Summary
The Court held that no concluded contract arose from the letter of intent and brief commencement of work in this tender. Performance security, the integrity pact and other stipulated formalities remained unfulfilled, so the employer could not recover the extra cost of engaging another contractor under the proposed contract’s risk-and-cost provision. Forfeiture of bid security remained permissible. The balance of the ten-lakh-rupee deposit was ordered refunded within two months, and the employer’s appeal was dismissed.
Issues
- Whether the tender documents, letter of intent and commencement of work established a concluded contract permitting risk-and-cost recovery.
Held
- Whether a letter of intent creates a binding contract depends on its terms, the tender conditions and the parties’ conduct. Such a letter ordinarily expresses an intention to contract later, but clear and unambiguous language may establish immediate acceptance. Its label alone is not decisive. (¶¶ 11, 12, 13, 18, 20, 21)
- Here the tender made formation subject to furnishing performance security. The bidder neither supplied it nor signed the mandatory integrity pact; no work order or formal agreement followed. Mobilisation and a little over a month’s work did not overcome those unfulfilled preconditions. (¶¶ 14, 15, 19, 20, 22, 23)
- The consequence prescribed for non-compliance was cancellation of the award and forfeiture of bid security, unlike the distinct contractual terms in Jawahar Lal Burman. The employer could not enforce the proposed contract’s additional risk-and-cost liability without a concluded contract. (¶¶ 6, 18, 21, 22, 24)
- The bid security could be deducted from the ten-lakh-rupee deposit and the balance had to be refunded within two months. The appeal was dismissed, parties bearing their own costs, and the interim order was discharged. (¶¶ 24, 25, 26)
Result
Appeal dismissed with parties bearing their own costs; only bid-security forfeiture upheld and the balance of the deposit to be refunded within two months. Interim order discharged.