Supreme Court

Padia Timber Company(P) Ltd. vs. The Board of Trustees of Visakhapatnam Port Trust

MANU/SC/0006/2020

05.01.2021

Contract

Acceptance of the offer must be absolute and unqualified and cannot be conditional

Present appeal is against a common Judgment and Order passed by the High Court confirming a Judgment and Order of the Additional Senior Civil Judge, allowing the suit filed by the Respondent-Port Trust against the Appellant for damages, and dismissing Original Suit filed by the Appellant for refund of earnest deposit.

The short question involved in present 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.

It is a cardinal principle of the law of contract that, the offer and acceptance of an offer must be absolute. 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 present Court in Haridwar Singh v. Bagun Sumbrui and Ors. An acceptance with a variation is no acceptance. It is 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 If the acceptance is conditional, offer can be withdrawn at any moment until absolute acceptance has taken place. In Jawahar Lal Burman v. Union of India, referred to by the High Court, this Court held that, under Section 7 of the Contract Act, acceptance of the offer must be absolute and unqualified and it cannot be conditional.

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.

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 till the date of refund thereof. The Judgment and order of the High Court under appeal as also the common judgment and order of the Trial Court are set aside. Appeal allowed.

Tags : Refund Earnest Deposits Entitlement

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