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Regular Second Appeal No. 179 of 1968, decided on 21st March 1968.

S. 3‑Acceptance of tender without communication of such acceptance‑Cannot be binding on invitor‑Communication cannot be deemed where acceptance not communicated due to negligence of promisee, his employee or agent.

A Municipal Committee invited tenders for leasing out certain premises. The Chairman allegedly accepted the offer of the plaintiff being the highest offer and passed orders on the file for delivery of possession to him. Such acceptance, however, was not communicated by the Municipal Committee to the plaintiff and was subsequently revoked. The plaintiff's suit against the Committee fur damages was resisted on grounds that in the absence of communication of acceptance there was no valid contract giving rise to cause of action for damages. The trial Court hold that acceptance was not communicated due to negligence of employees of the Municipal Committee.

Held, there is no legal basis for proposition that communication of acceptance is to be deemed in a case where acceptance is not communicated due to the negligence of promisee, or his employee or agents.

Powell v. Lee (1908) 99 L T 284 and Central Bank, Yeotmal v. Vyankatesh A I R 1949 Nag. 286 rel.

r. S‑Contract‑Formalities required by law must be gone through in order to create a binding contract and to attach liability‑Tender accepted by Municipal Committee No agreement, however, recorded in writing In terms of r. 5--- Held there was no valid contract.

Cases may arise where there may be the intention to draw formal document after the parties have agreed upon the essen tial terms of the bargain. In one case the formal document may be a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In such a case there is a binding contract and the: reference to the mere formal document can be ignored. In cases, however, where the law does not recognise a contract unless it is executed in a particular manner and form, there will be no binding contract unless it is executed as required by law.

In the case of contract entered into by the officer of Local Bodies with third parties the practice of leaving the agreement in the form of correspondence and tenders in anticipation of a formal deed to be executed later on is in disregard of the legal provisions and has nothing to recommend. In the public interest, and proper as it is from every angle, it is necessary that after the officers acting on behalf of the Local Bodies have reached an agreement, they should contemporaneously draw up the agreement, and execute it in accordance with the relevant provisions of law.

Currimbhoy & Co. v. Creet A I R 1933 P C 29; In re: Mayor or Ludlow v. Charlton (1840) 151 E R 642 Ramaswamy Chesty v. The Municipal Council, Tanjore 1906 I L R 29 Mad. 360 and M. M. Sherazee v. District Council, Kyaukse A I R 1937 Rang. 378 rel.

A. N. Najafi for Appellant.

Date of hearing: 21st March 1968.

Municipal Committee, Multan, the defendant‑respondent invited tenders for leasing out the pre mises of Octroi Post No. 11. The appellant offered Rs. 70.00 per mensem, for the premises. It was the highest offer. The Chairman, Municipal Committee accepted the offer vide order Exh. P. 7, which reads:

"I agree. Shop must go to the highest bidder Dr. Azeem Shad, who should be given the possession. The old tenant be ejected at once. Necessary steps be taken."

2. The acceptance was revoked before it was communicated to the plaintiff and it was decided that the premises should continue with its previous occupant. The plaintiff, since he was not delivered possession of the premises, filed a suit against the Committee claiming damages in the sum of Rs. 5,000.00. The suit was resisted by the defendant on the ground that there was no valid contract between the parties which could give rise to a cause of action for damages. It was decreed by the learned Civil Judge, but on appeal the learned Additional District Judge reversed the decision and dismissed the suit. This is the second appeal.

3. Although the offer of the appellant was accepted by the Chairman, it was admittedly not communicated to him. The learned Civil Judge held that the acceptance was not communi cated to the plaintiff due to the negligence of the employee of the Municipal Committee and, in the circumstances, non‑commu nication of the acceptance would not affect the validity of the contract. There is no legal basis for the proposition that the communication of an acceptance is to be deemed in a case where the acceptance is not communicated due to the negligence of the promisee, or his employees, or agents.

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 omission 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 of 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. In Powell v. Lee ((1908) 99 LT 284), the plaintiff was a candidate for the head mastership of a school, and the board of managers, with whom the appointment lay, passed a resolution selecting him for the post. One of the managers acting in his individual capacity, informed the plaintiff of what had occurred, but he received no other intimation. Subsequently, the resolution was rescinded and the Court held that in the absence of an autho rised communication froth the whole body of managers there was no completed contract. The note on the file and the order passed by the Chairman are only for office consumption and not for any other purpose. In Central Bank Yeotmal v. Vyankatesh (F I R 1949 Nag. 286), the bank had passed a resolution accepting the offer of the plaintiff to sell the land to him under a particular scheme. The resolution was not communicated to the plaintiff. He filed a suit for specific performance. It was held that in the absence of communication of acceptance there was no contract between the parties.

4. However, even it the acceptance had been communicated to the plaintiff, there would have been no valid contract between the plaintiff and the Municipal Committee in the absence of an agreement in writing, under the seal of the Municipal Committee. It is provided in rule 5 p f the West Pakistan Municipal Committees (Contract) Rules, 1960, as follows:---

"5. Manner of making contracts.‑(1) A formal deed of agreement shall be executed between the Municipal Committee and the contractor, for every Contract‑

(a) the performance whereof is subject to such conditions as may be specified;

(b) which is to be made after inviting tenders; and

(c) for the acquisition, purchase, lease, sale or transfer of any immovable property,

(2) All agreements by or on behalf of a Municipal Committee shall be signed by its chairman and attested by two witnesses and shall bear the seal) of the Municipal Committee and shall be executed in such form as would bind him if it were made on his own behalf and may in the like manner and form be varied and discharged.

(3) All agreements shall be written on a stamped paper of the appropriate value and shall, where necessary, be registered under the law for the time being in force for the registration of documents.

(4) All contracts shill be recorded in a Contract Register to be maintained in Form C.‑2."

Cases may arise where there may be the intention to draw formal document after the parties have agreed upon the essen tial terms of the bargain, In one case the formal document may be a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In such a case there is a binding contract and the reference to the mere formal document can be ignored. In cases, however, where the law does not recognize a contract unless it is executed in a particular manner and form, there will be no binding contract unless it is executed as required by law. It was held in Currimbhoy & Co. v. Creet (AIR 1933PC 29), that "where the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or terms of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is binding contract and the reference to the mere formal document may be ignored." It is now well established that where the law provides that a contract to be enforceable should be executed in a particular form and manner, the necessary formalities must be gone through in order to create a binding contract and to attach liability. In re: Mayor or Ludlow v. Charlton ((1840) 151 E R 642=10 L J Ex. 75). where the alleged contract between the Municipal Corporation and the defendant was not founded on deed but rested wholly on what was to be found in the books of Corporation, it was held that the contract was not binding on the Corporation. In Ramaswamy Chetty v. The Municipal Council, Tanjore (I L R 29 Mad. 360), a contract was entered into with a Municipal Committee, but it was not signed by the Chairman as was required by section 45 of the District Municipalities Act IV of 1884. It was held that such a contract was not binding on the Municipality. In M. M. Sherazee v. District Council, Kyaukse (A I R 1937 Rang. 378), it was held that a party acting upon a contract required by law to be executed in a particular manner cannot sue for breach of such a contract if not so excepted.

5. In the case of contract entered into by the officers of Local Bodies with third parties the practice of leaving the agreement in the form of correspondence and tenders in antici pation of a formal deed to be executed later on is in disregard of the legal provisions and has nothing to recommend. In the public interest, and proper as it is from every angle, it is G necessary that after the officers acting on behalf of the Local Bodies have reached an agreement, they should contemporane ously draw up the agreement, and execute it in accordance with the relevant provisions of law. This, in our opinion, would obviate to a very great extent the complications, as we have noticed, arising in the determination of contractual rights and obligations between the private parties on one hand and the statutory bodies on the other.

6. The appeal has no merit and is dismissed in limine.

Appeal dismissed.

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