Introduction

• This case introduces the concept of a standing offer, also known as a continuing offer. A standing offer is the kind of offer where it remains open for acceptance over a period of time, such as tenders.
• In this case, the advertisement provided by the shopkeeper to sell the products is merely an invitation to offer, not an offer.
• If the person placing an advertisement inviting such an offer is not the offeror, but rather the person who sees the advertisement and can become the offeror by placing a bid to the other party, then the person who proposes the advertisement can become the offeree if they accept the tender.

Facts

• In this case, Madras and Southern invited tenders through an advertisement for the supply of imperial jaggery to the railway grain shops.
• The respondent read the advertisement and submitted a tender offer to Railways, who are the appellants here. According to the terms and conditions, the jaggery was to be transported in four installments.
• During the contract, there was a term stating that the appellant could cancel the contract at any time.
• The deputy general manager of the Railways informed the respondent that they had canceled an order of jaggery, and according to them, the contract was closed.
• The respondent protested against the decision of the appellant and contended that they had the right to cancel the contract only.
• Subsequently, the respondent instituted the case before the trial Court, which dismissed the suit on the basis that the Railway authority had the right to cancel the contract. However, the High Court held that the Railway authority had no authority to cancel the contract, and the clause was void.
• As a result, the appellant, the Railway, filed an appeal before the Supreme Court.

Issue Involved

• Whether the appellant had an authority to cancel the contract without any justification?

Observation

• The court said, the respondent has the right to cancel that agreement for such supply of jaggery about which no formal order had been placed by the Deputy General Manager with the respondent.
• The Court further said this is not applied to the supplies of jaggery about which a formal order had been placed specifying definite amount of jaggery to be supplied and the definite date or definite short period for its actual delivery
• Once the order is placed for such supply on such dates, that order amounts to a binding contract making it incumbent on the respondent to supply jaggery in accordance with the terms of the order.
• The Court said the respondent has right to cancel the outstanding contract not the whole contract as a matter of right.

Conclusion

• The Court dismissed the appeal and restored the order of the High Court. The Court construed the contract between the parties in the instant case where the respondent had not made a definite offer but standing or open or continuing offer because of the tender requiring a deposit of security and placing of the formal order.