Author: Shefali Chaudhary, 2nd year student at ICFAI University, Dehradun.
Citation: 1966 AIR 1724, 1964 SCR (3) 774
Date of decision: May 9, 1963
Original copy: View
Bench: Raghubar Dayal, K. Subbarao, J. R. Mudholkar
Statutes involved: Indian Contract Act, 1872
Issues in question:
- Whether there was no enforceable obligation to purchase the entire quantity or not?
- Whether the appellant was at liberty to end the contract at any stage of the duration of the contract regarding the outstanding obligations under it or not?
Background of the case:
- The appealing party, Madras and Southern Railway, invited tenders by an ad for the stock of 14,000 imperial pounds Cane Jaggery to the railroad grain shops.
- Maddala Thathiah read the ad (which was an invitation to offer) and set the bid for that invitation to give tender by keeping Rs. 7,900 as a security expense. All in all, the respondent after reading the advertisement of invitation to the tender offered the tender to the Railways.
- According to the terms and conditions in the agreements, jaggery was to be shipped in four installments, for example 3,500 maunds each. During the agreement, the madras and southern railway said that they have the ability to drop the agreement anytime.
- Deputy General Manager of Railways told the respondent that they have dropped the contract for the stock of Jaggery and the agreement was shut according to them. Maddala Thathiah protested against the Madras and Southern Railway, but they took the safeguard that the power to cancel the agreement was with them only. Maddala Thathiah filed the suit to claim the damages on breach of contract.
- The Trial Court dismissed the suit in light of the fact that the railway administration had the power to cancel the agreement anytime without paying any damages. The decision herein was in the favor of the Railway.
- The High Court held that the provision allowing the appellant’s power to drop the agreement was void and the Trial Court wasn’t right in not settling on the damages and dismissing the suit for settlement. The appellant was directed to pay the damages for the breach of agreement.
- The Court construed that the impugned statement alludes to the right of the appellant to drop the agreement for the supply of the stock of jaggery about which no formal order had been put by the General Manager with the respondent. However, it is not significant to such supplies of jaggery about which a proper formal order had been set specifying a clear amount of jaggery to be delivered and the date or definite period for its delivery.
- When the request of order is made for such supplies in such dates, the order forms an official agreement making it incumbent on the respondent to supply the jaggery as per the order and furthermore making it incumbent on the General Manager also to accept the jaggery delivered in pursuance of that order.
- The Court construed the agreement between the parties in this situation where the respondent had not made a clear offer however standing or open or continuing offer was made due to the tender requirement of deposit and placing a formal order.
- A standing offer can be revoked at any instance given that it has not been accepted in the lawful sense and acceptance in the lawful sense is finished when an order for a definite amount of goods is made. Each demand by the offeree is an individual act of acceptance that makes a different contract.
- Consequently, the appeal was dismissed and the order of the High Court with respect to the remand of the suit to the trial court for deciding the issue about the damages was restored.
- The judgement gives clearness on the lawfull proposal and its acceptance in the lawful manner and duties of both the parties to deliver and accept the said order respectively.
- The Supreme Court restored the judgement of the high court and ordered for the payment of the damages.