Skip to main content

Contract is not complete unless all conditions proposed by both/either parties are accepted by all

In M/s. Padia Timber Company(P) Ltd. vs The Board of Trustees of Visakhapatnam Port Trust Through its Secretary, the short question involved in this appeal is, whether the acceptance of a conditional offer with a further condition results in a concluded contract, irrespective of whether the offerer accepts the further condition proposed by the acceptor.

In this matter, a tender was floated by the Respondents against which the Appellant had submitted its offer which some specific conditions. The Appellant did not accept Clauses 15 and 16 of the Tender and rather made a counter proposal. In accordance with the terms and conditions of the tender, the Appellant deposited Rs.75,000/- towards earnest deposit, along with its quotation. There were several rounds of correspondences between the parties primarily on the objection/condition raised by the Appellate which was inconclusive and finally the Appellant rejected the proposal of the Respondent and requested return of the earnest money. However, the Respondent with out resolving the dispute went ahead and placed the order with the Appellant, who refused. Finally the Respondent concluded the purchase through a third party at a higher price and filed suit seeking damages for breach of contract with interest.

The Trial court observed that the Appellant had placed their offer in response to the tender which was accepted by the Respondent which made it a concluded contract and the purchase order was issued within the validity period quoted by the Appellant. The Trial Court observed that, in order to determine whether or not there was a concluded contract between the Appellant and the Respondent-Port Trust, the crucial question was whether the tender submitted by the Appellant had been accepted by the Respondent- Port Trust within 31st October, 1990, being the stipulated period of validity of the quotation given by the Appellant. The Trial Court found that acceptance of the purchase order was completed as against the Appellant, when the letter of intent cum purchase order was dispatched from the end of the Respondent-Port Trust. Once it was proved that there was a concluded contract and the defendant that is, the Appellant before this Court, had admittedly not supplied the goods as per the terms of the purchase order, it had to be held that the defendant had committed breach of contract. The Trial Court, in effect, held that the fact that the Appellant had received the letter of intent and endorsed the receipt thereof within 31st October, 1990, established the case of the Respondent that the contract had been concluded.

The appeal before the High Court was also dismissed.

The Supreme Court observed that even though the High Court referred to the submission of the Appellant that the letter of intent was subject to ratification by the Board and and the only witness of the Respondent-Port Trust had admitted that no contract had been concluded, the High Court did not deal with the same. The Trial Court as well as the High Court relied on Section 4 of the of the Indian Contract Act, 1872 which establishes when the communication of a proposal is complete, but completely overlooked Section 7 which states that in order to convert a proposal into a promise the acceptance must be absolute.

Noting that very clearly, the Appellant had made their acceptance subject to confirmation of certain conditions which were not accepted by the Respondent unconditionally, the Supreme Court went on to hold that it is a cardinal principle of the law of contract that the offer and acceptance of an offer must be absolute.  It can give no room for doubt. The offer and acceptance must be based or founded on three components, that is, certainty, commitment and communication. However, when the acceptor puts in a new condition while accepting the contract already signed by the proposer, the contract is not complete until the proposer accepts that condition, as held by this Court in Haridwar Singh v. Bagun Sumbrui and Ors. An acceptance with a variation is no acceptance. It is, in effect and substance, simply a counter proposal which must be accepted fully by the original proposer, before a contract is made. In Union of India v. Bhim Sen Walaiti Ram, a three-Judge Bench of this Court held that acceptance of an offer may be either absolute or conditional. If the acceptance is conditional, offer can be withdrawn at any moment until absolute acceptance has taken place. The Respondent-Port Trust agreed to inspection at the Depot of the Appellant, but imposed a further condition that the goods would be finally inspected at the showroom of the Respondent-Port Trust. This Condition was not accepted by the Appellant. It could not, therefore, be said that there was a concluded contract. There being no concluded contract, there could be no question of any breach on the part of the Appellant or of damages or any risk purchase at the cost of the Appellant. The earnest deposit of the Appellant is liable to be refunded.


Comments

Most viewed this month

Partition proceedings are vitiated even if single co-sharer is not made party or is not served in accordance with law

Cause Title :  Bhagwant Singh vs  Financial Commissioner (Appeals) Punjab, Chandigarh,  CWP-2132-2018 (O&M), High Court Of Punjab & Haryana At Chandigarh Date of Judgment/Order : 31.08.2022 Corum : Hon’ble Mr. Justice Sudhir Mittal Background A large parcel of land was owned by the Nagar Panchayat. Thereafter, some of the co-sharers sold their shares to third parties including the petitioners herein. On 22.11.1995, respondents No.3 to 5 filed an application for partition of the land. The petitioners were not impleaded as parties.  On completion of proceedings, sanad was issued on 28.08.1996. Vide two separate sale deeds dated 28.05.2008 respondents No.3 and 5 sold some portion in favour of respondent No.6 and 7. These respondents sought implementation of the sanad resulting in issuance of warrants of possession dated 05.06.2008. Allegedly, it was then that the petitioners realized that joint land had been partitioned and that proceedings h...

Power of Attorney holder can also file cheque bounce cases: Supreme Court

The Supreme Court has held that a criminal complaint in a cheque bounce case can be filed and pursued by a person who holds a power of attorney (PoA) on behalf of the complainant. A three-judge bench headed by Chief Justice P Sathasivam gave the "authoritative" pronouncement on the issue, referred to it by a division bench in view of conflicting judgements of some high courts and the apex court. "We are of the view that the power of attorney holder may be allowed to file, appear and depose for the purpose of issue of process for the offence punishable under Section 138 of the Negotiable Instruments Act (which deals with cheque bounce cases)," the bench, also comprising justices Ranjana Prakash Desai and Ranjan Gogoi, said. The bench, in its judgement, said, "...we clarify the position and answer the questions in the following manner: "Filing of complaint petition under Section 138 of Negotiable Instruments Act through PoA holder is perfectly legal...

Christian who reconverts as Hindu SC will get quota benefits

Amid the controversy over “ghar wapsi”, the Supreme Court on Thursday ruled that a person who “reconverts” from Christianity to Hinduism shall be entitled to reservation benefits if his forefathers belonged to a Scheduled Caste and the community accepts him after “reconversion”. Citing articles by B R Ambedkar and James Massey, and reports by Mandal Commission and Chinappa Commission, the court said: “There has been detailed study to indicate the Scheduled Caste persons belonging to Hindu religion, who had embraced Christianity with some kind of hope or aspiration, have remained socially, educationally and economically backward.” The bench of Justices Dipak Misra and V Gopala Gowda held that a person shall not be deprived of reservation benefits if he decides to “reconvert” to Hinduism and adopts the caste that his forefathers originally belonged to just because he was born to Christian parents or has a Christian spouse. Expanding the scope of a previous Constitution benc...