1996 PLP 118 (CLC)

"1........................ 2.........................

3. On acceptance of the offer 15% of the total price will be deposited with the company by the selected purchaser within 15 days failing which the earnest money shall stand forfeited.

4. The remaining balance will be payable by the purchaser before taking delivery of the pipes provided that all the pipes subject to this contract shall be lifted by the purchaser within 60 days. 5........................

6. The Company reserves the right to reject any or all offers without assigning any reason."

11. In response to the abovementioned tender notice, the plaintiff made its offer vide E x h. 6 which is dated 8‑8‑1988. The rate quoted was R s .7,555 per metric ton. Alongwith this offer a Pay Order dated 7‑8‑1988 for Rs.5,00,000 (Rupees five lacs) was also enclosed. In para. 3 of this letter Exh.6, it was categorically mentioned by the plaintiff that if the quoted rate is "accepted they will give a revolving legal letter of credit." However, on opening of tenders on 8‑8‑1988 the plaintiff was declared highest bidder.

12. Plaintiff in para. 6 of his plaint has averred that the defendant instead of accepting the offer in accordance with terms and conditions as laid down in the tender indulged in negotiation with plaintiff to enhance the rate of Steel Pipes. The defendant vide para. 6 of written statement has admitted this fact and has further stated therein that although the offer of plaintiff was highest but under the tender inquiry it was not binding on the defendant to accept the offer. The defendant has admitted holding of negotiation. From 8‑8‑1988 till 4 9‑1988 there is nothing of record which may show was as to what type of terms and conditions were discussed during the said negotiations held between the plaintiff and the defendant. Both the parties have chosen not to produce any oral evidence to prove such facts. Exh. 8 is relevant to some extent which shows the nature and pattern of the negotiation. This is a letter dated 4‑9‑1988 which contains an off addressed to the defendant by the plaintiff. Through this letter, the plaintiff had increased the rate of steel pipes from Rs.7,555 to Rs.8,000 per metric ton. Other conditions were also offered which are to some extent not ' accordance with the tender notice (Exh. 5‑A). There is no evidence as to when this letter Exh. 8 was received by the defendant. On 7‑9‑1988th plaintiff withdrew the offer through another letter which was brought on record as Exh.

9. In this letter, it was again offered to the defendant by the plaintiff that they are willing to purchase the steel pipes at the same rate as of their letter dated 8‑8‑1988 and that the defendant should convey their "final acceptance" to the plaintiff failing which it will be presumed that the Company is not inclined to sell the steel pipes to the plaintiff. Through this letter; the plaintiff also demanded return of earnest money Rs.5,00,000.

13. The most relevant document for decision of this issue is the letter of defendant dated 8‑9‑1988 which has been brought on record by the parties as Exh.

10. Appreciation of this letter will resolve the entire controversy. Relevant contents of defendant's letter dated 8‑9‑1988 (Exh. 10) is reproduced as hereunder:‑‑ "We have received your above referred both letters (dated 4‑9‑1988 and 7‑9‑1988) you have given complete details of your submission in your letter dated 4‑9‑1988 and thereby without any reason you declined to fulfil the same as mentioned in your letter dated 7‑9‑1988. Under the circumstances, in the interest of justice, we are again giving you an opportunity that if still you are interested to finalize the Agreement in the light of your letter dated 4‑9‑1988, then please make necessary appropriate arrangement within a period of seven days from the date of issue of this letter else we shall not be responsible or liable for any consequences thereon. Please also note that on failure to comply the same on your part, we shall be free to assign and award the said contract to any person or body else, and your bid security of Rs.5,00,000 (Rupees five lacs only) shall be forfeited in our favour, please note."

14. Exh. 10 is sufficient proof of the fact that prior to issuance of acceptance of the offer made by the plaintiff, it was withdrawn through Exh.

9. Both these letters of offer and its subsequent revocation made by the plaintiff are mentioned in the abovesaid letter of the defendant. It is pertinent to note that the plaintiff made offer on 4‑9‑1988 and withdrew the same within a short period of two days, the third being 6th September, 1988 a day of national holiday is not counted. Through this letter (Exh. 10), the defendant insisted upon the plaintiff to perform on the terms and conditions of the letter of 4th September, 1988 which was revoked by them. This letter of defendant which is Exh. 10 does not in any manner convey acceptance of the tender of plaintiff dated 8‑8‑1988 offered by plaintiff through Exh.

6. This fact coupled with the fact that subsequent negotiations were held after receiving first offer of the plaintiff is the conclusive proof of the fact that the defendant never accepted offer of the plaintiff made in response to the public notice Exh. 5‑A.

15. There is another important aspect of defendant's letter dated 4‑9‑1988 (Exh. 10) through which the defendant has called upon the plaintiff for "finalization of the agreement in the light of letter dated 4‑9‑1988". If for the sake of argument this letter of the defendant Exh. 10 is accepted as a confirmed acceptance even then this content of the letter shows that this acceptance was conditional which was to be followed by a written agreement to be executed between the parties. In any manner, the letter of defendant dated 4‑8‑1988 cannot be termed as absolute and unconditional acceptance of the offer of plaintiff dated 4‑9‑1988. It cannot be denied that without communication of an offer, no contract can arise. Equally, it can also be said that in absence of acceptance of proposal/offer which acceptance should be absolute and unqualified there is no contract. It is the communication of a proposal/offer and intimation of its acceptance which creates a contract. The facts of such transactions are missing in this case.

16. The question under what circumstances an agreement can be called a concluded agreement came up for consideration before several Courts. There are few references which I would like to quote as the facts of these reported cases are to some extent similar to the facts of this case. In the case of Devidatt Ramniranjandas v. Shriram Narayandas (AIR 1932 Bombay 291), it was held by a Division Bench of Bombay High Court as follows:‑‑ "... It seems to me that when a merchant or commission agent sends his quotations or terms of business to other people it is merely an intimation on his part of his readiness to transact business with them on those terms. It is clear that on the mere passing of the letters between the parties a 'contract as such did not come into existence between the parties. It is conceded, and rightly, that the letters left the parties free and that plaintiffs were free to decline to do any business or carry out any transactions and that the defendants were not bound to send any business to the plaintiffs..."

17. In another case, reported as Central Bank, Yeotmal Ltd. v. Vyankatesh Bapuji (AIR 1949 Nagpur 286), a learned Single Judge of Nagpur High Court held that the offer of the bank which was never communicated to the defendant who may have come to know of the same after obtaining a copy of the resolution, was not treated as communication of acceptance by the bank. This acceptance was not upheld and the Court declared that there is no concluded and binding contract. This rule was followed by a Division Bench of Lahore High Court in the case of Dr. Azeem Shad v. Municipal Committee, Multan (PLD 1968 Lahore 1419). The question involved in this case was again relating to offer and acceptance and after considering several cases from Indian jurisdiction, the Lahore High Court came to the following conclusion:‑‑ "The general rule relating to offer and acceptance has always been understood to be that there can be an acceptance of an offer by the communication of the assent of the person to whom the offer is made or by his doing some act which he is required by the terms of the offer to do. Under section 3 of the Contract Act, the communication of proposals and the acceptance of proposals `are to be deemed by any act or commission of the party' proposing and accepting `by which he intends to communicate such proposal' and acceptance. Our attention has not been drawn to any act or omission bf the respondent by which it might have intended to communicate the acceptance to the plaintiff. A mere acceptance without, communicating the same cannot be binding."

18. In the case of Messrs Shalsons Fisheries Ltd., Karachi v. Messrs Lohmann & Co. and another (PLD 1982 Karachi 76) the issue involved was conclusion and breach of contract. This was a suit for damages arising out of a breach of contract by a defendant Company. Section 7 of the Contract Act was interpreted by a learned Single Judge of this Court Mr. Saiduzzaman Siddiqui, J. (as he then was) in the following manner:‑‑ "... In terms of section 7 of the Contract Act, in order to convert a proposal into a binding contract; the acceptance to the proposal must be absolute and unqualified. There must be shown to exist a consensus ad idem between the parties with regard to all the terms of contract. A qualified acceptance of a proposal or acceptance of the proposal with variation is no acceptance. It is simply a counter‑proposal. Such acceptance does not bring into existence a binding contract between the parties ....

19. It has not been denied by the defendant that the letter dated 8‑9‑1988 was issued after receiving the revocation of proposal made by the plaintiff. In fact, Exh.10 clearly shows that this letter was written by the defendant after receiving both the proposal and its revocation (Exhs. 8 and 9). If this letter of defendant dated 8‑9‑1988 would have been communicated earlier then the letter of revocation, situation would have been different and the defendant may have succeeded in claiming that the agreement was a concluded and binding contract on the plaintiff. The acceptance of the defendant to the offer of the plaintiff was formally made after receiving revocation. Keeping in view the provisions of sections 3, 4, S and 7 of the Contract Act, 1872 as well as above quoted law, I am of the considered view that there was no concluded and binding contract between the parties. 1, therefore, answer both these issues in negative as not proved. ISSUE NO. 3:

20. The issue whether any party is entitled for forfeiture of earnest money and if so, then up to what extent has been finally settled by the Hon'ble Supreme Court of Pakistan in the case of Province of West Pakistan v. Messrs Mistri Patel & Co. and another (PLD 1969 SC 80). This case was followed by a Division Bench of this Court consisting of Mr. Dorab F. Patel, J. and Mr. Zafar Hussain Mirza, J. (as they then were) in the case of Haji Suleman v. Eastern Rice Syndicate and others (PLD 1976 Karachi 277). In the second case, suit of the appellant was dismissed by a learned Single Judge of the High Court by refusing to grant prayers for the return of security deposit/earnest money which was forfeited by the respondent/defendant on the ground that appellant/plaintiff had committed a breach of contract. It was held by the said Division Bench of this Court, as follows:‑‑ "Be that as it may, even if it is assumed that the appellant was the defaulting party, in view of the legal position explained above, in my consideration, the respondent could forfeit the earnest money or advance payment only on proof of loss sustained by him. Taking the rule laid down by their Lordships in the above‑referred Supreme Court case as a guide, it would only be permissible, in the facts and circumstances of the case, to award reasonable compensation subject to the limit of the amount paid under the contract by way of advance. But as stated above, there is no counter‑claim set up by the respondent nor is there evidence worth the name brought on the record to indicate as to what should be the reasonable compensation in the circumstances of this case. The respondent has not brought any evidence on the record to indicate at what price the goods were subsequently sold in the market on their release from the custom authorities. Nor is there any evidence to show that any loss was sustained on this account. In the absence of such evidence it is not possible to determine such compensation. To dismiss the suit of the appellant would obviously amount to allow the respondent to forfeit the advance merely on account of the alleged breach of contract on part of the appellant, which is contrary to the rule laid down by their Lordships of the Supreme Court. The respondent is, thus, not entitled to retain or forfeit the advance payment even if the breach on the part of the appellant is established ...."

21. The reported cases relied upon by the learned counsel for the defendant are not attracted in view of the facts of this case. In the case of Chiranjit Singh, the Privy Council held that the earnest money was part of the purchase price and it was forfeited as the transaction falls through by reason of the fault or failure of the vendee. In the reported case, there was a concluded and binding contract between the parties whereas in this present case I am inclined to take a contrary view, i.e. there was no valid and legal contract between the parties.

22. In the present case, no evidence was laid down by the defendant to prove any loss or damage suffered as a result of the alleged breach of contract. Defendant was granted opportunity by this Court on 4th May, 18th May and again on 18th May, 1993 for clarification of the statement submitted by the defendant for the price received after disposal of the goods in question, but this opportunity was not availed by the defendant. I have already held under Issues Nos. 1 and 2 that there was no concluded and binding contract between the C parties and following the law as laid down in the cases of Mistri Patel and Haji Suleman, I am of the considered opinion that defendant was not entitled for forfeiture of the earnest money deposited by the plaintiff. I accordingly answer this issue in negative. ISSUE NO. 4:

23. None of the counsel for the parties have addressed this Court on this Issue. It has been proved through documents that first offer of plaintiff dated 8‑8‑1988 was not accepted by the defendant and further negotiations were held between the parties, as such, the plaintiff made a second proposal but before its acceptance, the same was withdrawn. There is no impediment in law prohibiting an offer to be withdrawn but not after its acceptance. Section 5 of the Contract Act clearly defines such situation where an offer made by the party can be withdrawn. In this connection, it will be very relevant to quote the illustrations given in section 5:‑‑ "A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches, A, but not afterwards."

24. In view of the facts of the case and for the law as cited above, the Issue No. 4 is answered in affirmation and I hold that the plaintiff was entitled to withdraw his offer/proposal as the same was not accepted by the defendant at the time of its revocation. ISSUE NO. 5:

25. The plaintiff has claimed six (6) different reliefs through its prayer clause. The question of legal status is not involved in this suit. This is a suit for return of earnest money which was forfeited by the defendant, therefore, there is no ground for making any declaration or granting perpetual injunction. Suit of the plaintiff for return of earnest money is decreed with cost.

26. On 29‑12‑1988 an amount of Rs.5,00,000 (Rupees five lac) was deposited by the defendant with the Nazir of this Court in compliance of this Court's order dated 13‑12‑1988. The plaintiff 'will be entitled to withdraw the same amount alongwith the‑profit, if any, through execution proceedings. In the circumstances, prayer for the grant of profit at the rate of bank mark‑up is disallowed.

27. The suit is decreed in the above terms. AA./P‑319/K Suit decreed.