Case Note & Summary
The petitioner, M/s Abhay Construction, a partnership firm, submitted a tender to the Maharashtra State Road Development Corporation Ltd. for collection of toll at Rotegaon on Shiur Shrirampur road for a period of 90 weeks, offering Rs. 1,99,71,577 and depositing Rs. 8,00,000 as earnest money. The respondents issued a letter of acceptance on 20th March 2002, but stated that the appointment was for a period of 52 weeks only. The petitioner failed to pay the performance security and security deposit within the stipulated time, leading to forfeiture of the earnest money. The petitioner challenged the forfeiture, arguing that the variation in the contract period from 90 weeks to 52 weeks constituted a counter-offer, not acceptance, and thus no contract was concluded. The respondents contended that the acceptance was valid and the petitioner's failure to comply justified forfeiture. The court analyzed the principles of contract law, noting that an acceptance must be absolute and unqualified; any variation amounts to a counter-offer. Since the respondents unilaterally changed the contract period, there was no meeting of minds, and no concluded contract. Therefore, the forfeiture of earnest money was invalid. The court allowed the petition, directing the respondents to refund the earnest money deposit of Rs. 8,00,000 with interest at 6% per annum from the date of forfeiture until payment.
Headnote
A) Contract Law - Offer and Acceptance - Counter-Offer - Variation of Terms - When the offeree accepts the offer with a variation in terms, it amounts to a counter-offer and not acceptance of the original offer - The petitioner offered to collect toll for 90 weeks, but the respondents accepted only for 52 weeks, which is a material variation - Held that there was no concluded contract, and forfeiture of earnest money was unjustified (Paras 4-6).
Issue of Consideration
Whether the respondents' letter of acceptance varying the contract period from 90 weeks to 52 weeks constitutes a valid acceptance of the petitioner's offer, and consequently, whether the forfeiture of earnest money deposit is justified.
Final Decision
The court allowed the writ petition, quashed the forfeiture of earnest money, and directed the respondents to refund Rs. 8,00,000 with interest at 6% per annum from the date of forfeiture until payment.
Law Points
- Contract Law
- Tender
- Offer and Acceptance
- Counter-Offer
- Forfeiture of Earnest Money
- Variation of Terms
Case Details
2014 LawText (BOM) (04) 7
Writ Petition No. 1311 of 2003
S. V. Gangapurwala, N. W. Sambre
N. B. Suryawanshi for Petitioner, S. B. Pulkundwar for State, Pradeep Deshmukh for Respondent No. 3, S. V. Adwant for Respondent No. 4
M/s Abhay Construction, through its working partner Nanasaheb S/o Bajirao Wagh
The State of Maharashtra, The Maharashtra State Road Development Corporation Ltd., The Chief Engineer, The Executive Engineer
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Nature of Litigation
Writ petition challenging forfeiture of earnest money deposit in a tender for toll collection contract.
Remedy Sought
Petitioner sought refund of earnest money deposit of Rs. 8,00,000 with interest.
Filing Reason
Respondents forfeited earnest money after petitioner failed to pay performance security due to alleged variation in contract period.
Issues
Whether the letter of acceptance varying the contract period from 90 weeks to 52 weeks constitutes a valid acceptance of the petitioner's offer.
Whether the forfeiture of earnest money deposit is justified in the absence of a concluded contract.
Submissions/Arguments
Petitioner argued that the variation in contract period from 90 weeks to 52 weeks amounted to a counter-offer, not acceptance, and thus no contract was concluded; forfeiture was invalid.
Respondents argued that the acceptance was valid and the petitioner's failure to pay performance security justified forfeiture.
Ratio Decidendi
An acceptance with a variation in terms is a counter-offer and does not result in a concluded contract. Since the respondents accepted the petitioner's offer for a different period (52 weeks instead of 90 weeks), there was no meeting of minds, and the forfeiture of earnest money was unjustified.
Judgment Excerpts
The acceptance of the offer with a variation in the terms of the offer would not be an acceptance but a counter offer.
In the present case, the offer of the petitioner was for 90 weeks, whereas the acceptance was for 52 weeks. The same would not be an acceptance but a counter offer.
As there was no concluded contract, the respondents were not justified in forfeiting the earnest money deposit.
Procedural History
The petitioner submitted a tender offer for toll collection for 90 weeks. Respondents issued letter of acceptance for 52 weeks. Petitioner failed to pay performance security. Respondents forfeited earnest money. After exchange of legal notices, petitioner filed writ petition in 2003. The High Court heard and decided the matter on 1st April 2014.
