Claim is inevitable in the construction contract due to many reasons expressed or implied. If the claims are not administrated with good governance, it may cause delay to the project timeline and financial loss. Sometimes it can be found that the Engineer (Employer’s Representative) approves the Contractor’s claims at first place, after sometimes they revoke it which may have detrimental impact on the Contractor. In this respect, it is pertinent to refer to normalcy in the construction process that upon getting approval from the Engineer, the Contractor will get involved in the procurement process and will hire supplier/vendor for new material and/or service and make the advance payment and supplier/vendor will proceed with the design, production and fabrication. If the Engineer revoke the approval suddenly, the produced design, materials would be abortive, the Contractor will not be able to recover the paid money. Therefore, in general sense, revocation of acceptance is not allowed in the construction business.
Bangladesh Contract Act, 1872
Revocation of acceptance after communication is complete is an infringement of the laws of the Bangladesh by the Employer as well as material breach of the Contract as per the Sub-Clause 4 and 5 of the Contract Act, 1872 which states
“5 [Revocation of proposals and acceptances] A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.”
Illustrations
A proposes, by a letter sent by post, to sell his house to B.
B accepts the proposal by a letter sent by post.
A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.
“4 [Communication when complete] The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
The communication of an acceptance is complete, –
as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer.”
Illustrations
B accepts A's proposal by a letter sent by post.
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The communication of the acceptance is complete, –
as against A, when the letter is posted;
as against B, when the letter is received by A.
Other Jurisdiction
Indian Contract Act and Pakistan Contract Act, also have the same reference for the revocation of acceptance. However, vide Uttar Pradesh Act, 57 of 1976, in section 5 of Indian Contract Act, at the end of the first paragraph, the following explanation has been inserted as amendment, namely: –
“Explanation—Where an invitation to a proposal contains a condition that any proposal made in response to such invitation shall be kept open for a specified time and a proposal is thereupon made accepting such condition, such proposal may not be revoked within such time.”
UNIDROIT Principles SECTION 1- ARTICLE 2.1.4 (REVOCATION OF OFFER) “Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before it has dispatched an acceptance.”
As per Chinese Contract Law Chapter II Making of the Contract Article 18, “An offer may be revoked. The revocation notice of an offer shall reach the offeree before the dispatch of an acceptance notice by the offeree.” Article 19 “An offer may not be revoked under any of the following conditions:
(1) the offeror has specified a time limit for the acceptance, or has explicitly indicated in any other manner the irrevocability of the offer;
(2) there are grounds for the offeree to maintain the irrevocability of the offer and the offeree has made preparations for the fulfillment of the contract.”
As per Australian Contract Law, as a general rule an offer may be terminated at any time prior to acceptance -even if the offeror had promised they would keep it open until a particular date (unless that promise is supported by consideration). To be effective a revocation must be communicated - whether directly or indirectly - and any form of words or conduct conveying an intention to no longer be bound by the offer will suffice.
FIDIC General Conditions of Contract
In case of acceptance or rejection of a claim, the Engineer shall consult with each Party in an endeavor to reach agreement and if agreement is not achieved, the Engineer shall make a fair determination for acceptance and rejection in accordance with the Contract, taking due regard of all relevant circ*mstances as per Sub-Clause 3.5 [Determinations]. However, in case of revocation of such acceptance, Even though there is no explicit provision in FIDIC, the Contractor can refer to the FIDIC GC Clause 8.4 [Extension of Time for Completion] which states “When determining each extension of time under Sub-Clause 20.1, the Engineer shall review previous determinations and may increase, but shall not decrease, the total extension of time.” As per the language of above cited reference of FIDIC Contract it can be understood that the Employer/Engineer have no rights to reject the Contractor’s Claim after approval. In this regard, from the content of GC Clause 8.4, it can be interpreted that increment can be allowed (which will have good impact on the Contractor), but decrement cannot be allowed (which will have bad impact on the Contractor). In view of the above, we can say that rejection will not be allowed at any means as even decrement is not allowed which will have comparatively less bad impact on the Contractor than rejection.
Conclusion
In the conclusion it can be noted that when offer is accepted through any forms of communication as specified by the language of the contract, legal relationship will be formed between the parties resulting to binding Contract. Afterwards, revocation of acceptance will be regarded as breach of contract as per the provisions of the Contract law. All forms of standard contract have provisions for remedies against breach of contract which should be followed for the recovery of damages of impacted party. Such provision can be found in FIDIC Sub-Clause 20.1 [Contractor’s Claims] which enables the Contractor for recovery of damages for breach of the Contract under any clause of the FIDIC conditions or otherwise in connection with the Contract by the Employer which states “If the Engineer does not respond within the timeframe defined in this Clause, either Party may consider that the claim is rejected by the Engineer and any of the Parties may refer to the Dispute Board in accordance with Sub-Clause 20.4 [Obtaining Dispute Board’s Decision].” In this connection, the second paragraph of Sub-Clause 3.5 [Determinations] states “The Engineer shall give notice to both Parties of each agreement or determination, with supporting particulars, within 28 days from the receipt of the corresponding claim or request except when otherwise specified. Each Party shall give effect to each agreement or determination unless and until revised under Clause 20 [Claims, Disputes and Arbitration].”
