Union of India V. Maddala Thathiah AIR 1966 SC 1724 Case Analysis

Facts

• Union of India V. Maddala Thathiah , AIR 1966 SC 1724
  • Standing offer
  • The facts giving rise to this appeal by special leave, are these:
• 2. The Dominion of India, as the owner of the Madras and Southern Mahratta Railway, represented by the General Manager of that railway, invited tenders for the supply of jaggery to the railway grain shops.
• The respondent submitted his tender for the supply of 14,000 imperial maunds of cane jaggery during the months of February and March 1948. The tender form contained a note in Para 2 which was meant for the quantity required and the described dates of delivery. This note was:
  • “This Administration reserves the right to cancel the contract at any stage during the tenure of the contract without calling up the out standings on the unexpired portion of the contract”.
• The dates for the delivery of the four instalments were slightly changed by a subsequent letter, dated February 28, 1948.

Law Points

• Making of an agreement
• Tender is an offer
• Standing offer − until revocation he stands ready.
• 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.
• any such term in a contract which destroys the contract itself according to the earlier terms is void as in that case there would be nothing in the alleged contract which would have been binding on the appellant.
• Section 10 of ICA − what agreements are contract
• Section 23 of ICA 1872
• What considerations and objects are lawful, and what not .The consideration or object of an agreement is lawful, unless
  • it is forbidden by [law]; or
  • is of such a nature that, if permitted, it would defeat the provisions of any law; or
  • is fraudulent; or
  • involves or implies injury to the person or property of another; or
  • the Court regards it as immoral, or opposed to public policy.
  • In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void
• 3. By his letter, dated March 8, 1948, the Deputy General Manager informed the respondent that the balance quantity of jaggery outstanding on date against the order, dated February 16, 1948, be treated as cancelled and the contract closed.
• The protests of the respondent were of no avail as the railway administration took its stand against the stipulation that the right to cancel the contract at any stage was reserved to it.
• Ultimately, the respondent instituted the suit against the Union of India for recovering damages resulting from breach of contract.

PRINCIPLES

• S. Mohan, J. in Tata Cellular v. Union of India [AIR 1996 SC 11] had observed:
  • A tender is an offer. If is something which invites and is communicated to notify acceptance. Broadly stated, the following are the requisites of a valid tender:
    • 1. It must be unconditional;
    • 2. Must be made at the proper place;
    • 3.Must confirm to the terms of obligation;
    • 4. Must be made at the proper time;
    • 5. Must be made in the proper form;
    • 6. The person by whom the tender is made must be able and willing to perform his obligations;
    • 7. There must be reasonable opportunity for inspection;
    • 8. Tender must be made to the proper person;
    • 9. It must be of full amount”.]
• The trial Court dismissed the suit holding that the railway administration could cancel the contract without giving any reason whenever it liked, without making itself liable to pay any damages
• The High Court held that the clause reserving the right in the appellant to cancel the contract was void and in view of the trial Court having not decided the issue about damages, remanded the suit for disposal after dealing with that matter.

Supreme court upheld the judgment of the high court and dismissed the petition!