INTRODUCTION TO LAPSE OF AN OFFER

A contract is formed between two parties when one party makes an offer to another with the intent of obtaining the other party's approval to the offer. Once the offer of first party is accepted by the second party, a valid contract is formed.

However, the Indian Contract Act of 1872 categorically states that acceptance must be given by the offeree before the ‘Lapse of Offer’. The “Lapse of Offer” occurs under the conditions specified in Section 6 of the Indian Contract Act of 1872.

LAPSE OF AN OFFER AND SECTION 6 OF INDIAN CONTRACT ACT, 1872

Section 6 of the Act discusses the manner and circumstances under which a proposal is deemed revoked, resulting in the lapse of offer.
1. Communication of revocation by offeror to offeree;
2. Lapse of Time i.e., Failure of offeree to communicate the acceptance within the time specified in the proposal for its acceptance, or, if no time is specified, failure to communicate the acceptance within a reasonable time
3. Failure of the acceptor to fulfil a condition precedent to acceptance; or
4. Death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

If any of the aforementioned events occur, we can say that a 'Lapse of offer' has occurred in the eyes of the law.

I. LAPSE OF AN OFFER THROUGH NOTICE OF REVOCATION

Section 5 provides that “A proposal may be revoked by the offeror at any time before the communication of acceptance is complete as against the offeror and not afterward. While acceptance may be revoked any time before the completion of communication of acceptance as against the acceptor but the same cannot be done afterward.”

Thus, we can say than lapse of an offer taken place when either the offer is withdrawn

1. By the offeror before the acceptance of offer is communicated to him by the offeree; Or
2. By the offeree before his acceptance reaches to the offeror.

II. LAPSE OF AN OFFER ON ACCOUNT OF LAPSE OF TIME

In Dhondu Undru Chudhary vs Ganpat Lal Shankar Lal Agarwal 1991 AIR SC 1037, the Hon’ble Supreme Court of India observed that “A lease terminates on the expiry of its term. It would require a fresh term lease. The lessee’s remaining in possession does not revive the lease by itself. Similarly on the expiry of the time, if any, fixed for the acceptance, the lapse of offer takes place. ”

If the offeree is given a fixed time in a contract to communicate acceptance, the offeree is obligated to accept the offer within that time because the offer lapses after the fixed time expires.

In contracts where no time limit for accepting an offer is specified, it is a well-established principle that the offer must be accepted within a reasonable time.

III. LAPSE OF AN OFFER ON ACCOUNT OF FAILURE TO ACCEPT CONDITION PRECEDENT

Where the offer is subject to some preconditions which have to be complied with before the acceptance is made, then any acceptance made without fulfilling those conditions refers to ‘Lapse of Offer’.

IV. LAPSE OF AN OFFER ON ACCOUNT OF DEATH OR INSANITY OF OFFEROR

The death or insanity of the offeror, leads to ‘lapse of offer’, provided that the fact comes to the knowledge of offeree before he makes his acceptance.

In Bradbury v Morgan (1862) 1 H&C 249, where a creditor continued to act on a guarantee without the knowledge of the surety’s death, the court pointed out that an offer is not necessarily terminated with the death of the offeror. It may remain open until the offeree comes to know of the death.

In Reynolds v Artherton (1921) 125 LT 690, Court observed that “There is no provision in the Act about the effect of the death on an offeree. But as an offer can be accepted only by the offeree and not by any other person, it should not be capable of being accepted by the offeree’s executor also.”