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Mrs. Chand Kunwar and ors. Vs. State of Rajasthan - Court Judgment

LegalCrystal Citation
SubjectContract
CourtRajasthan High Court
Decided On
Case NumberSecond Appeal No. 271 of 1969
Judge
Reported inAIR1981Raj23
ActsContract Act, 1872 - Sections 2
AppellantMrs. Chand Kunwar and ors.
RespondentState of Rajasthan
Appellant Advocate Rajendda Mehta, Adv.
Respondent Advocate M.D. Purohit, Addl. Govt. Adv.
DispositionAppeal partly allowed
Cases ReferredKundanlal v. The Secretary of
Excerpt:
.....moulding the reliefs the court will take these facts into consideration. - as faujraj failed to supply the contracted commodities, the jail authorities purchased them from the market at a higher price up to june 30, 1956. the plaintiff-respondent has stated that on account of the purchase of the contracted articles from the market, the government had suffered a loss of rupees 4984.11 because of the breach of contract, committed by faujraj. this, according to the learned counsel pre-supposed a specific order relating to specific quantity of the contracted commodities and if the agent had failed to supply the goods on placing of the order of their supply then there would have been a breach of contract. 5 was a completed contract and as late faujraj committed breach of the conditions..........body is not bound to give the tenderer any order at all, in other words, the contractor offers to supply goods at a price, and if the purchasing body chooses to give him an order for goods during the stipulated tune, then he is under an obligation to supply the goods in accordance with the order; but apart from that nobody is bound. only an offer comes into being which the tenderer is free to revoke at any time before the next order is placed. once an order is placed the tenderer is bound to supply the goods under that perticular order. he is still free to revoke the offer for purposes of future orders. there is also an intermediate contract that can be made in which although the parties are not bound to any specified quantity, yet they bind themselves to buy and to pay for all the.....
Judgment:

S.K. Mal Lodha, J.

1. This appeal under Section 100, C. P. C. is by defendants against the appellate judgment and decree dated March 28, 1969, of the learned District Judge, Jodhpur by which he confirmed the decree for Rs. 4685.33 with proportionate costs passed by the Civil Judge, Jodhpur on April 15, 1966 in a suit for recovery of Rs. 4984.69 on account of loss suffered by the plaintiff-respondent as there was a breach of contract.

2. A few facts giving rise to this appeal may briefly be recounted here: The defendants-appellants are the legal representatives of late Fauj Raj, who according to the plaintiff-respondent, worked under the name and style 'Faujraj & Company', for the supply of ration commodities. The Authority of the Central Jail, Jodhpur invited tenders for the supply of ration commodities for the period commencing from July 1, 1955 to June 30, 1956. The conditions of the contract are contained in Ex. 2. Material conditions for the disposal of the appeal are as under :

^^2- lQy Bsdsnkj dks Lohr oLrq,bUMsUV feyrsgh ,d lIrkg esa tsy xksnke esa fcuk vfrfjDr pktZ ds nsuh gksxh A

4 dksbZ oLrq Lohr uequs vuqlkju gksus ij o Bsdsnkj ds eky le; ij nsus esa vlQy gksus ij lkeku cktkj ls [kjhnktk;sxk ftlds Hkko QdZ dk ftEesnkj Bsdsnkj gksxk^^

Late Faujraj, proprietor of Fauj Raj & Company gave a tender on April 30, 1955. His tender was accepted by the Government of Rajasthan. A contract for the supply or ration commodities mentioned in memorandum No. p-4333/F. 16 (143) Home. 11/55 dated July 29,1955 was sanctioned in his favour for the period from August 1, 1955 to June, 1956. The sanction was conveyed to late Faujraj by the Superintendent, Central Jail on August 2, 1955. An agreement (Ex. 5) in pursuance of the sanction was executed. The security amount was not deposited by Faujraj. He, however, supplied the ration commodities regularly to the Jail Authorities for some time, but later on he could not arrange for regular supply. On March 25, 1956 he refused to supply the commodities and intimated to the Jail authority vide letter dated June 27, 1956 that he was confined to bed and, therefore, was unable to make the necessary arrangement for supply of the contracted articles. As Faujraj failed to supply the contracted commodities, the Jail Authorities purchased them from the market at a higher price up to June 30, 1956. The plaintiff-respondent has stated that on account of the purchase of the contracted articles from the market, the Government had suffered a loss of Rupees 4984.11 because of the breach of contract, committed by Faujraj. The State, therefore, instituted a suit for the recovery of Rs. 4984.11 in the court of Civil Judge, Jodhpur on May 11,1961 against the defendants-appellants being the legal representatives of Faujraj. The suit was resisted by the defendants. One of the important pleas taken by them was that even if the case of the plaintiff is taken to be proved, the agreement (Ex. 5) was not completed and, therefore, the defendants are not liable for breach and Faujraj was at liberty to put an end to this contract at any time. The trial court framed five issues inclusive of the relief. After trial, the learned civil Judge, by his judgment dated April 15, 1956, partly decreed the suit for Rupees 4685.33 and the bar of the decree was limited to the extent of the assets left by Faujraj and received by the defendants and not satisfactorily accounted for. The suit for the amount of Rupees 299.36 was dismissed with costs and future and pendente lite interest was allowed at the rate of 6% p.a. on the decretal amount.

3. Being dissatisfied, the defendants went in appeal and the learned District Judge, by his judgment, dated March 28, 1969, confirmed the judgment and decree passed by the learned Civil Judge on April 15, 1966. Aggrieved, the defendants have come up in appeal to this Court.

4. I have heard Mr. Rajendra Mehta, learned counsel for the appellants and the learned Additional Government Advocate on behalf of the respondent.

5. Mr. Rajendra Mehta, appearing for the appellant has not raised any controversy in regard to the sum of Rupees 924.3 as mentioned in Ex. 126. This amount pertained to the loss suffered by the respondents for non-supply of contracted commodities up to March, 1956. The controversy in this appeal, therefore, remains confined to the balance of the decretal amount.

6. The only argument raised by Mr. Rajendra Mehta is that by means of the agreement (Ex. 5), no completed contract come into existence and as there was no completed contract, the defendants cannot be held to be liable for its breach. On the basis of condition No. 2, reproduced from Ex. 2 and Clause 2 of the agreement (Ex. 5), it was strenuously contended that the 'Agent' (Late Faujraj) was bound to deliver the contracted commodities in accordance with the requirements of Central Jail at the godown. Jodhpur. This, according to the learned counsel pre-supposed a specific order relating to specific quantity of the contracted commodities and if the Agent had failed to supply the goods on placing of the order of their supply then there would have been a breach of contract. In other words, according to the learned counsel the binding contract could only come into existence after the placing of the order by the Jail Authorities with regard to specified quantity of the contracted commodities. Learned Additional Government Advocate controverted this position and submitted that Ex. 5 was a completed contract and as Late Faujraj committed breach of the conditions thereof, he was liable to make good the loss suffered by the plaintiff.

7. I have given my most anxious and thoughtful consideration to the rival contentions raised on behalf of the learned counsel for the parties and I am of opinion that there is considerable force in what the learned counsel for the appellant has contended.

8. It was contended before the learned District Judge whether upon the true construction of Ex. 2 and agreement Ex. 5, it could be held that there was a contract on the part of late Faujraj to supply certain commodities to the Central Jail. The learned District Judge opined that the agreement (Ex. 5) did not give an option to the Jail Authorities to give or not to give the tenderer any order at all for supply of specified goods. After considering the relevant case-law, he reached the conclusion that the parties had entered into a binding contract which became irrevocable after the tender was accepted by the Government and it was not merely a revocable continuing offer which was to be accepted from time to time by giving orders. It will be useful here to quote Clause 2 of the agreement (Ex. 5) which is as under;

'The agent agrees to deliver the said commodities in accordance with the requirements of Central Jail at the godown Jodhpur.'

The question, that, therefore, arises is whether having regard to condition No. 2 in Ex. 2 and Clause 2 in the Agreement (Ex 5). a binding contract came into existence or it was merely a standing offer.

9. Para 230 of the Halsbury's Laws of England Fourth Edition, Vol. 9, deals with 'Tenderers'. The learned Author has stated in para 230 that an advertisement that goods or services are to be bought or sold by tender is not, prima facie, an offer to sell to the person making the highest tender and. normally, the actual tender will amount to an offer. It follows that in the usual case, acceptance of such a tender concludes a binding contract. He has stated as under:

'In one instance, however, such an acceptance does not usually have this effect. Ordinarily, a tender for the supply of such goods as may be required, no quantity being specified, is not an offer which may be accepted generally so as to form a binding contract, but is a continuing offer, which is accepted from lime to time whenever an order is given for any of the goods specified in the tender. An acceptance of such a tender merely amounts to an intimation that the offer will be considered to remain open during the period specified, and that it will be accepted from time to time by orders for specific quantities and does not bind either party unless and until such orders are given. Nevertheless, a tender may be so worded as to impose an obligation on the person who accepts it to order all the goods that he requires for a particular business or purpose during the period specified from the person whose tender has been accepted provided it is sufficiently specified what the terms of the contract are.'

Cheshire and Fiffot on 'Law of Contract, under the topic 'Acceptance in the case of tenders' have mentioned as follows: There is no doubt, of course, that the tender is an offer. The question however, is whether its 'acceptance' by the corporation is an acceptance in the legal sense so as to produce a binding contract. This can be answered only by examining the language of the original invitation to tender. There are at least two possible cases. First, the corporation may have stated that it will definitely require a specified quantity of goods, no more and no less, as, for instance, where it advertises for 1,000 tons of coal to be supplied during the period January 1st to December 31st. Here the 'acceptance' of the tender is an acceptance in the legal sense, and it creates an obligation. The trader is bound to deliver, the corporation is bound to accept, 1,000 tons and the fact that delivery is to be by instalments as and when demanded does not disturb the existence of the obligation. Secondly, if the corporation advertises that it may require articles of a specified description upto a maximum amount, as, for instance, where it invites tenders for the supply daring the coming year of coal not exceeding 1,000 tons altogether, deliveries to be made if and when demanded, the effect of the so-called 'acceptance' of the tender is very different. The 'Tenderer' has made what is called a standing offer. Until revocation he stands ready and willing to deliver coal upto 1,000 tons at the agreed price when the corporation from time to time demands a precise quantity. The 'acceptance' of the tender, however, does not convert the offer into a binding contract, for a contract of sale implies that the buyer has agreed to accept the goods. In the present case, the corporation has not agreed to take l,000/- tons, or indeed any quantity of coal. It has merely stated that it may require supplies upto a maximum limit. In this latter case, the standing offer may be revoked at any time provided that it has not been accepted in the legal sense; and acceptance in the legal sense is complete as soon as a requisition for a definite quantity of goods is made. Each requisition by the offeree is an individual act of acceptance which creates a separate contract. If the corporation in the case given telephones for twenty five tons of coal, there is an acceptance of the offer and both parties are bound to that extent and to that extent only -- the one to deliver, the other to accept twenty-five tons. If, however, the tradesman revokes his offer, he cannot be made liable for further deliveries, although he is bound by requisition already made.'

10. The nature of 'standing offer' was considered in Perclval Ltd. v. London County Council Asylums and Mental Deficiency Committee (1918) 87 L.JKB 677. In that case, the plaintiffs advertised for tenders for the supply of stores. The defendant made a tender to the effect that he undertook to supply the company for twelve months with such quantities of special articles as the company may order from time to time, The Company, by a letter accepted the tender and subsequently gave various orders which were executed by the defendant. Ultimately the Company gave an order for goods within the schedule, which the defendant refused to supply. The Company succeeded in an action for breach of contract. The tender was a standing offer, to be converted into a series of contracts by the subsequent acts of the company and that an order prevented pro tanto tha possibility of revocation, and the defendant, though he might regain his liberty of action for the future, was meanwhile bound to supply the goods actually ordered. Reference of the aforesaid paras in Law of Contract by Cheshire and Fiffot has been made by their Lordships in Union of India v. M. Thathaiah, AIR 1966 SC 1724. It will be useful here to refer to Chaturbhuj Vithaldas v. Moreshwar Parashram, AIR 1954 SC 236. In that case, certain letters were analysed. After analysing those letters, their Lordships opined that no binding engagement can be spelt out of them except that the company undertook to sell to the Canteen contractors only through the Canteen Stores and not direct and undertook to pay a commission on all sales. It was held that this constituted a continuing arrangement under which Canteen Stores, i. e.. the Government, would be entitled to the commissions on all orders placed and accented in accordance with the arrangement. The letters merely set out the terms on which the parties were ready to do business with each other if and when orders were placed and executed. As soon as an order was placed and accepted a contract arose. It is true that this contract would be governed by the terms set out in the letters but until an order was placed and accepted there was no contract. Also, each separate order and acceptance constituted a different and distinct contract. In this connection, reliance was placed by their Lordships of the Supreme Court on Rose and Frank Co. v. J.R. Crompton & Bros. Ltd. 1925 AC 445, Chaturbhuj's case was referred to in Union of India's case. From Chaturbhuj's case, their Lordships in Union of India's case, excerpted the following:

'But except for this the letters merely set out the terms on which the parties were ready to do business with each other if and when orders were placed and executed. As soon as an order was placed and accepted a contract arose. It is true this contract would be governed bv the term set out in the letters but until an order was placed and accepted there was no contract,'

It was held in that case that on the basis of the note, the acceptance of respondent's tender by the Deputy General Manager may even amount to a contract in the strict sense of the term. It was observed :

'.....we do not consider it in that sense in view of the provision of Paras 8, 9 of the tender requiring a deposit of securitv and the placing of the formal order.'

In Secretary of State v. Madho Ram, AIR 1929 Lah 114. one M signed a tender for the supply of petroleum oil to the military authorities in the Lahore Division for the period of one year. The tender was in the following terms: 'I, hereby agree that on acceptance of this tender or so much thereof as relates to the supply of petroleum oil, I shall in accordance with such acceptance supply and deliver at my own expense so much oil petroleum as the officer I. G. supplies concerned, may require subject to the condition set forth in the tender and in Schedule annexed thereto.' The schedule to the tender set out the respective prices to be charged on the estimated requirements. The price to be charged was fixed in the schedule at Rs. 3,12.0 per gallon and the estimated requirement stated to be 200 gallons. In a footnote to the schedule appeared the words 'and as required after completion of these quantities.' M claimed the exclusive right of supplying to the military authorities of Lahore all supplies of Petrol ordered for the military department and sued the military department for damage for having purchased petroleum from persons other than himself. In those facts, it was held that the tender was merely an offer to supply poods at certain price for the fixed period and so long as the offer remained open M was bound to supply the goods at the price when called upon to do so up to at least the estimated quantity and M could at any time withdraw his offer upon proper notice to the military authorities and upon such withdrawal his liability to supply the goods not already ordered would have terminated. It was further held that the military authorities were free to accept the offer or not as they would think fit and they could buy the goods from any other source without any reference to M. In that case, reliance was placed on M. Percival Ltd.'s case.

In the Bengal Coal Co. v. Homee Wadia & Co., (1899) ILR 24 Bom 97, 'A agreed in writing to supply coal to B at certain prices and upto a stated quantity, or in any quantity which may be required for a period of twelve months, is not a contract unless B binds himself to take some certain quantity, but a mere continuing offer which may be accepted by B from time to time by ordering goods upon the terms of the offer. In such a case, each order given by B is an acceptance of the offer and A can withdraw the offer, or, to use the phraseology of the Act revoke the proposal, at any time before its acceptance by an order from B. Such a transaction may be reduced to a statement by the intending vendor in this form If you will send me orders for coal, I shall supply it to you for a period of twelve months at a particular rate.' This is merely a proposal from A to B. If in reply to such a proposal, B says to A 'I agree', it does not constitute an acceptance of the proposal. An acceptance can take place only by B sending an order to A'. The Bengal Coal's case was relied on in Kundanlal v. The Secretary of the State for India in Council (1904) 39, Pun Re 223. In that case, the Commissariat Department invited tenders for the supply of such grass as it might require for a period of twelve months. The defendant sent in a tender to supply the grass for the period at a certain fixed price in such quantities as the Department might order from time to time. By one of the terms of the tender the plaintiff was bound to give fifteen days notice if more than 1,000 maunds of grass was required at a time. The plaintiff accepted the tender and on September 12, save a notice to the defendant (which was not despatched from plaintiff's office until the 14th) that he would require delivery of 1,400 maunds on or before the 28th September. The plaintiff having failed to deliver the grass (although several extensions were allowed to him), the plaintiff rescinded the contract and brought an action for damages for non-delivery against the defendant. It was, inter alia, held that the tender made by the defendant and accepted by the plaintiff was not a contract by itself but created a series of continuing offers on the part of the defendant which plaintiff was at liberty to convert into contract by giving orders in accordance with the terms of the tender.

11. In this case it is clear from Ex. 2 that the person in whose favour the contract was sanctioned, would be required to supply the contracted commodities to the Jail Godown within a week without recovering the additional charges. Clause 2 of the agreement (Ex. 5) lays down that the Agent would be required to deliver the contracted commodities in accordance with the requirements of Central Jail at Godown, Jodhpur Clause 2 of the agreement (Ex. 5) does not constitute the contract by itself, but it merely created a series of continuing offers on the part of the Agent, which the plaintiff (Jail Authorities) were at liberty to convert into contract by giving orders in accordance with the terms of the tender. As the agreement (Ex. 5) is not a binding contract, the failure to supply the goods without placing any specific order in regard to them does not give rise to a breach of contract so as to entitle the plaintiff-respondent to recover the loss from the defendants. This view of mine stands supported by Percival Ltd.'s case ((1918) 87 LJ KB 677), Bengal Coal Company's case, ( (1899) ILR 24 Bam 97), Kundanlal's case ((1904) 39 Pun Re 223)) and Secretary of State's case (AIR 1929 Lah 114). The learned District Judge has made reference to the decision rendered in Jigna Devi v. the State of Rajasthan (D. B. First Appeal No. 54 of 1954, decided on April 10, 1958), in which Percival Ltd.'s case and Bengal Coal Company's case have been referred. It was observed by the Division Bench in Jigna Devi's case (supra) as follows:

'It is true that the acceptance of a tender does not in every case produce a binding contract. Whether or not it does so depends upon the language of the original invitation to tender, of the tender which is offered and of the acceptance or other formal document if any executed between the parties. It is quite common for large bodies that require supplies over a year to ask for tenders and to obtain them. It sometimes happens that the effect of the form of the tender with an acceptance is to make a firm contract by which the purchasing body undertakes to buy all the specified material from the contractor. On the other hand, these tenders are very often in a form under which the purchasing body is not bound to give the tenderer any order at all, in other words, the contractor offers to supply goods at a price, and if the purchasing body chooses to give him an order for goods during the stipulated tune, then he is under an obligation to supply the goods in accordance with the order; but apart from that nobody is bound. Only an offer comes into being which the tenderer is free to revoke at any time before the next order is placed. Once an order is placed the tenderer is bound to supply the goods under that perticular order. He is still free to revoke the offer for purposes of future orders. There is also an intermediate contract that can be made in which although the parties are not bound to any specified quantity, yet they bind themselves to buy and to pay for all the goods that are in fact needed by them. In such a case there is a binding contract which will be broken if the purchasing body in fact does need some of the articles which are subject of the tender and does not take them from the tenderer.'

I have carefully read the above judgment and am clearly of the opinion that it is of no avail to the plaintiff respondent. In that case in Clause 2 of the notice inviting tenders, it was specified that the licensee shall supply raw opium according to the allotment made by the Kotah State except the Sambhar Shamlat area and to no other person or persons in the State. Clause, 7 of the agreement read as under;

'If the licensee fails to supply the required quantity of opium from time to time within the time required the cash security deposited by him shall be liable to forfeiture.'

Clause 8, inter alia, provided for the grant of necessary permits to the licensee for the import of the opium. The learned Judges, after taking into consideration Clauses 1 to 14, reached the conclusion that 'On a careful consideration of the language of the notice inviting tenders and of the agreement dated 1-4-49 we are of opinion that the Jodhpur Government entered into a firm contract with the plaintiff under which it bound itself to purchase the entire quantity of opium allotted to it by the Kotah State.' The words 'according to allotment made by the Kotah State' are said to have meant the whole of the allotment made by the Kotah State.

12. The learned District Judge misdirected himself when he construed the agreement (Ex. 5) as a binding contract. Having regard to the language used in condition No. 2 of Ex. 2 and Clause 2 of the agreement (Ex. 5). I am of opinion that the contract was merely a continuing offer and no binding contract came into existence. It was merely a standing offer fand it was only after the orders were placed for specified quantity that the appellant was bound to supply the contracted commodities to the Jail Authorities. It was only after the acceptance of the order that a completed binding contract could have come into existence.

13. In view of the conclusion which I have arrived at hereinabove, I am unable to agree with the finding recorded by the learned District Judge that the parties entered into the binding contract which became irrevocable after the tender was accepted by the Government and the plaintiff-respondent is not entitled to recover the loss from the defendants on account of the breach of contract.

14. For the reasons mentioned above, I am constrained to allow this appeal in part.

15. The result is that the appeal is partly allowed and the decree of the trial court as confirmed by the first appellate court is modified and the decretal amount is reduced from Rs. 4685.33 to Rs. 924.18. In other words, the suit of the plaintiff-respondent is dismissed for Rupees 4060.51 (Rs. 299.36 plus Rupees 3761.51) and decree for Rs. 924.18 only is maintained. The plaintiff will be entitled to interest pendente lite and future @ 6% per annum on the decretal amount of Rs. 924.18. The parties will be entitled to receive and pay costs throughout according to their success and failure in this Court.


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