Termination of an Offer in Contract Law
There are three ways in which an offer can be terminated. After termination, the offer is no longer a valid offer and cannot be accepted.
1. Rejection of the Offer (By the Offeree)
The offeree can simply reject the offer. When this happens the offer is automatically terminated. Furthermore, if the offeree responds to the initial offer with suggested new terms this will constitute a counter offer and an implied rejection of the original offer. In this scenario, the offeree becomes the new offeror (Hyde v Wrench (1840) (HC)). A new offer on new terms has the effect of ‘killing off’ the previous offer.
Specifically, it is vital to note that genuine requests for further information are not counter offers (Stevenson, Jacques & Co v McLean (1880) (HC)). This was held to be a request for information and not an implied rejection.
2. Revocation of the Offer (By the Offeror)
The general rule is that an offer can be revoked by the offeror at any time before acceptance (Dickinson v Dodds (1876) (CoA)). The offeror can revoke before acceptance even if they have said that they will keep the offer open for a specified time. However, if the offeree has provided consideration (e.g. paid) for the offer to be held open then the offeror will be in breach if they revoke the offer before the specified time (Routledge v Grant (1828)).
Additionally, if the offeror makes a second offer before the offeree has accepted the first offer then this can also count as a revocation of the original offer. The initial offer will be terminated so long as it is clear that the intention of making a second offer was to revoke the first (Pickfords v Celestica (2003) (CoA)).
Communication of Revocation
Revocation of an offer by the offeror is only valid once communicated to the offeree (Byrne v Tienhoven (1880)). It is important to remember that the postal rule does not apply to the communication of a revocation; the revocation only takes effect when it reaches the other party. Furthermore, revocation of an offer can be communicated by a third party as long as it is reasonable for the offeree to believe the message (Dickinson v Dodds (1876) (CoA)).
3. Lapse of an Offer
An offer lapses if it is not accepted within a stipulated time or a reasonable time – a question of fact depending on the circumstances of the case.
Summary of Key Legal Precedents
- Hyde v Wrench (1840): Established that a counter offer constitutes an implied rejection and kills the original offer.
- Stevenson, Jacques & Co v McLean (1880): Confirmed that genuine requests for further information do not terminate an offer.
- Dickinson v Dodds (1876): Established that revocation can be validly communicated by a reliable third party.
- Byrne v Tienhoven (1880): Ruled that revocation is only effective upon reaching the offeree (postal rule does not apply).
- Routledge v Grant (1828): Clarified that offers can be revoked before a deadline unless consideration is provided to keep it open.