2021 (1) TMI 1216 - SC - Indian Laws

Acceptance of offer - acceptance of a conditional offer with a further condition - Breach of contract or not - entitlement to recover the suit amount from the Defendant - applicability of time limitation - 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? - interpretation of Indian Contract Act - HELD THAT - The High Court found that there was no dispute that tenders had been called for and that it was the case of the Respondent Port Trust that the offer of the Appellant had in fact been accepted and purchase order issued on 31st October 1990 under registered Post that had been acknowledged but refused by the Appellant. The High Court also recorded the contention of the Appellant that in the absence of previous approval from the Board of Trustees of the Respondent-Port Trust under the proviso to Section 34(1) of the Major Port Trust Act 1963 there could be no enforceable contract. 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 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. 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 VERSUS. BAGUN SUMBRUI AND ORS. 1972 (2) TMI 95 - SUPREME COURT . 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 UOI. VERSUS BHIMSEN WALAITI RAM 1969 (9) TMI 109 - SUPREME COURT 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 If the acceptance is conditional offer can be withdrawn at any moment until absolute acceptance has taken place.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 High Court also overlooked Section 7 of the Contract Act. Both the Trial Court and the High Court over-looked the main point that in the response to the tender floated by the Respondent-Port Trust the Appellant had submitted its offer conditionally subject to inspection being held at the Depot of the Appellant. This condition was not accepted by the Respondent-Port Trust unconditionally. 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. Since it is held that the Appellant was neither in breach nor liable to damages it is not necessary for us to examine the questions of whether the compensation and/or damages claimed by the Respondent Port Trust was reasonable or excessive whether claim for damages could only be maintained subject to proof of the actual damages suffered and whether the Respondent Port Trust had taken steps to mitigate losses - the Appellant was entitled to refund of earnest money deposited with the Respondent-Port Trust. The earnest money shall be refunded within four weeks with interest @ 6% per annum from the date of institution of suit No. 450 of 1994 till the date of refund thereof. Appeal allowed.

Summary

Issues Involved:
1. Whether the acceptance of a conditional offer with a further condition results in a concluded contract.
2. Whether there was a concluded contract between the parties.
3. Whether the Appellant committed a breach of contract.
4. Whether the Respondent-Port Trust was entitled to recover damages.
5. Whether the Appellant was entitled to the refund of the earnest deposit.

Issue-wise Detailed Analysis:

1. Acceptance of a Conditional Offer:
The core issue was 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. This was not addressed by the lower courts.

2. Concluded Contract:
The Appellant submitted a conditional offer to the Respondent-Port Trust, insisting on inspection at its depot. The Respondent-Port Trust accepted this condition but added a further condition for final inspection at its General Stores. The Appellant did not accept this additional condition, leading to the conclusion that no contract was formed. The principle that the acceptance must be absolute and unqualified, as per Section 7 of the Indian Contract Act, 1872, was emphasized. An acceptance with a variation is a counter-proposal and not a concluded contract.

3. Breach of Contract:
The Trial Court held that there was a concluded contract based on the dispatch of a letter of intent within the validity period of the offer. However, the Supreme Court found that since the acceptance was conditional and not absolute, no concluded contract existed. Therefore, the Appellant could not be held liable for breach of contract.

4. Entitlement to Damages:
The Respondent-Port Trust claimed damages for the Appellant's refusal to supply wooden sleepers, invoking the risk purchase clause. The Trial Court awarded damages, but the Supreme Court overturned this, stating that without a concluded contract, there could be no breach and hence no entitlement to damages.

5. Refund of Earnest Deposit:
The Appellant sought a refund of the earnest deposit after rejecting the Respondent-Port Trust’s additional condition. The Supreme Court ruled in favor of the Appellant, ordering the refund of the earnest deposit with interest, as there was no concluded contract and hence no basis for forfeiture.

Conclusion:
The Supreme Court allowed the appeal, setting aside the judgments of the High Court and the Trial Court. It held that there was no concluded contract due to the conditional acceptance, and thus, no breach or entitlement to damages. The Appellant was entitled to a refund of the earnest deposit with interest.