Revocation - Contract Law

Contract Law

In the law of contracts, revocation is a type of remedy for buyers when the buyer accepts a nonconforming good from the seller. Upon receiving the nonconforming good, the buyer may choose to accept it despite the nonconformity, reject it (although this may not be allowed under the perfect tender rule and whether the Seller still has time to cure), or revoke their acceptance. Under Article 2 of the Uniform Commercial Code, for a buyer to revoke, he must show (1) the goods failed to conform to the contract and (2) it substantially impaired the value of the goods (this is a question of fact).

If the buyer knew of the nonconformity at the time of acceptance, he can revoke only if he can show he accepted the goods with the impression the seller would cure it and that did not happen. If he did not know of the nonconformity at acceptance, he can revoke only if he can prove he was reasonably induced by the difficulty of discovering the defect or by the seller's assurances. The buyer can revoke if (1) it occurs within a reasonable time after the buyer discovers or should have discovered; (2) before any substantial change in the goods not caused by their own defects; and (3) not effective until the buyer notifies the seller he is going to revoke. Upon revocation, the buyer can then cancel the contract and compel refund of the purchase price of the goods. In some states, the courts allow the seller to set off the price for the time the buyer kept the goods before the revocation.

In contract law, revocation can also refer to the termination of an offer. An offeror may revoke an offer before it has been accepted, but the revocation must be communicated to the offeree, although not necessarily by the offeror. If the offer was made to the entire world, such as in Carlill v Carbolic Smoke Ball Company, the revocation must take a form that is similar to the offer. However, an offer may not be revoked if it has been encapsulated in an option.

If the offer is one that leads to a unilateral contract, then unless there was an ancillary contract entered into that guaranteed that the main contract would not be withdrawn, the contract may be revoked at any time.