INTRODUCTION
Nikhil made an offer to Rahul to sell his car, stating that Rahul had only two days to accept the offer, after which Nikhil would sell the car to someone else. Rahul agreed to these terms and went home. The next evening, a mutual friend informed Rahul that Nikhil had already sold the car that morning to another buyer, as the buyer was willing to pay a higher price. Despite this, on the following day, which was the final day for Rahul to accept the offer according to the terms, Rahul went to Nikhil and accepted the offer. However, Nikhil refused, stating that he had already sold the car to someone else. Angered by the situation, Rahul brought an action against Nikhil for violation of the contract and sought specific performance.
- Did Nikhil have the right to sell his car to someone else before the expiration of the time?
- Is the revocation of an offer communicated by a third person valid?
This is a hypothetical scenario and the matter of Dickinson v Dodds. Addresses the same questions here.
COMMUNICATION OF REVOCATION OF OFFER
The matter of Dickinson v. Dodds relates to the communication of the revocation of the offer under the Indian Contract Act, of 1872 (hereinafter, ICA).
In Felthouse v. Bindley, it was established that the acceptance must be communicated directly to the offeror. Additionally, Powell v Lee Clarified that the communication of acceptance must come from the offeree. These two cases make it explicitly clear that communication of acceptance by the offeree to a third person, or by a third person to the offeror, is not valid. Although these are English case laws, their principles are also accepted under Indian law.
The matter of Dickinson v Dodds addressed whether the revocation of an offer can be communicated by a third person. This is an English case and unlike the law regarding intimation of acceptance, the approach to the intimation of revocation differs between Indian and English law, meaning the judgment in Dickinson v. Dodds is not entirely applicable in India.
So, in this blog, we will summarize the Dickinson v. Dodds case, explore the Indian law on the communication of revocation of an offer, and examine the differences between English and Indian law on this issue.
DICKINSON V DODDS
Facts
The defendant Mr. Dodds delivered an offer to the Plaintiff, Mr. Dickinson to sell his house for £800. This offer was to remain open for acceptance until 9:00 a.m. on Friday, June 12th. However, a day before accepting the offer, Mr Dickinson learned from a third person that the property had already been sold to someone else. Despite this, on the following day, Friday, Mr Dickinson communicated his acceptance to Mr Dodds before 9:00 a.m. Mr Dodds rejected the acceptance, stating that the property was already sold. Consequently, Mr. Dickinson brought an action against Mr. Dodds for violation of the contract and sought specific performance.
Issues before court
- Whether defendant Mr. Dodds’ promise to keep the offer open until 9:00 a.m. Friday 12th June was a legally binding contract between the parties.
- Whether the defendant was allowed to revoke his offer before the prescribed time and sell his house to someone else?
Held
- The decision was delivered by J. James and J. Mellish in favour of the defendant.
- In the judgment, the judges reasoned that the promise to keep the offer open until Friday, 12th June, was not a binding contract because it was a nudum pactum (a bare promise without consideration).
- A fundamental principle of an agreement is that there must be an offer, acceptance, and consideration for both parties.
- Therefore, any promise without consideration for either party is a bare promise and is not feasible in the eye of the law. Such promises do not bind any party.
- In this case, since the promise lacked consideration, there was no conclusive contract between the parties.
- On the second issue, the court held that because the promise was not binding, the defendant was free to revoke his offer before the prescribed time and sell his house to a third person.
- The court also clarified that the revocation of an offer communicated by any third person is valid, unlike the intimation of acceptance, which has to be made directly between the offeror and offeree; acceptance communicated by or to a third person is not valid. The exact words of the court in this regard were as follows “An offer to sell property may be withdrawn before acceptance without any formal notice to the person to whom the offer is made. It is sufficient if that person has actual knowledge that the person who made the offer has done some act inconsistent with the continuance of the offer, such as selling the property to a third person.”
- Additionally, the court noted that, to form a contract there must be consensus ad idem (meeting of minds). In this case, a meeting of minds was absent because, while the plaintiff had accepted the offer in his mind, the defendant had already sold the property to another, and for him, the offer had ceased to exist.
Analysis
In this case following principles were made clear for English law:
- A promise without consideration is nudum pactum and does not bind either party, allowing them to freely break such a promise. In this case, if the plaintiff had provided any consideration to the defendant for the promise, the promise would have been binding, and the defendant could not have sold his property to anyone before the prescribed time.
- A meeting of minds is necessary between the parties for a contract to be formed. In this case, it was mentioned that “It must, to constitute a contract, appear that the two minds were at one, at the same moment, that is, that there was an offer continuing up to the time of the acceptance.”
- The revocation of an offer communicated by a third person is equally valid as if done by the offeror himself, provided it comes from a reliable source. Whether the communication is from a reliable source is a question of fact and shall be determined by the specific situation of each case.
INDIAN LAW REGARDING COMMUNICATION OF REVOCATION OF PROPOSAL
The Indian law is different from the English law. According to Indian law communication of revocation of an offer can be done only by the offeror himself. This rule is due to the wording of Section 6 Clause 1 of ICA.
Section 6. “Revocation how made.- A proposal is revoked—
- by the communication of notice of revocation by the proposer to the other party;”
Section 6 of ICA gives four modes of communication in its four clauses. Clause 1 provides the first mode of revocation which is Notice of Revocation. It clearly states that intimation of revocation must be “by the proposer” to the other party. Therefore in India, revocation of an offer communicated by a third person is not enforceable.
However, the principle of nudum pactum is recognized in India as well. This means that a promise without consideration is a bare promise and does not bind any party to perform their obligations. ‘In this regard, The ICA makes it clear that a promise with consideration from both parties constitutes an agreement, and an agreement enforceable by law becomes a contract.’ Hence, ICA expressly states that a promise must have consideration to form a binding contract.
Therefore if we answer the issues that were discussed at the start of this blog in the hypothetical scenario then it will be the following:
- Did Nikhil have the right to sell his car to someone else before the expiration of the time given to Rahul?
Under English Law:- Yes
Under Indian Law:- Yes, because the principle of nudum pactum is also acceptable in India and in this scenario, there was no consideration for the said promise.
- Is the revocation of an offer communicated by a third person valid?
Under English Law:- Yes, if it was from a reliable source
Under Indian Law:- No, because of the wording of Section 6(1).
CONCLUSION
In conclusion, the law regarding the revocation of an offer communicated by a third person is different in English and Indian law. While in English law communication of revocation of an offer by a third person is valid as if done by the offeror himself, in Indian law according to Section 6(1) of ICA revocation of the offer must be done by the offeror himself. However, the principle of nudum pactum is also acceptable in Indian Law. That means a promise without consideration will not be enforceable in India either.
So, this is how the matter of Dickinson v. Dodds clarified that the revocation of an offer can be communicated by a third person, unlike the communication of acceptance under English Common Law. Whereas the law regarding communication of acceptance and intimation of revocation of offer follows the same principle in India, according to which acceptance and revocation of offer communicated by a third person is invalid. We can also conclude that it is the main difference between English and Indian law. The difference is while the rule regarding intimation of acceptance and revocation of an offer is different for English Law, in Indian Law the rules are the same.
Author(s) Name: Himadri Jaiswal (Mahatma Gandhi Kashi Vidyapith, Varanasi)
