only for a reasonable time. The length for a reasonable time will depend on the circumstances of the case with respect to offers involving other types of subject matter, definition of a reasonable time depends upon the demand for the subject matters and upon the volatility of its price. [13]

CONDITIONAL OFFER

An offer which expressly provides that it is to terminate on the occurrence of some condition cannot be accepted after that condition has occurred; and such a provision may also be implied. [14] In other words, termination of an offer may also occur due to a condition not being met [15] . For example, in Financings Ltd v Stimson [16] the offer was made in an implied condition, namely the car maintaining in its undamaged state is a conditional precedent. Since the car was stolen from the dealers and damaged, the offer was terminated when the condition fails and became incapable of being accepted.

Another issue concerned in regards to the condition required would be the capability of both parties for a contractual obligation. The loss of contractual capacity by either offeror or offeree will terminate an offer and such loss of capacity is usually evidenced by the appointment by the court. [17]

DEATH

The death of either the offeror or the offeree will cause such termination: the right to accept an ordinary offer is not transferable. The unaccepted offer of a deceased person cannot be converted into a contract binding upon his estate. [18] In Dickinson v Dodds [19] Mellish LJ stated ‘if a man who makes an offer dies, the offer cannot be accepted after he is dead.’ On the other hand, in Reynolds v Atherton [20] Warrington LJ stated that an offer “made to a living person who ceases to be a living person before the offer is accepted…is no longer an offer at all”.

ACCEPTANCE

Once the offer was accepted by the offeree, the contract is formed and brought the offer to an end. It can be made either orally, in writing, or by the implication of conduct when they are received by the offeror. However, in Felthouse v Bindley [21] the court refuse to impose an obligation on the offeree to reject the offer and further stated that silence does not amount to acceptance.

Illegality

Finally, a change in the law which makes a potential contract illegal will terminate an offer, since courts will not enforce an illegal contract. [22]

In conclusion, offer can be terminated by Revocation, Rejection, Lapse of time, Conditional Offer, Operation of law, Death, Acceptance and Illegality.