Areas of applicable law: Contract law – Offer – Revocation of an offer
Main arguments in this case: When can an offer be withdrawn?
In contract law an offer can be terminated due to various reasons. The simplest way an offer can be terminated if the offer is not accepted or refused by an offeree. And an offer can also be terminated if it has been counter offered, or if it is withdrawn before the offeree has accepted it. However if an offer has already been made and the offeror later wants to withdraw it, the withdrawal has to be communicated (the offeree has to be notified before he accepts the offer).
The issues of revocation and acceptance of an offer on the basis of postal communication was clarified in the case of Byrne v Van Tienhoven (1880) in which it was held that withdrawal of an offer has to be communicated (received by the offeree) but acceptance becomes binding on posting of the letter.
The fact of the case: Van Tienhoven was based in Cardiff and on 1 October they posted an offer letter to sell tinplates to Byrne in New York.
While the offer letter was on its way to New York, Van Tienhoven changed their minds and posted a letter of revocation on 8 October to withdraw their offer which they had made on 1 October.
The offer letter that was sent on the 1 October arrived at Byrne’s on 11 October, and they accepted the offer on the same day by sending a telegram to Van Tienhoven.
On 15 October, Byrne sent a letter of acceptance to Tienhoven to confirm what they had already accepted by their telegram of 11 October.
The letter of withdrawal that Van Tienhoven had sent to Byrne arrived at Byrne’s on 20 October.
The issue here was when the contract was formed or did Tienhoven have the right to withdraw the offer?
The offer was accepted on the 11 October and it became binding by sending a telegraph to Tienhoven. On the other hand revocation or withdrawal of an offer has to be communicated before the offeree has accepted the offer.Since Byrne’s acceptance took place before Tienhoven’s revocation, a legally binding contract was formed on 11 October.