Circumstances in which an offer lapses and becomes invalid are listed below:

1. An offer lapses after stipulated or reasonable time:
An offer lapses if acceptance is not communicated within the time prescribed in the offer, or if no time is prescribed, within a reasonable time [Sec. 6(2)]. What is a reasonable time is a question of fact depending upon the circumstances of each case.

For example, an offer made by telegram suggests that a reply is required urgently and if the offeree delays the communication of his acceptance even by a day or two, the offer will be considered to have lapsed.

Illustration:

In Rams-gate Victoria Hotel Co. vs Montefiore an application for allotment of shares was made on 8 June. The applicant was informed on the 23 November that shares were allotted to him.
He refused to accept them. It was held that his offer had lapsed by reason of the delay of the company in notifying their acceptance, and that he was not bound to accept the shares.

2. An offer lapses by not being accepted in the mode prescribed, or if no mode is prescribed, in some usual and reasonable manner.

But, according to Section 7, if the offeree does not accept the offer according to the mode prescribed, the offer does not lapse automatically.

It is for the offeror to insist that his proposal shall be accepted only in the prescribed manner, and if he fails to do so he is deemed to have accepted the acceptance.

3. An offer lapses by rejection:

An offer lapses if it has been rejected by the offeree. The rejection may be express i.e., by words spoken or written, or implied. Implied rejection is one: (a) where either the offeree makes a counter offer, or (b) where the offeree gives a conditional acceptance.

Illustrations:

(i) A offered to sell his house to B for Rs 90,000. B offered Rs 80,000 for which price A refused to sell. Subsequently B offered to purchase the house for Rs 90,000. A declined to adhere to his original offer. B filed a suit to obtain specific performance of the alleged contract.

Dismissing the suit, the court held that A was justified because no contract had come into existence, as B, by offering Rs 80,000, had rejected the original offer.

Subsequent willingness to pay Rs 90,000 could be no acceptance of A’s offer as there was no offer to accept. The original offer had already come to an end on account of ‘counter offer’ (Hyde vs Wrench).

(ii)A, offered to sell his motorcar to B for Rs 85,000. B said that he accepted the offer if he was appointed as General Manager of s factory. B’s acceptance is a ‘conditional acceptance’ which amounts to rejection of A’s offer and there is no contract.

4. An offer lapses by the death or insanity of the offeror or the offeree before acceptance:

If the offeror dies or becomes insane before acceptance, the offer lapses provided that the fact of his death or insanity comes to the knowledge of the acceptor before acceptance [Sec. 6(4)].

From the language of the Section, it may be inferred that an acceptance in ignorance of the death or insanity of the offeror, is a valid acceptance, and gives rise to a contract. Thus the fact of death or insanity of the offeror would not put an end to the offer until it comes to the notice of the acceptor before acceptance.

An offeree’s death or insanity before accepting the offer puts an end to the offer and his heirs cannot accept for him (Reynolds vs Atherton).

5. An offer lapses by revocation:

An offer is revoked when it is retracted back by the offeror. An offer may be revoked, at any time before acceptance, by the communication of notice of revocation by the offeror to the other party [Sec. 6(1)].

For example, at an auction sale, A makes the highest bid. But he withdraws the bid before the fall of the hammer. There cannot be a concluded contract because the offer has been revoked before acceptance.

Further, an offer, agreed to be kept open for a definite period, may be revoked even before the expiry of that period, unless there is some consideration for so keeping it open.

The effect of fixing a time for acceptance is merely to fix a time beyond which the offer cannot be accepted. Where no time limit is set, the offer cannot be accepted after a reasonable time.

Illustration:

M offers to sell his house to A for Rs 1, 40,000. N says to M that if he agrees to keep the offer open for 10 days he (iv) will pay him Rs 1,000. M agrees. M cannot revoke the offer before the expiry of 10 days, as N has obtained an option to purchase the house within 10 days. If M revokes the offer before the expiry of 10 days, he can be sued for breach of option contract.

6. Revocation by non-fulfilment of a condition precedent to acceptance:

An offer stands revoked if the offer fails to fulfil a condition precedent to acceptance [Sec. 6 (3)]. Thus, where A, offers to sell his scooter to B, for Rs 4,000, if B joins the Lions Club within a week, the offer stands revoked and cannot be accepted by B, if B fails to join the Lions Club.

7. An offer lapses by subsequent illegality or destruction of subject matter:

An offer lapses if it becomes illegal after it is made, and before it is accepted. Thus, where an offer is made to sell 10 bags of wheat for Rs 6,500, and before it is accepted, a law prohibiting the sale of wheat by private individuals is enacted, the offer comes to an end.

In the same manner, an offer may lapse if the thing, which is the subject matter of the offer, is destroyed or substantially impaired before acceptance