Col. D.I. Mac Pherson vs M.N. Appanna and Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Original Suit No. 1 of 1945

Decision Date: 9 February 1951

Coram: Saiyid Fazal Ali, B.K. Mukherjea, N. Chandrasekhara Aiyar

In the case titled Col. D.I. Mac Pherson versus M.N. Appanna and Another, the judgment was delivered on 9 February 1951 by the Supreme Court of India. The author of the judgment was Justice Saiyid Fazal Ali, and the bench was composed of Justice Saiyid Fazal Ali, Justice B.K. Mukherjea and Justice N. Chandrasekhara Aiyar. The petitioner is identified as Colonel D.I. Mac Pherson and the respondents are M.N. Appanna and the second unnamed party. The citation for this decision appears as 1951 AIR 184 and 1951 SCR 161, and the decision concerns the law of contract, specifically the issues of offer, acceptance, the distinction between a statement of the lowest price and a counter-offer, and the application of the precedent set by Harvey v. Facey (1803) A.C. 552.

According to the headnote, the factual backdrop involved an exchange of communications concerning the purchase of a house owned by a party designated as B. A person identified as Y, who was looking after the house, transmitted to B via cable that an offer of Rs 6,000 had been received from a prospective buyer labelled A. On 5 August 1944, B replied by cable stating that he would not accept less than Rs 10,000. Y then conveyed B’s statement to A on 9 August, and on 14 August A wrote a letter to Y affirming that the oral offer he had made to Y on 11 August of Rs 10,000 was thereby confirmed. On 26 August Y sent another cable to B stating, “Offered Rs 10,000. May I sell.” On the same day a different friend of B, known as W, made an offer of Rs 11,000, which B accepted. A subsequently instituted suit for specific performance, alleging that B’s cable of 5 August constituted a counter-offer which A had accepted on 14 August, thereby creating a contract in A’s favour on that date.

The Court held that the cable sent by B on 5 August was merely a statement of the lowest price at which he would be prepared to sell and did not amount to an implied promise to sell at that price. Consequently, A’s letter of 14 August was treated as a fresh offer rather than an acceptance of a counter-offer, and because B never accepted this new offer, no contract was formed in A’s favour. The Court applied the principle articulated in Harvey v. Facey to reach this conclusion.

The judgment forms part of a civil appellate jurisdiction matter. It arose from an appeal against a judgment and decree dated 1 April 1946 rendered by the Judicial Commissioner of Coorg in Original Suit No. 1 of 1945. Counsel for the appellant was C.R. Pattabhi Raman, and counsel for the respondent was Jindra Lal. The Court’s decision was delivered by Justice Fazal Ali. The appeal concerned a suit filed by the first respondent, referred to in the judgment as the plaintiff, against the appellant, designated as the first defendant, and the second respondent, designated as the second defendant, seeking specific performance of a contract. The first defendant owned a bungalow in Mercara known as “Morvern Lodge.” The plaintiff’s suit alleged that there existed a contract for the sale of this bungalow and that the first defendant had failed to fulfil the contractual obligations. The judgment also noted that the first defendant possessed several estates in Mercara and that an individual named Mr. White served as an alternative director for one of those estates, while a person named Youngman managed another estate and was responsible for “Morvern Lodge” during the first defendant’s absence.

In this case, the first defendant owned several estates, one of which was managed by a man named Youngman. Youngman was responsible for looking after “Morvern Lodge” while the first defendant was absent. Around the middle of 1944, the plaintiff asked another employee, White, to transmit his offer of four thousand rupees for the bungalow to the first defendant. On the first of June 1944, White complied by sending a cable to the first defendant that read, “Have enquiries Mercara bungalow if for sale, wire lowest figure.” Several weeks later, on the twenty-fourth of July 1944, the plaintiff addressed a letter to the first defendant stating that he was prepared to purchase the bungalow for five thousand rupees and requesting that the first defendant indicate to which bank a cheque should be drawn to pay the price.

Following the plaintiff’s letter, Youngman sent a cable to the first defendant stating, “Have had offer Morvern Lodge rupees six thousand for immediate possession.” On the eighth of August 1944, Youngman received a cable from the first defendant which declared, “Won’t accept less than rupees ten thousand.” The day before, on the seventh of August, the plaintiff wrote to Youngman asking whether his offer had been accepted and adding that he would be willing to pay any higher amount that seemed reasonable. On the same day, the first defendant replied to Youngman by airgraph, explaining that he had received Youngman’s cable about a six-thousand-rupee offer and also a cable from White indicating a value of ten thousand rupees, and therefore he would not accept less than ten thousand rupees. On the ninth of August, Youngman wrote back to the plaintiff, quoting the first defendant’s statement: “Won’t accept less than rupees ten thousand.” The plaintiff later asserted in his plaint that he received Youngman’s letter on the fourteenth of August and immediately accepted the counter-offer made by the first defendant, confirming his acceptance in a written letter addressed to Youngman. However, in his testimony the plaintiff explained that he met Youngman on the eleventh of August after receiving the letter and personally informed him that he would pay ten thousand rupees for the bungalow and required immediate delivery, also agreeing to bear the conveyance charges. Subsequently, on the fourteenth of August, the plaintiff wrote to Youngman referring to their recent conversation, reaffirming his oral offer of ten thousand rupees, and requesting that Youngman promptly consult his lawyers in Madras, arrange to receive the money, and hand over the bungalow as soon as possible.

The Court observed that three days after the plaintiff’s letter of 14 August, on 17 August Subbayya wrote to Youngman stating that he confirmed his offer of ten thousand five hundred rupees made to Youngman the previous day for the purchase of the bungalow and that he expected Youngman to cable the offer to the first defendant as promised. It appeared that Youngman did not transmit Subbayya’s offer to the first defendant; instead, on 26 August Youngman sent a cable to the first defendant that read: “Offered ten thousand Morvern Lodge immediate possession. May I sell.” On the same day White transmitted a cable to the first defendant stating: “Hold offer for Morvern Bungalow rupees eleven thousand cash subject immediately acceptance and occupation. Strongly recommend acceptance.” Subsequently, on 29 August Youngman sent an air-graph to the first defendant in which he thanked the recipient for the air-graph letters of 8 August, which had reached him on the 24th instant, and explained that he had cabled on Saturday an offer of ten thousand rupees for Morvern Lodge from the would-be purchaser who had earlier offered six thousand rupees. Youngman further related that he had received a call from White a day or two later informing him that White had cabled an offer of eleven thousand rupees on the same day, and he expressed the expectation that the first defendant would have accepted White’s offer. Youngman then requested that a Power-of-Attorney be prepared as soon as possible. In response, the first defendant sent a cable to White stating: “Accept rupees eleven thousand Morvern Lodge occupation permitted when full amount deposited my account Mercantile Bank Madras inform Youngman.” Following this communication, the second defendant paid the amount of eleven thousand rupees and took possession of the bungalow. The central issue for determination was whether, in view of the reproduced correspondence, a concluded contract for the sale of “Morvern Lodge” in favour of the plaintiff existed on 14 August as alleged in the plaint. The Judicial Commissioner of Coorg, who tried the suit, held that a contract had indeed been concluded; however, instead of granting specific performance, he awarded the plaintiff a compensation of three thousand rupees. The first defendant alone appealed against that decree after obtaining a certificate under section 109(c) of the Civil Procedure Code from the Judicial Commissioner, while the plaintiff did not prefer any appeal. The plaintiff contended that the cable sent by the first defendant on 5 August, received by Youngman on 8 August, stating that he would not accept less than ten thousand rupees, constituted a counter-offer made through Youngman, and that the contract became complete when he accepted it. The Court, however, found it difficult to conclude, on the basis of the entire factual matrix, that a contract had been concluded on 14 August 1944.

In this matter the Court concluded that no contract had been finalized on 14 August 1944. This conclusion was supported by the precedent set in Harvey v Facey, a case whose factual pattern resembled the present dispute. In Harvey v Facey the appellants sent a telegram asking, “Will you sell us B.H.P.? Telegraph lowest cash price,” to which the respondents replied, “Lowest price for B.H.P. pound 900.” The appellants then telegraphed, “We agree to buy B.H.P. for pound 900 asked by you. Please send us your title-deed in order that we may get early possession,” but received no answer. The Privy Council held that those exchanges did not constitute a binding contract. Lord Norris, delivering the judgment, explained that the third telegram from the appellants treated the respondent’s statement of the lowest price merely as an indication of price, not as an unconditional offer to sell. He further observed that the respondent’s telegram could not be regarded as obligating him beyond the price term, that the appellants’ reply was itself an offer requiring acceptance, and that a contract could arise only if the respondent accepted that final offer. The Court rejected the contention that a mere statement of price implied a contract to sell at that price, emphasizing that no implied agreement existed beyond the precise answer given.

The present case was examined in light of those principles. The critical issue was whether the first defendant’s cable of 5 August represented a counter-offer or merely an invitation to receive offers. The plaintiff’s letter of 14 August addressed to Youngman affirmed his oral offer of ten thousand rupees for the bungalow, but it did not expressly acknowledge acceptance of any counter-offer made by the first defendant. Likewise, Youngman’s cable of 28 August to the first defendant did not state that the first defendant’s proposal had been accepted; instead, it reported that Youngman had received an offer of ten thousand rupees for the bungalow and concluded with the question, “May I sell?” Consequently, neither party treated the first defendant’s cable as an accepted counter-offer. Both parties proceeded on the premise that the plaintiff’s ten-thousand-rupee offer remained subject to acceptance by the first defendant, and they acted as if no definitive transaction could be completed without a clear assent from the first defendant.

In this case the parties had not treated the cable dated 26 August as containing a counter-offer. Instead they proceeded on the basis that the plaintiff had made an offer of ten thousand rupees which required acceptance by the first defendant. It appeared that the first defendant was corresponding not only with Youngman but also with White, and both of them reasonably believed that no sale could be finalized without obtaining the first defendant’s explicit consent. The plaintiff’s representative, counsel for the plaintiff, argued vigorously that by 26 August 1944 Youngman had come under the influence of the rival bidder or, at the very least, of White, who was supporting the rival. According to that argument the cable sent by Youngman to the first defendant had been deliberately worded so as to prejudice the plaintiff’s position. However, the evidence did not support such an extreme conclusion. In contrast, Youngman openly testified that he considered it improper to entertain Subbayya’s higher offer and therefore did not communicate that offer to the first defendant. This admission was corroborated by the contents of the 26 August cable, and if Youngman exhibited any preference it was clearly in favour of the plaintiff. Under these circumstances it was difficult to find that Youngman had willfully mischaracterised the plaintiff’s acceptance of a counter-offer as his own offer in the cable addressed to the first defendant on that date. Consequently, the view adopted by the Judicial Commissioner was held to be erroneous. Because no contract had been concluded, the decree issued by the Commissioner awarding compensation to the plaintiff for breach of contract could not be sustained. Accordingly, the appellate Court allowed the appeal, set aside the judgment and decree of the Judicial Commissioner, and dismissed the plaintiff’s suit. No order as to costs was made in view of the facts of the case. The appeal was permitted, and the agents for the parties were recorded as M.S.K. Sastri for the appellant and Rajinder Narain for the respondent.