P L D 1984 Lahore 430 (PLP)

This order shall also dispose of Civil Revision No. 1626‑D/1981, as the question involved is identical.

2. The facts of the case, as they appear from the pleadings of the parties are that the respondent‑Corporation brought a suit for a declaration that the defendant was bound to communicate and the plaintiff was entitled to receive the formal acceptance of their bid in respect of Plot No. 44, Industrial Block, Gulberg‑111, Lahore.

3. The respondent had participated in an open auction held by the appellant on 22nd November, 1974 and offered the highest bid of Rs. 1,54,833 in respect of Plot No. 44, Industrial Block, Gulberg‑III, Lahore. The respondent paid a sum of Rs. 10,000 in cash and Rs. 40,000 by cheque, being the 1/3rd amount of the total sale price at the spot.

4. The remaining 2/3rd had to be paid within six weeks of the formal order accepting the bid. The possession of the plot was delivered to the plaintiff at the spot. According to the respondent, the appellant did not communicate its acceptance of the bid to the plaintiff‑respondent before cancelling the sale for non‑performance by it, though some letters were sent by the respondent asking for it. The case of the appellant was that it sent acceptance of the offer but the respondent did not perform its part of the contract.

5. The facts in the other case are also similar, except that a cheque in the sum of Rs. 16,000 to be the part‑payment of the advance money given by the respondent, was dishonoured and the petitioner (L. D. A.) is said to have asked the respondent, in the acceptance letter, to send that amount as well, in addition to the remaining 2/3rd.

6. The trial Court framed the following issues: ‑ (1) Whether the suit is not maintainable in the present form? (2) Whether the plaintiff is a registered firm? (3) Whether this Court has no jurisdiction to try the suit? (4) Whether the plaintiff is entitled to the declaration prayed for? (5) Relief. Later, it found all the issues in favour of the plaintiff‑and decreed the suit.

7. The Additional District Judge, who heard the appeal filed by the appellant dismissed it and upheld the order of the trial Court mainly, for the reason that the defendant‑appellant had failed to prove that it had com municated its acceptance of the offer to the respondent. Earlier, the trial Court had also disbelieved the version of the appellant for the reason that it had produced or proved no copy of the letter sent, no postal receipt and no postal acknowledgment of the respondent.

8. In the other case, the learned trial Court had dismissed the suit of the respondent for the reason that the cheque, in the sum of Rs. 16,000 given in lieu of earnest money having been dishonoured and there being no other evidence that the same amount had been repaid, the appellant was justified to cancel the sale. The appellate Court at the instance of the respondents, however, set aside the judgment and decree of the trial Court and held that though the payment of Rs. 16,00(1 in lieu of the dishonoured cheque had been proved, the L. D. A., had failed to send the intimation of acceptance of the auction in favour of the respondent.

9. It appears to me that the findings recorded by the two Courts below, as to the omission on the part of the appellant to transmit acceptance of the bids of the respondents, should have normally resulted in the dismissal of the suit, for, if that was the factual situation, there was no concluded contract in law. However, on going through the pleadings of the parties and the record. I am of the view, that the admission on the part of the appellant that it transmitted the acceptance of the offer of respondent, should not have been disbelieved or ignored. It was on admission of fact adverse to the interest of the appellant and was supported by the impugned action which was an act of rescision of contract for non‑performance of his part by the respondent.

10. Thus, the facts produced or proved on record do go to show that the appellant sent through post its acceptance of the bid of the respondents but the respondents did not receive them and so did not pay the balance amount so as to face cancellation of the concluded sales. The short question thus arising in these cases is whether the acceptance of offers transmitted to the respondents through post did create a binding contract and if so, what is the effect of late receipt or non‑receipt of acceptance by the respondents and their failure to pay the balance payment? Section 4 of the Contract Act which deals with the situation reads as under: ‑ "The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. The communication of an acceptance is complete as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer. The communication of a revocation is complete as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge."

11. This provision, unlike the English Law, bifurcates 'acceptance' and this aspect is very important when the question of the liability of the acceptor and the proposer under the contract is to be considered. It is to be noted that in order to constitute a binding or enforceable contract there must be A an offer (proposal) and acceptance. Further, no contract can arise without effectual communication of offer and the same is the case if the offer is accepted but it is not communicated.

12. In the case in hand, the respondents made offers which were to be accepted by the appellant. The appellant signified its acceptance also and posted that to the respondents. They. however, did not reach them. Accord ing to section 4 reproduced above and as held by the House of Lords in Dunlop v. Higgina (1 H L C 381) a person posting a letter of acceptance is not answerable for casualties occurring at the post office. The Court of Appeal in Household Fire Insurance Co. v. Grant ((1879) L R 4 Ex. D 216), also held the defendant to be a shareholder and liable to pay for the shares even though a letter of allotment of shares posted to him was, never received by him. Thus the mere transmission of the acceptance would result in a binding contract against the respondents. Again, admittedly, the acceptance was not revoked either. Consequently, the contract was complete and binding on the respondents immediately after the acceptance; was posted and it was not revoked. It is rather the liability of the appellant that would start only after the acceptance comes within the knowledge of the respondent.

13. The above position of law seems to have been well‑settled. In Kamisetti Subbiah v. Katha Venkataswamy (27 I L R 355) a Division Bench of the Madras High Court ruled that in Indian Contract Act, where the proposal and acceptance are made by letters, the contract is made at the time, when and, at the place where, the letter of acceptance is posted though the contract is voidable at the instance of the acceptor by communication of his revocation before the acceptance has come to the knowledge of the proposer.

14. In Henthorn v. Fraser ((1892) 9 Ch. 27), the Court held that when the parties have in mind to use the post as a means of communicating the acceptance of it, the acceptance is complete as soon as it is posted and that revocation of an offer is of no effect until brought to the mind of the person to when the offer was made and revocation sent by post does not operate from the time of posting it.

15. In Baroda Oil Cakes Traders v. Parshottam Narayandas Bagulia (A I R 1954 Bom. 491), the Court relied on section 4 of the Contract Act to hold that as soon as accept ance is posted or sent by telegram the acceptance is complete against the proposer and so far as he is concerned, the contract is concluded and the proposer is bound as soon as the proposal is accepted subject to the right of the acceptor to revoke his acceptance.

16. In Pokhar Mal Ram Nath v. Khanewal Oil Mills ((1945) 221 1 C 594), it was observed by this Court that the moment the letter of acceptance is posted by the addressee in the post box at the place where he received the letter of offer, G the contract is concluded and the complete contract has come into existence and that there is no question of acceptance subsisting unless the acceptance letter reaches the place, where the offer‑letter was placed.

17. The learned counsel for the petitioner took up the position that his client, in that case, would revoke the acceptance. That, I am afraid, cannot be done at this stage. The case of the appellant throughout has been that it did accept the offer and communicated it to the respondents. That has already come to the knowledge of the respondent and he has been in fact litigating to avoid the penalty of rescission of the contract. According to section 4, the respondents were bound to perform the contract immediately, the offer was posted. The appellant never revoked the offer. The respondent H on the other hand are also willing to perform their part of the contract. The question involved thus is only of delay. The Supreme Court in Eassabhoy v. Saboor Ahmad (P L D 1973 S C 39(45)) observed that :‑ "It is well‑settled principle of law that in contracts relating to immovable property, time is not the essence of the contract and the claim of the t appellant, even if it were accepted that he had given three days' notice to the respondent for the completion of the contract, failing which it would come to an end, cannot at all be considered to be reasonable time." In view of the above, this appeal has no merit and is dismissed. However, the respondents must perform their part of the contract within six weeks, which is the reasonable time in the circumstances of this case. The parties shall bear their own costs. M. Z. M. Appeal dismissed.