Hi All, One of my friends has received an offer from a company. The offer letter was sent from the company's official email address. She is currently serving her notice period in her current company. However, the HR from the new company has sent an email stating that they are revoking her offer as they have lost an expected new business. She does not wish to withdraw her resignation from her current company as it is a matter of dignity and to avoid office drama with her managers. Is there any way we can take legal action against the company that made the offer? Looking forward to hearing from you.
Regards, Chethan
From India, Hyderabad
Acknowledge(0)
Amend(0)
Regards, Chethan
From India, Hyderabad
Acknowledge(0)Amend(0)
The new company, having offered you the job, and after you have communicated your acceptance thereof to the employer, then that offer cannot be revoked under section 5 of the Contract Act. You can seek damages in civil court against the company for revoking the contract.
Thanks,
Sushil
From India, New Delhi
Acknowledge(0)Amend(0)
225Thanks,
Sushil
From India, New Delhi
Acknowledge(0)Amend(0)
Understanding Legal Implications of Employment Contracts
Law is fun. It has to be understood in the context of laws applicable. Since it is settled that general principles of contract are applicable to master and servant relations (vide Shriram Piston and Rings vs TS Mogha case) decided by Delhi HC in 2012, the breach of contract committed by an employer by not allowing a prospective employee to join renders him liable for damages under Sections 73 and 74 of the Contract Act.
Delhi High Court Case: Shriram Pistons & Rings Ltd. & Anr. vs Shri T.S. Mokha
On 25 January 2012, Justice Bhagwati (as his Lordship then was) in the concurring judgment in Executive Committee of Vaish Degree College, Shamli Vs. Lakshmi Narain (Supra) in para 31, observed: "The law in such a case, therefore, adopts a more realistic posture and holds that the repudiation effectively terminates the contract and the employee can only claim damages for wrongful breach of the contract."
If the agreement was for a specific period, one can recover damages of salary for that period (SS Shetty case decided by the Apex court) or it depends upon relevant statutory enactment e.g., Industrial Disputes Act or Shops and Establishment Act of a specific State and terms and conditions of appointment.
Supreme Court Case: SS Shetty's Case
The Supreme Court held that if the contract of employment was for a specific term, the servant would in that event be entitled to damages, the amount of which would be measured prima facie and subject to the rule of mitigation in the salary of which the master had deprived him. The servant would then be entitled to the whole of the salary benefits, etc., which he would have earned had he continued in the employment of the master for the full term of the contract, subject of course to mitigation of damages by way of seeking alternative employment.
Delhi High Court Case: S.M. Murray vs Fenner (India) Ltd.
On 27 February 1986, AIR 1986 Delhi 427, it was held that if the contract of employment was for a specific term, the servant would be entitled to damages, measured prima facie and subject to the rule of mitigation in the salary of which the master had deprived him. The servant would then be entitled to the whole of the salary benefits, etc., which he would have earned had he continued in the employment of the master for the full term of the contract, subject to mitigation of damages by way of seeking alternative employment.
In the present case, the term of the service agreement was to expire on 16-2-1986. The plaintiff stated that he did not take up any alternative employment though he had been making attempts and no suitable employment was being offered to him. In these circumstances, I am of the view that the plaintiff is entitled to damages calculated in terms of his salary and other perquisites for the whole of the period of his employment from the date of wrongful termination of the service agreement, i.e., 21-4-1984, till it was to expire in its normal course, i.e., 16-2-1986. This comes to Rs. 2,56,776.64.
Delhi High Court Case: Dr. Samarendra Mohan Mukherjee vs Indian School Of Mines
On 20 December 2007, it was decided that the appellant should be paid a lump sum amount of Rs. 2 lac by the respondent-ISM towards the cost of litigation as well as to secure ends of justice as admittedly the appellant was wrongly denied appointment as Registrar, ISM. This will also be in accord with the Order dated 17th April 1995 passed by the learned Single Judge that in the interest of justice the appellant would be compensated and granted necessary relief in case he was to succeed in the writ petition. Restricting relief to the difference in pay scales for a period of one year would be unfair and unjust to the appellant.
Statutory Right Under Section 5 of the Contract Act
Section 5 in The Indian Contract Act, 1872 states: "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.
According to the apex court, statutory right under Section 5 of the Contract Act is conferred. Section 5 says a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer.
Supreme Court Case: State Of Haryana & Ors vs M/S Malik Traders
On 17 August 2011, it was true that as per Section 5 of the Indian Contract Act, 1872, a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer. It is also true that before receipt of the letter of acceptance dated 26.11.2008, the respondent had sent a letter dated 15.11.2008 withdrawing its offer. However, admittedly, in paragraph 8 of the written offer/bid, the respondent had agreed to keep the bid open for acceptance up to 90 days after the last date of receipt of bid. The respondent had also agreed that it shall be bound by the communication of acceptance of the bid dispatched within the aforesaid period of 90 days. Hence, the respondent could not have withdrawn the bid before the expiry of the period of 90 days. It is not disputed that the acceptance of the respondent's bid was communicated to the respondent within the said period of 90 days. Therefore, the respondent was bound by the said acceptance of the bid, despite its withdrawal by the respondent in the meanwhile.
Under the cover of the provisions contained in Section 5 of the Act, the respondent cannot escape from the obligations and liabilities under the agreements contained in its offer/bid. The right to withdraw an offer before its acceptance cannot nullify the agreement to suffer any penalty for the withdrawal of the offer against the terms of the agreement. A person may have a right to withdraw his offer, but if he has made his offer on a condition that the Bid Security amount can be forfeited in case he withdraws the offer during the period of bid validity, he has no right to claim that the Bid Security should not be forfeited and it should be returned to him. Forfeiture of such Bid Security amount does not, in any way, affect any statutory right under Section 5 of the Act. The Bid Security was given by the respondent and taken by the appellants to ensure that the offer is not withdrawn during the bid validity period of 90 days and a contract comes into existence. Such conditions are included to ensure that only genuine parties make the bids. In the absence of such conditions, persons who do not have the capacity or have no intention of entering into the contract will make bids. The very purpose of such a condition in the offer/bid will be defeated if forfeiture is not permitted when the offer is withdrawn in violation of the agreement.
Supreme Court Case: The Union Of India vs Kishorilal Gupta And Bros
On 21 May 1959, it was held that though such repudiation ends the liability of the parties to perform the contract, it does not put an end to their liability to pay damages for any breach of the contract. The contract is still in existence for certain purposes.
Extract of an Article Relating to HR
transform-hr.com >Withdrawing an offer of employment
October 2007 Issue 22
Withdrawing an Offer of Employment
Did you know that if you withdraw an offer of employment after having received an acceptance of the offer, it will constitute a breach of contract, even though the prospective employee has not yet started work?
What is an Offer of Employment?
Firstly, it is important to remember that a job offer can be verbal or in writing. It is strongly advised that when you make an offer, you put it in writing to avoid any future disputes. Applicants have the right to raise a claim at an Employment Tribunal with regards to the recruitment process - specifically, they can raise discrimination and breach of contract claims. More information on breach of contract claims is given further on in this article.
At the point an offer is made, the offer is known to be an expression of willingness to be legally bound. It is important to realise therefore that at this stage there is no legally binding contract. The point in time where the offer (whether this is verbal or written) becomes a binding contract is when the offer has been accepted.
When is an Offer Accepted?
Legally, an acceptance must be in the form of a positive act, taken by the successful applicant. This could be, for example, where your applicant has handed in their notice to their current employer and has agreed on a start date with your organisation. It could also be in the form of a written response to your job offer, stating their intentions to commence work as per the offer of employment.
When Can an Offer of Employment Be Withdrawn?
If business circumstances lead to the organisation needing to withdraw an offer of employment, the time that this needs to be carried out, without incurring any penalty, is prior to acceptance. It is important to understand, however, that a withdrawal is only complete when it has been received by the applicant.
This legal point means that it is vital that any withdrawal made is submitted in writing and forwarded to the individual via special delivery mail. You can then be assured, once proof of delivery has been obtained, that it has been received by the applicant. Your HR Department, or Northgate HR Advice Line for all Northgate HR clients, can produce this correspondence for you, should you be in the position of needing to withdraw an offer of employment.
What Happens if I Need to Withdraw the Offer but the Offer Has Already Been Accepted?
If the applicant has already taken positive steps which result in there being a binding contract between the two parties, for example, they have agreed on a start date with you, signed an acceptance letter, handed in their notice with their current employer, this does not mean that you cannot withdraw a job offer. In this situation, it simply means that you have to take a different course of action to ensure that you do not face a breach of contract claim at an Employment Tribunal.
As the applicant would be entitled to sue for damages as a result of there having been a breach of contract between the two parties, you will now need to look at compensating the applicant with an amount that corresponds to the notice period they would be entitled to receive had they commenced work with your organisation.
In most cases, this will be a minimal amount, given that it is fairly common practice to place new employees on a one week's notice period during any probationary period. However, where it could become more costly to the organisation is where the situation involves the appointment of a more senior employee. The more senior the appointment, the more likely it will be that they have a greater notice period, for example, three or six months.
I hope the above legal position makes the fog on comprehension clear!!
Thanks
Regards
From India, New Delhi
Acknowledge(8)
Amend(0)
Law is fun. It has to be understood in the context of laws applicable. Since it is settled that general principles of contract are applicable to master and servant relations (vide Shriram Piston and Rings vs TS Mogha case) decided by Delhi HC in 2012, the breach of contract committed by an employer by not allowing a prospective employee to join renders him liable for damages under Sections 73 and 74 of the Contract Act.
Delhi High Court Case: Shriram Pistons & Rings Ltd. & Anr. vs Shri T.S. Mokha
On 25 January 2012, Justice Bhagwati (as his Lordship then was) in the concurring judgment in Executive Committee of Vaish Degree College, Shamli Vs. Lakshmi Narain (Supra) in para 31, observed: "The law in such a case, therefore, adopts a more realistic posture and holds that the repudiation effectively terminates the contract and the employee can only claim damages for wrongful breach of the contract."
If the agreement was for a specific period, one can recover damages of salary for that period (SS Shetty case decided by the Apex court) or it depends upon relevant statutory enactment e.g., Industrial Disputes Act or Shops and Establishment Act of a specific State and terms and conditions of appointment.
Supreme Court Case: SS Shetty's Case
The Supreme Court held that if the contract of employment was for a specific term, the servant would in that event be entitled to damages, the amount of which would be measured prima facie and subject to the rule of mitigation in the salary of which the master had deprived him. The servant would then be entitled to the whole of the salary benefits, etc., which he would have earned had he continued in the employment of the master for the full term of the contract, subject of course to mitigation of damages by way of seeking alternative employment.
Delhi High Court Case: S.M. Murray vs Fenner (India) Ltd.
On 27 February 1986, AIR 1986 Delhi 427, it was held that if the contract of employment was for a specific term, the servant would be entitled to damages, measured prima facie and subject to the rule of mitigation in the salary of which the master had deprived him. The servant would then be entitled to the whole of the salary benefits, etc., which he would have earned had he continued in the employment of the master for the full term of the contract, subject to mitigation of damages by way of seeking alternative employment.
In the present case, the term of the service agreement was to expire on 16-2-1986. The plaintiff stated that he did not take up any alternative employment though he had been making attempts and no suitable employment was being offered to him. In these circumstances, I am of the view that the plaintiff is entitled to damages calculated in terms of his salary and other perquisites for the whole of the period of his employment from the date of wrongful termination of the service agreement, i.e., 21-4-1984, till it was to expire in its normal course, i.e., 16-2-1986. This comes to Rs. 2,56,776.64.
Delhi High Court Case: Dr. Samarendra Mohan Mukherjee vs Indian School Of Mines
On 20 December 2007, it was decided that the appellant should be paid a lump sum amount of Rs. 2 lac by the respondent-ISM towards the cost of litigation as well as to secure ends of justice as admittedly the appellant was wrongly denied appointment as Registrar, ISM. This will also be in accord with the Order dated 17th April 1995 passed by the learned Single Judge that in the interest of justice the appellant would be compensated and granted necessary relief in case he was to succeed in the writ petition. Restricting relief to the difference in pay scales for a period of one year would be unfair and unjust to the appellant.
Statutory Right Under Section 5 of the Contract Act
Section 5 in The Indian Contract Act, 1872 states: "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.
According to the apex court, statutory right under Section 5 of the Contract Act is conferred. Section 5 says a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer.
Supreme Court Case: State Of Haryana & Ors vs M/S Malik Traders
On 17 August 2011, it was true that as per Section 5 of the Indian Contract Act, 1872, a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer. It is also true that before receipt of the letter of acceptance dated 26.11.2008, the respondent had sent a letter dated 15.11.2008 withdrawing its offer. However, admittedly, in paragraph 8 of the written offer/bid, the respondent had agreed to keep the bid open for acceptance up to 90 days after the last date of receipt of bid. The respondent had also agreed that it shall be bound by the communication of acceptance of the bid dispatched within the aforesaid period of 90 days. Hence, the respondent could not have withdrawn the bid before the expiry of the period of 90 days. It is not disputed that the acceptance of the respondent's bid was communicated to the respondent within the said period of 90 days. Therefore, the respondent was bound by the said acceptance of the bid, despite its withdrawal by the respondent in the meanwhile.
Under the cover of the provisions contained in Section 5 of the Act, the respondent cannot escape from the obligations and liabilities under the agreements contained in its offer/bid. The right to withdraw an offer before its acceptance cannot nullify the agreement to suffer any penalty for the withdrawal of the offer against the terms of the agreement. A person may have a right to withdraw his offer, but if he has made his offer on a condition that the Bid Security amount can be forfeited in case he withdraws the offer during the period of bid validity, he has no right to claim that the Bid Security should not be forfeited and it should be returned to him. Forfeiture of such Bid Security amount does not, in any way, affect any statutory right under Section 5 of the Act. The Bid Security was given by the respondent and taken by the appellants to ensure that the offer is not withdrawn during the bid validity period of 90 days and a contract comes into existence. Such conditions are included to ensure that only genuine parties make the bids. In the absence of such conditions, persons who do not have the capacity or have no intention of entering into the contract will make bids. The very purpose of such a condition in the offer/bid will be defeated if forfeiture is not permitted when the offer is withdrawn in violation of the agreement.
Supreme Court Case: The Union Of India vs Kishorilal Gupta And Bros
On 21 May 1959, it was held that though such repudiation ends the liability of the parties to perform the contract, it does not put an end to their liability to pay damages for any breach of the contract. The contract is still in existence for certain purposes.
Extract of an Article Relating to HR
transform-hr.com >Withdrawing an offer of employment
October 2007 Issue 22
Withdrawing an Offer of Employment
Did you know that if you withdraw an offer of employment after having received an acceptance of the offer, it will constitute a breach of contract, even though the prospective employee has not yet started work?
What is an Offer of Employment?
Firstly, it is important to remember that a job offer can be verbal or in writing. It is strongly advised that when you make an offer, you put it in writing to avoid any future disputes. Applicants have the right to raise a claim at an Employment Tribunal with regards to the recruitment process - specifically, they can raise discrimination and breach of contract claims. More information on breach of contract claims is given further on in this article.
At the point an offer is made, the offer is known to be an expression of willingness to be legally bound. It is important to realise therefore that at this stage there is no legally binding contract. The point in time where the offer (whether this is verbal or written) becomes a binding contract is when the offer has been accepted.
When is an Offer Accepted?
Legally, an acceptance must be in the form of a positive act, taken by the successful applicant. This could be, for example, where your applicant has handed in their notice to their current employer and has agreed on a start date with your organisation. It could also be in the form of a written response to your job offer, stating their intentions to commence work as per the offer of employment.
When Can an Offer of Employment Be Withdrawn?
If business circumstances lead to the organisation needing to withdraw an offer of employment, the time that this needs to be carried out, without incurring any penalty, is prior to acceptance. It is important to understand, however, that a withdrawal is only complete when it has been received by the applicant.
This legal point means that it is vital that any withdrawal made is submitted in writing and forwarded to the individual via special delivery mail. You can then be assured, once proof of delivery has been obtained, that it has been received by the applicant. Your HR Department, or Northgate HR Advice Line for all Northgate HR clients, can produce this correspondence for you, should you be in the position of needing to withdraw an offer of employment.
What Happens if I Need to Withdraw the Offer but the Offer Has Already Been Accepted?
If the applicant has already taken positive steps which result in there being a binding contract between the two parties, for example, they have agreed on a start date with you, signed an acceptance letter, handed in their notice with their current employer, this does not mean that you cannot withdraw a job offer. In this situation, it simply means that you have to take a different course of action to ensure that you do not face a breach of contract claim at an Employment Tribunal.
As the applicant would be entitled to sue for damages as a result of there having been a breach of contract between the two parties, you will now need to look at compensating the applicant with an amount that corresponds to the notice period they would be entitled to receive had they commenced work with your organisation.
In most cases, this will be a minimal amount, given that it is fairly common practice to place new employees on a one week's notice period during any probationary period. However, where it could become more costly to the organisation is where the situation involves the appointment of a more senior employee. The more senior the appointment, the more likely it will be that they have a greater notice period, for example, three or six months.
I hope the above legal position makes the fog on comprehension clear!!
Thanks
Regards
From India, New Delhi
Acknowledge(8)+3 more
Amend(0)
Revoking a Job Offer: Legal Implications
Revoking a job offer is legally incorrect. Offer and acceptance are complete here, and a contract is deemed to have been entered into between the employee and employer.
The affected person should clearly inform the company that legal action will be taken against them for breach of contract, and damages will be sought in addition to other reliefs.
Points raised by the learned member Shri Sushil K Luthra are indeed valid and show a depth of knowledge. My sincere thanks to him for enlightening us on these aspects. Cases referred to by him indicate case law.
Whether it is public employment or fixed-period employment, the basis of the contract is the same. One cannot make an offer and then withdraw the offer after acceptance in an accepted fashion just because some contract/project has not come through. The noticeable fact is the employee has given notice and will suffer due to this sudden change/withdrawal of the job offer.
It is yet another matter that legal battles are expensive and time-consuming, but with whatever is written in the query, the legal rights of the person are affected, and he/she has legal recourse.
From India, Pune
Acknowledge(0)Amend(0)
Revoking a job offer is legally incorrect. Offer and acceptance are complete here, and a contract is deemed to have been entered into between the employee and employer.
The affected person should clearly inform the company that legal action will be taken against them for breach of contract, and damages will be sought in addition to other reliefs.
Points raised by the learned member Shri Sushil K Luthra are indeed valid and show a depth of knowledge. My sincere thanks to him for enlightening us on these aspects. Cases referred to by him indicate case law.
Whether it is public employment or fixed-period employment, the basis of the contract is the same. One cannot make an offer and then withdraw the offer after acceptance in an accepted fashion just because some contract/project has not come through. The noticeable fact is the employee has given notice and will suffer due to this sudden change/withdrawal of the job offer.
It is yet another matter that legal battles are expensive and time-consuming, but with whatever is written in the query, the legal rights of the person are affected, and he/she has legal recourse.
From India, Pune
Acknowledge(0)Amend(0)
Reference query of Mr. Banerjee, the aggrieved can argue to seek damages up to three years' wages in terms of the Apex court decision in Kayastha Pathshala v. Rajendra due to wrongful termination of the contract by the termination of services.
Thanks,
Sushil
From India, New Delhi
Acknowledge(0)Amend(0)
Thanks,
Sushil
From India, New Delhi
Acknowledge(0)Amend(0)
Sushil, great effort and useful insight. The exact opposite would lead to interesting discussions. In scenarios where an employee accepts the offer, agrees to the joining date in writing, but then does not show up, they may be utilizing the offer to negotiate for better pay elsewhere.
From India, Mumbai
Acknowledge(1)
Amend(0)
From India, Mumbai
Acknowledge(1)Amend(0)
Contract Act and Employer-Employee Dynamics
The Contract Act applies to both parties. One thing is clear: there will be a breach of contract, and damages will ensue. However, the quantification of damages sustained by the employer will vary on a case-by-case basis. One crucial point not to be forgotten is that the employer holds a better position than the employee. Any negative publicity initiated by a prospective employee in the media may significantly tarnish the employer's reputation. In the eyes of employees, the employer could be blacklisted, and talented individuals may hesitate before considering job openings with such an employer.
Thanks,
Sushil
From India, New Delhi
Acknowledge(0)Amend(0)
The Contract Act applies to both parties. One thing is clear: there will be a breach of contract, and damages will ensue. However, the quantification of damages sustained by the employer will vary on a case-by-case basis. One crucial point not to be forgotten is that the employer holds a better position than the employee. Any negative publicity initiated by a prospective employee in the media may significantly tarnish the employer's reputation. In the eyes of employees, the employer could be blacklisted, and talented individuals may hesitate before considering job openings with such an employer.
Thanks,
Sushil
From India, New Delhi
Acknowledge(0)Amend(0)
I went through the case. It does not apply to the circumstances referred to in this thread. That decision of the court was for a very specific case where someone was terminated after having worked for a certain number of years, with multiple suspensions and circumstances that look like the action is mala fides.
From India, Mumbai
Acknowledge(0)Amend(0)
From India, Mumbai
Acknowledge(0)Amend(0)
Mr. Luthra has provided several case references that can serve as precedents in various ways. Each case is unique and may have its own variations. The main point to be understood is that once an employer offers a job and receives acceptance from an employee, they cannot retract the offer. When a job is offered and accepted, it forms a binding contract. The case of Chethan falls into this category. Legally, Chethan's friend is protected, and the company does not have the legal right to rescind the job offer.
From India, Pune
Acknowledge(0)Amend(0)
From India, Pune
Acknowledge(0)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
Dispciplinary Action.doc
Company Profile Letter - Global Risk Management Services.pdf