The Supreme Court held in the case of M/s. Padia Timber Company (P) Ltd. vs. The Board of Trustees of Vishakhapatnam Port Trust Through its Secretary[1], that in case an offer is accepted upon placing a further condition, it is not an absolute contract and cannot be said to have been concluded.
Facts
In July 1990, the Respondent, which is a Port Trust, floated a tender for supply of ‘wooden sleepers’ which were due to be opened on August 1, 1990. Pursuant to this tender, the Appellant submitted his offer. The Appellant’s offer had a specific condition that inspection of the sleepers, would have to be conducted only at the depot of the Appellant.
It was informed that the opening of the tenders had been postponed to August 8, 1990. Thereafter, the Appellant submitted its revised quotation and/or offer.
By October 11, 1990, the Appellant agreed to supply wooden sleepers to the Respondent and reiterated that the Respondent could inspect the goods to be supplied, at the factory site of the Appellant at Vepagunta, Vishakhapatnam, as this would facilitate re-transit of rejected goods to the depot of the Appellant, without additional financial burden. Further, the Appellant also clarified that if the Respondent still required inspection at the site of the Respondent, they would charge 25% above the rate quoted by the Appellant for the supply of wooden sleepers.
Thereafter, the Respondent informed the Appellant that their offer had been accepted and agreed that the Inspection Committee would inspect the wooden sleepers at the site of the Appellant, while the Respondent imposed a further condition that the Appellant would have to transport the wooden sleepers to the General Stores of the Respondent by road, at the cost of the Appellant and the final inspection would be made at the General Stores of the Respondent. It was also requested that the delivery period be extended until November 15, 1990. However, the Appellant rejected this proposal of the Respondent and requested that the earnest money deposited by it be returned.
A purchase order was issued to the Appellant from the office of the Controller of Stores of the Respondent, on the terms and conditions specified in the purchase order and the Special Conditions of purchase appended thereto, according to the specifications and at the rates mentioned in the Purchase Order.
Thereafter, a letter of intent was issued which requested the Appellant to supply the materials ordered as per the purchase order, inter alia, contending that the purchase order had duly been placed on the Appellant within the period of validity of the price quoted by the Appellant, after issuing a letter of intent to the Appellant, accepting its offer. The Appellant was warned that if supply was not made as per the purchase order, risk purchase would be made at the cost of the Appellant and the Earnest Deposit of INR 75,000 would be forfeited.
Subsequently, on November 19, 1990, the Respondent requested the Appellant to commence supply of materials. However, vide its letter dated November 27, 1990, the Appellant wrote to the Respondent contending that there was no concluded contract between the Appellant and the Respondent and requested that the earnest money deposited by the Appellant with the Respondent be refunded to the Appellant.
Court’s Observations
The Court held that in case an acceptor put in a new condition while accepting the contract already signed by the proposer, the contract is not complete until the proposer accepts that condition. Further, if acceptance is conditional, offer can be withdrawn at any moment until absolute acceptance has taken place.[2]
It held that the Appellant was neither in breach nor liable to damages, it is not necessary to examine the questions of whether the compensation and/or damages claimed by the Respondent was reasonable or excessive, whether claim for damages could only be maintained subject to proof of the actual damages suffered, and whether the Respondent had taken steps to mitigate losses.
Another question which has arisen is whether prior approval of the Board of Trustees is a condition precedent for creation of a valid contract for supply of goods, or whether post facto ratification by the Board would suffice. It held that the Appellant was entitled to refund of earnest money deposited with the Respondent. The earnest money shall be refunded within four weeks with interest @ 6% per annum from the date of institution of suit till the date of return thereof.
Conclusion
The Court held that when the acceptor of a contract adds a new condition while accepting the contract which is already signed by the proposer, the contract is not complete until the proposer accepts that condition. It was reiterated 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.
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