Acceptance with variation is no acceptance at all : Supreme Court

A conditional offer made with a further condition will not result in a concluded contract until and unless the original offeror accepts the further condition proposed by the acceptor. The Supreme Court bench consisting of J. Navin Sinha and J. Indira Banerjee, reversed the decisions given by the lower courts and decided upon the requirements for a concluded contract in the matter of M/s Padia Timber Company (P) Ltd. v. The Board of Trustees of Visakhapatnam [Civil Appeal No. 7469 of 2008].

The respondent, on 17.7.1990, had floated a tender for supply of Wooden Sleepers to which the appellant submitted their offer and mentioned specifically that the inspection of the sleepers would be conducted at the depot of the appellant only. The appellants disagreed to two of the clauses in the original tender which said the purchaser would not pay separately for transit and that the purchaser had 30 days to notify any loss/damage and if so found, then the same would be rejected and returned to the supplier. The appellant rather made a counter offer and also deposited Rs. 75,000/- towards earnest deposit. The appellant made it clear that if the respondent wanted to inspect the goods at the site of the respondent, then the appellant would charge 24% above the rate quoted for the supply. The respondent accepted the offer but further imposed a condition that the transport would have to by road at the cost of the appellant and a request was made to extend the delivery period. The appellant did not accept this offer and sent a letter rejecting the proposal and requesting the respondent  to return the earnest money deposited. On the same day, the controller stores of the respondent put up an office notice seeking sanction against the Chairman for placing orders from the appellant. The respondent warned the appellant that if the supply was not made then the risk purchase would be made at the cost of the appellant and stated that the order was placed duly well within the period of validity of the price quoted by the appellant.

Since the appellant failed to supply the good, the respondent filed a suit before the court of II Additional Subordinate Judge seeking damages for breach of contract. Later, the respondent submitted the written statement and filed another suit claiming the refund of earnest money deposited. The two suits were heard together and the Trial Court held that the contract had been concluded and that the appellant had breached its obligations and the respondents were entitled  to damages as claimed. On appeal, the High Court dismissed the same, affirming the trial court’s orders.

The Supreme Court, in the present appeal, relying on the case of Harwinder Singh v. Bagun Sumbui and Ors. [AIR 1972 SC 1242], held that “ It is a cardinal principle of the law of contract that the offer and acceptance of an offer must be absolute. It can give no room for doubt. 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”. Further the court stated that an acceptance with variation is no acceptance at all and that a counter proposal is to be accepted by the original proposal before a contract is made. The SC held that the appellant was not in breach of contract therefore, was not liable to pay the damages and the respondents were ordered to return the earnest money deposited to the appellants.

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