Contract Act: LHC says ‘once an offer is accepted, a concluded contract comes into being’

LAHORE: The Lahore High Court (LHC) held that under the Contract Act once an offer is accepted, a concluded contract comes into being and it is not open for the person who accepted the offer to retract from the same.

The court passed this order in a petition of Pir Muhammad Construction Company challenging the cancellation of the contract for the supply of transformers by WAPDA officials.

The court declaring the impugned order as illegal and without lawful authority, directed the respondents WAPDA officials to proceed with the matter as per applicable law/ rules/ procedure and finalise the same at the earliest.

The petitioner company had submitted its bid of rupees 240 million for the disposal of the tender of transformer 79-MVA with accessories. The said amount was transferred/ en-cashed in favour of the respondents and consequently, a letter of acceptance of the bid was issued in favour of the petitioner. The respondent authority later knocked out the petitioner company which was against the fundamental rights of the petitioner.

The court said the reasons for the withdrawal of the letter of acceptance provided in the impugned order are extraneous to bid documents and not plausible, as well.

The court held that the respondents have not cited any provision of applicable law or placed any document on record to show that such prerogative was vested with them.

Even otherwise, there is no force in the contention of counsel for respondent-WAPDA that there was no concluded contract between the parties, the court added.

The case law cited by the counsel for the respondent in this regard, having distinguishable facts and circumstances, is not attracted to this case, the court added.

The court observed as per terms of general conditions of tender for disposal of unwanted store, an invitation of a tender would not constitute any liability on the part of the authority until a letter of acceptance was issued. However, it is nowhere provided that after acceptance of the bid, the tender could have been cancelled, the court added.

The court observed that the law on the subject is very clear that where government-controlled functionaries made a promise which created a right to anyone who believed in it and acted under the same, then such functionaries were precluded from acting detrimental to the rights of such person/ citizen.

The court said the other defect from which the impugned order suffers is that the petitioner was not granted any opportunity of showing cause or of hearing before passing the impugned order, which is against the global principle of natural justice.

The court observed it is well-settled law with the mandate of the dictums of the superior courts of the country that inaction, slackness, and dubious acts of executive functionaries cannot be accorded approval by the superior courts more particularly when suchlike actions on the face of it are besides the law, mandate of the constitution and principle of natural justice, the court concluded.

Copyright Business Recorder, 2023