Urban Council, Matale v. Weerasinghe
1952Present : Pulle J. and L. M. D. de Silva J.
URBAN COUNCIL, MAT ALE, Appellant, and H. WEERASINGHE,
S. C. 69—D. C. Matale, 338
Contract—Tender—Execution of a further contract—Circumstances when it is necessaryas a condition.
Tenders for the erection of certain buildings were called for by the defendant.The tender notice stated that the successful tenderer should be prepared to enterinto an agreement with the defendant and to deposit a certain portion of thetendered amount in the name of the defendant for the due completion of thecontract within a period of 5 months from the date of signing the contract ;if the successful tenderer declined to enter into an agreement within 10 daysof notification of the acceptance of the tender, his tender would be cancelledand the deposit forfeited. The plaintiff’s tender was accepted.
Held, that a binding contract for the erection of buildings could have arisenonly on the execution of a formal agreement between the plaintiff and defendant.
“ If the documents or letters relied on as constituting a contract contemplatethe execution of a further contract between the parties, it is a question ofconstruction whether the execution of the further contract is a condition orterm of the bargain or whether it is a mere expression of the desire of the partiesas to the manner in which the transaction already agreed to will in fact gothrough. ”
Li-PPEAL from a judgment of the District Court," Matale.
H. V. Perera, Q.C., with T. B. Dissanayake and G. L. L. de Silva, forthe defendant appellant.
N. E. Weerasooria, Q.G., with H. W. Jayewardene and P. Ranasinghe,for the plaintiff respondent.
Cur. adv. vult.
L. M. D. DE SILVA J.—Urban Council, JS1 alalc v. Weerasinghe
December 12, 1952. L. M. D. de Silva J.—
The plaintiff in this case sues the Urban District Council of Matalefor damages for breach of a contract which he says that the Councilentered into with him. The chief question which arises is whetherthere is a binding contract between the parties and if this question isanswered in the negative the plaintiff’s action fails. As we are of thatopinion we do not propose to discuss any other questions.
The facts are accurately stated in the judgment of the learned DistrictJudge and we recapitulate here only such facts as are necessary for thepurpose of the conclusions we have arrived at.
By a tender notice dated the 7th June, 1949, tenders for the erectionof certain buildings on two sites A and B were called for by the defendantcouncil. Paragraph 3 of the notice was to the following effect :—
“ Successful tenderers must be prepared to enter into an agreementwith the Chairman, Urban Council, Matale, and will be required todeposit a sum equal to 5% of the tendered amount in the name of theChairman, Urban Council, Matale, at the Council Office for the duecompletion of the contract at the rates quoted and within a period of5 months from the date of signing the contract. Should the successfultenderer decline to enter into an Agreement within 10 days of notifica-tion of the acceptance of the tender, his tender will be cancelled andthe deposit forfeited.”
The “ Form of Tender ” on which tenderers were required to tenderrand on which the plaintiff tendered, contained the followingclauses :—
“Anddo hereby undertake to have the whole
of the work comprised in Group ‘ B ’ which are described in the drawingsand specifications complete within the period of 5 months from thedate of the signing of the agreement hereinafter referred to,
andundertake to employ only Ceylonese labour
in the execution of this contract ….
Andfurther undertake in the event of this tender
being accepted, to execute when called upon by the Chairman, UrbanCouncil, Matale, to do so, an Agreement for the due performance ofthe works, and before the Agreement is signed to deposit a sum equalto 5% (five per cent.) of the accepted tender amount in the Bank ofCeylon in the name of the Chairman, Urban Council, Matale, and tomortgage and hypothecate the same as security or to execute q bondwith a bank approved by the Chairman, Urban Council, Matale, assecurity, in favour of the Urban Council, Matale, for the due andsatisfactory completion of the whole of the said works as well as suchadditional work as may be ordered, and for the maintenance in completerepair of the whole of the works for the space of six months from thedate of completion thereof and for the payment of all claims to whichthe Urban Council of Matale may be entitled to under the provisionsof the Agreement. ”
L. M. D. DE SELVA J.—Urban Council, Matdle v. Weerasinghe
A document called the “ Condition of Tender ” contained the followingclanse :—
“ If a tenderer within 10 days of his being noticed to do so by theChairman, Urban Council, Matale, declines or fails to enter into anAgreement on the basis of his tender and/or fails to deposit the securityor execute the bond referred to in paragraph 13 of these conditions*the tender deposit will be forfeited.”
The plaintiff tendered for both groups and his tenders were accepted.
The buildings referred to in the tender notice a§ those which had tobe erected on site A are referred to in this judgment as site A buildings-and those to be erected on site B as site B buildings. A formal “ agree-ment ” for erection of buildings on site B as contemplated by thedocument referred to was executed but before this was done the partiesagreed that the buildings to be erected thereon were to be site A buildingsand that the buildings to be erected on site A were to be site B buildings.The formal agreement has not been produced and we are not awarewhether the variation referred to was embodied in it. Be that as itmay, site A buildings were constructed on site B and the plaintiff doesnot in this case make any claim upon the contract which arose on theformal agreement. No similar formal agreement for the erection of"buildings on site A has been entered into. After the completion of thebuildings on site B the plaintiff requested the defendant to permit him toerect buildings on site A. The defendant endeavoured to obtain thenecessary sanction from the Local Government Board but did not succeedin obtaining it. As a consequence of this the plaintiff has been preventedfrom erecting the buildings on site A and has brought this action torecover damages for breach of contract. We are of the opinion that inthese circumstances, however unfortunate it may be, there is no bindingcontract in respect of site A between the plaintiff and the defendant.
The law upon this matter has been stated by Parker J. (afterwardsLord Parker) in Van Harzfeldt- Wildenburg v. Alexander (1912) 1 Ch. 284x“ It appears to be well settled by the authorities that if the documentsor letters relied on as constituting a contract contemplate the executionof a further contract between the parties, it is a question of constructionwhether the execution of the further contract is a condition or term of thebargain or whether it is a mere expression of the desire of the partiesas to the manner in which the transaction already agreed to will in factgo through. In the former case there is no enforceable contract eitherbecause the condition is unfulfilled or because the law does not recognisea contract to enter into a contract. In the latter case there is a bindingcontract and the reference to the more formal document may be ignored.The fact that the reference to the more formal document is in wordswhich according to their natural construction import a condition isgenerally if not invariably conclusive against the reference being treatedas the expression of a mere desire ”. Lord Parker was there dealingwith a sale of land in England but we see no reason why the principleslaid down in the passage quoted should not be applied more widely.It appears to us in the case before us that the documents from which
L. M. D. DE SILVA J.—Urban Council, Mat ale v. Weerasinghe
passages have been quoted earlier indicate that a binding contract forthe erection of buildings was to arise only on the execution of a formalagreement. For example, the failure on the part of the plaintiff toenter into a formal agreement if called upon to do so by the Chairmanwas to be penalised by the forfeiture of the deposit. We are not calledupon to decide whether this forfeiture clause is enforceable but theclause indicates to some extent the intention of the parties. The stipu-lation is that the deposit is to be forfeited and appears to exclude anyintention that damages for breach of contract by the plaintiff (or anyoneelse) are to be payable at any time before the execution of the formalagreement.
A further point urged by counsel for the appellant which has consider-able force is that the period within which the work had to be completedwas according to the tender notice “ five months from the date of thesigning of the contract ” and that this period could not be ascertaineduntil the formal agreement was signed. It was contended that thisperiod for completion was a vital term and that it was necessary thatit should be definitely determined before a contract could be said to havearisen. There is force in this argument. But in any case the wordsindicate that the parties did not intend to be bound by a contract forthe erection of buildings before a formal agreement was signed.
It was contended by counsel for the respondent that no formal agreementwas necessary to give rise to a contract for building on site A. With thisargument we are unable to agree for the reasons already given. It wasfurther contended that when parties agreed that site A buildings shouldbe erected on site B and site B buildings on site A the formal agreementwas superseded by an entirely new contract which covered both sites.But this argument overlooks the fact that the variation in respect ofsites and buildings took place before the formal agreement was enteredinto. This is clear from the evidence of the plaintiff. Moreover, asalready stated, as the formal agreement entered into has not been producedwe cannot even say that the variation was not embodied in it. Thevariation has to be regarded as a variation of the terms of the tendersaccepted and the necessity for formal agreements was not avoided"thereby.
We are of the view that upon the documentary and oral evidence nobinding contract for the erection of buildings on site A has arisen andthat it could have arisen only upon the formal agreement referred to inthese documents being executed.
For these reasons we set aside the decree entered by the District Courtand dismiss the plaintiff’s action. As the right which the plaintiff claimedto erect buildings on site A was not resisted before this case was institutedon the point of law on which this appeal succeeds or even in the courtbelow and also having regard generally to the merits we think it properthat each party should bear its own costs both on appeal and in the courtbelow.
Pottle J.—I agree.
Decree set aside.
URBAN COUNCIL , MATALE ,Appellant , and H . WEERASINGHE, Respondent
Urban Council, Matale v. Weerasinghe