Acceptance Of Conditional Offer With An Additional Condition Does Not Conclude A Contract

THE SUPREME COURT RECENTLY REITERATED THAT A CONTRACT CANNOT BE SAID TO HAVE CONCLUDED IF THE CONDITIONAL OFFER WAS ACCEPTED BY ADDING A FURTHER CONDITION.

SECTION 7 INDIAN CONTRACT ACT

• Section 7 of the Indian Contract Act provides that “In order to convert a proposal into a promise the acceptance must be absolute and unqualified.”

• As per this section, an offer will become a contract only if the acceptor accepts the offer as it is, i.e. without adding any condition of his own.

•  When the acceptor adds a further condition, the offer is no more the same and becomes a counter offer.

HIGHLIGHTS OF THE PRESENT CASE

•  Visakhapatnam Port Trust had floated a tender for supply of Wooden Sleepers.

• The appellant company M/s Padia Timber Company sent an offer which contained a condition that the final inspection of the wooden sleepers shall be done at company’s site only.

• The appellant company also deposited a sum of ₹ 75000/- with the Port Trust in accordance with Terms and Conditions of tender offer.

• The Port Trust accepted the offer but added further conditions that the appellant company shall bear the transportation costs of wooden sleepers and also, that the one final inspection shall be done at Port Trust’s site.

•  Not agreeing to the conditions imposed by Port Trust, the Appellant Company communicated its desire of withdrawing its offer, and getting a refund of the ₹75000 deposited by it.

• The Port Trust filed suit against the Appellant Company for breach of contract and claimed damages worth ₹33,19,991/-.

•  The Trial Court ruled in favor of the port Trust and directed the Appellant Company to pay damages.

•  The High Court rejected the appeals filed.

•  However, the Supreme Court, in the appeal, held that a contract cannot be said to have concluded if the conditional offer was accepted by adding a further condition, and that the High Court had mistakenly overlooked section 7 of Contract Act.

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