Author: Surya, 3rd Year student at RNB Global University, Bikaner.
Citation: (2017) 351 SC
Date of Decision: April 21, 2017
Bench: Ranjan Gogoi, Navin Sinha
Original Copy: View
Statutes involved: Indian Contract Act, 1872
Issue in question:
- Whether the contract was made between the parties or it was just an offer and counter offer?
Background of the case:
- Bangladesh Chemical Industries Corporation (BCIC) issued a tender for supply of Phosphoric Acid. M/s. Emirates Trading Agency LLC (Respondent) filled the tender and it got an order to supply Thirty Thousand MT Phosphoric Acid.
- Respondent had signed an agreement with Appellant to supply 30,000 MT Phosphoric Acid.
- The Respondent sent a draft agreement to the Appellant on 26 Oct, 2007, for supply of 30,000 MT Acid to the BCIC during November and December, 2007. In order to confirm, the Appellant was supposed to return it after signing and stamping.
- But instead of accepting the offer the appellant made a counter offer to supply 28,500MT between the period of January to March, 2008.
- Thus, both the parties never agreed on the same point and there was no meeting of minds therefore no contract arises there between appellant and the respondent.
- Because of breach of contract by the appellant the respondent had to bear financial loss as well as it has lost the tender.
- Thus, the respondent filed a suit against the appellant in order to recover the loss as well as the interest on it.
- The Trial Court gave decision in favour of the Respondent and asked the Appellant a sum of Rs.5,25,55,460/- with 8% interest from the date of the filing of suit till realisation.
- Appellant moved to the HC and made an appeal against the order of Trial Court, but the same was dismissed on 04 Feb,2014. Then the Appellant filed a review petition. The HC in the review petition also relied on the observations of the trial court and the first appellant court and dismissed the review petition.
- The SC gave a decision in favour of the Appellant. The SC held that there was no contract between the parties because the Appellant had not accepted the offer made by the Respondent and made a counter offer. The parties never agreed on the same point regarding the amount and time of supply of Phosphoric Acid. As per Section 7 of Indian Contract Act,1872 in order to convert a proposal in contract the acceptance must be absolute and unqualified.
- According to section 73 of Indian Contract Act, 1872 the aggrieved party is entitled to get compensation from the other party who commits the breach of contract. But here in this case, as there was no meeting of minds therefore the contract never came into existence.
- The court held that Respondent is not entitled to get compensation and Respondent’s claim is not maintainable.
- It is clear that a contract will come into existence only when one party accepts an offer made by the other. If a party made an offer and the other party made a counter offer and there is no meeting of minds or they don’t agree on the same then the contract will not arise.
- In this particular case the SC gave a decision on the basis of Section 7 and Section 73 of the Indian Contract Act, 1872.
- Thus, as per the decision of the court, acceptance is necessary to convert a proposal into a contract. So, it is rightly held that the Respondent cannot claim compensation, for the loss suffered by him, from the Appellant.