Case No.:

(HC-CS-30-1960)

Court:

The High Court

Issue No.:

1960

Principles

·  Contract-Offer and acceptance-Tender to remove and re-erect hangar-Acceptance of tender-Written contract not parties in final agreement

·  Damages-special damages-General damages include loss of profits-Ioss from cancelling other contracts so as to fulfil the present contract too remote.

(i) The fact that a contract has not been signed by the parties does not by itself show that they are not in full and final agreement.
Branca v. Cobaro [1947] K.B. 854 followed. Rossdale v. Denny [1921] 1 Ch. 57 distinguished
(i

i) Where one party to a contract cancel other contracts in order to fulfil that contract, the loss from the cancellation is too remote to be said to be directly arising from the breach of that contract by the other party.
 

Judgment

(HIGH COURT)

IDRIS EL HADI AND MOHAMED ABDEL MAGID

V.

SUDAN GOVERJ.IMENT (MINISrRy OF WORKS) (HC-CS-30-1960)

Action

The facts are set out in the judgment of Osman El Tayeb J.

Advocates: Ahrned Suleiman……… for plaintiffs

             Salih Farah for Attorney-General ... for defendant

October 10, 1960. Osman El Tayeb 1. : —The Ministry of Works pub lished a notice calling for tenders for the removal, transportation and re-erecting of Hangar No. 21 in the former R.A.F. airfield to a new site near the Sudan Airways Hangar at Khartoum Airport. The notice stated that all specifications could be inspected in the office of the Divisional Engineer, Construction Division. It required that tenders be submitted at or before 12 noon on Tuesday, August 19, 1958. It also required that the tender be accompanied by a deposit of £S.1, 000, that would be repaid after submission of the tender.

In the printed form of the Ministry, containing all the specifications, and the General Conditions of Tender and Contract for the execution of works, the plaintiffs submitted their tender. It was for the lump sum value of £S.40,000. And the sum of £S.1000 was deposited.

Upon opening the tenders, the official concerned, Sayed Miheimid. A/Director found that the tender of plaintiffs was the lowest one. He thought that it was too low. He communicated his opinion to the Director. They formed a board to consider the matter. The result was that the tender of plaintiffs was to be accepted. The Director called upon plaintiffs and informed them that their tender was accepted.

According to the general conditions, the contractor whose tender is accepted has to make a deposit of a certain percentage of the value of the tender as a guarantee of good faith. Plaintiffs discussed the percentage of the deposit with the Director, who directed them to write him a letter They wrote the letter dated September 14, 1958, requesting that the percentage of the deposit be 2 1/2 to 5 per cent. Thereafter plaintiffs received the formal letter signed by Divisional Engineer. Construction Division dated October11, 1958, that reads:

“Dear Sirs,

I have the pleasure to inform you that your tender for the construction of above job amounting to £S.40,000,000m/ms (forty thousand Sudanese Pounds) has been considered and accepted.

Will you please arrange to call within three days for payment of deposit and signature of Contract Documents.

For your information, the amount of deposit will be5% collectable as follows: 2 1/2 in cash and the rest by deduction from the first two payments.”

According to the evidence of Sayed Nasr Suleiman, Divisional Engineer, the job was considered to be an urgent one, and so as the approval was received they allowed plaintiffs to start work and to make the preliminary preparations. Plaintiffs started the work.

On October 17. 1959, while plaintiffs were on the work, the military authorities ordered them to stop work. Plaintiffs referred the matter to Sayed Nasr Suleiman. The latter sent a lefter marked “very urgent” dated October i8, 1958, addressed to Kaid El Amin, Head Quarters, Ministry of Defence, requesting him to arrange for Hangar No. 21 to be vacated to permit the contractors to recommence work immediately. According to evidence of Mr. Mirza, an official of the Ministry of Works, the plaintiffs visited him.in his office on October 18. I958 in order to sign the contract, and they asked that the tender deposit be considered as the con tract deposit. For a reason not explained the actual signing of the contract was not made. The plaintiffs continued with the preparations for the work until they received the letter dated October 26, 1958, cancelling the letter of acceptance dated October 11, 1958. The letter stated:

“I regret to inform you that I have received instructions from the Director of Works that Hangar in question is to remain where it is and not be removed. So please consider my first letter as cancelled.”

It is signed for Divisional Engineer. Construction Division.

Plaintiffs, accordingly, ceased to do any more work and the deposit of £S.1, 000 was refunded to them some months later. Plaintiffs are now claiming damages for breach of contract. They contend that on the above facts a binding contract was concluded between them and the Ministry of Works, and that the unilateral cancellation by the Ministry of that contract constituted breach thereof.

It is submitted on behalf of defendants that the acceptance of the offer by them was provisional upon the fulfilment of certain conditions, which plaintiffs failed to -observe. The conditions, it is submitted, were two:

(1) The making of a deposit equal to per cent, of the value of the contract, 2 1/2 per cent, of it payable in cash and the rest deductible from the first two payments; and (2) the signing of a formal contract. As to the first condition, I find from the evidence that it was fulfilled, it must be first observed that both parties-did not bind themselves by clause of the General Conditions attached to the tender, because this clause did not stipulate the amount of the deposit nor the time for its payment. They made an agreement as to the deposit that is mentioned above. It transpired that the amount that plaintiffs had to deposit in cash or at once was equal to the tender deposit that was already in the hands of defendants and kept by them. The plaintiffs stated that they treated that tender deposit to be the contract deposit, and the defendants had not objected. But  defendants usually accept the tender deposit to be treated as the contract deposit. Sayed Miheimid said in his evidence: “When a contractor comes to sign the contract he may ask that the tender deposit be transferred to the contract deposit. A contractor may inform the head accountant verbally to make the transfer. It will be written in the contract.”

The tender deposit was there, not refunded after the tender was accep ted, and it is equal to the contract deposit, it appears. I take it that both parties accepted and treated it as a contract deposit.

For the second point, the submission on behalf of defendant is that the rule of decision in the English case Rossdale v. Denny [1921] 1Ch.57 is applicable. This case is about the acceptance of an offer subject to prepara tion of a formal contract embodying such reasonable provisions as solicitors may approve. The decision is that no binding contract was made. On the other bend it is submitted on behalf of plaintiffs that the rule in the English case Branca v. Cobaro [1947] K.B. 854 is applicable. In this case a vendor agreed to sell the lease and goodwill of a farm on the terms of a written document which was declared to be a provisional agreement until a fully legalised agreement drawn up by a solicitor and embodying the conditions therein stated was signed. It was held that the agreement was binding from the outset, as the new document to be drawn up by a solicitor was to contain nothing more than the conditions therein stated.

It is clear to my mind that the rule in the latter case is the one applicable to this case. The crucial question is whether there was consensus between the parties as to the material conditions of the contract. The acceptance may be provisional on the signing of a formal document, the specifications and conditions that it shall contain have already been known to the parties and agreed upon. And the acceptance may be on the other hand, provisional on the preparation and signing of a formal document, the specification and conditions that it shall contain not yet being known to the parties and agreed upon. In the first case the contract is made and concluded before the signing of the formal document, but in the second case the parties are still in negotiation, and no contract is made until they prepare the formal document and approve the conditions therein stated.

Chitty on Contracts, Vol. 1, 21st edition, page 27, states the rule as follows:

“The leading case is Rossiter v. Miller (1873) 3 App.Cas. 1124, where Lord Blackburn said: ‘So long as the aities are in negotiation either party may retract. The mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement embody ing the terms which shall be signed by the parties does not, by itself, show that they continue merely in negotiation.’ The terms of an alleged option’ were hereafter to be agreed. This was held to have no binding effect. But the fact that the acceptance contains a statement that the acceptor has instructed his solicitor to prepare the necessary documents does not render the acceptance a conditional one. It is a question of construction in every case whether the parties have made the operation of the contract conditional upon the execution of a further document, or whether they have made an immediately binding agreement which is later to be superseded by a formal contract, in the latter case the agreement, even though merely temporary, is binding.”

In the present case the tender was made in the papers supplied to plaintiffs by defendants, that are containing all the necessary specifications and terms of the job and also those containing the General Conditions, and as such the tender as an offer was accepted by defendants. The letter of acceptance supplemented the conditions of the tender by specifying the amount of guarantee and the mode of its payment, and it reminded plaintiffs to call at the office to sign the contract.

The guarantee was treated as being paid. This is dealt with above. The reminder to plaintiffs to call at the office to sign a contract added nothing new, as the contract that was to be signed added nothing to the con ditions and terms that were with the tender. The cancellation of the contract by defendants constituted a breach that entitles plaintiffs to damages.

As to the special damages, plaintiffs proved that they started and made preparations for the execution of the job. Defendants’ witnesses proved that the job was considered an urgent one so they required plaintiffs to start immediately. As they started and made preparations plaintiffs have incurred expenses. These expenses are recoverable as special damages. In the evidence of plaintiffs they employed workers for their aggregate daily wages of £S.15.420m/ms for fourteen days. The sum that was paid amounts to £S.215.880m/ms. The work that these workers did is not very clear, in view of the evidence of Sayed Nasr Suleimaii who testified that all that the plaintiffs did was the marking of the joints of the steel framing of the hangar, and that he assessed the value of this work at £S.30 in all. In spite of that I have to believe plaintiffs that those labourers were engaged by them for this job, that they secured them to be ready for it.

Plaintiffs proved that they made a trailer especially for this job costing the sum of £S.500.  It is true that the trailer is not all a loss as it may be sold. The loss here may be assessed at £S.250 Plaintiffs proved that they bought steel ropes for the cost of £S.62, and they might have been resold for £S.32 so the loss is £S.3o. They proved that they hired pneumatic tools from the Sudan Railways Department for £S.8o, and when the tools were returned they were refunded the sum of £S.54 so the loss was £S.26. They said that they incurred other expenses that they did not explain. It is fair to allow them for the unexplained items the sum of £S.100 to include transport and the like. The conclusion is that under this head they are entitled to the sum of L.S.881.

For the- general damages plaintiffs are entitled to the loss that was directly arising from the breach, which is the loss of the expected profits that they might have made. Defendant’s adduced evidence to establish that the accepted value of the tender of plaintiffs was too low, that plaintiff had they done the job would not have made any profits. Defendants contend that plaintiffs suffered no loss by the breach and so are not entitled to substantial damages.

As I see it the evidence referred to cannot be accepted, and I believe that plaintiffs were expecting to make some profits from that job had they done it. The job was one of a peculiar nature and not of common occurrence. Ways and means of the dismantling, transport and re-erecting of such heavy steel frames may differ, and accordingly the cost. First plaintiff is the owner of a big workshop,and it appears from his evidence that he was managing to do the job with expenses much less than those the witnesses of defendants thought of. The court should not deprive a man from the fruits of the good designs that he had been preparing because of varying opinions based on no experience.

For these reasons I have to award plaintiffs substantial damages based on the average rate of profits—as it appears from the evidence—at 50 per cent, of the value of the contract, making the amount of £S.4,000.

Plaintiffs are claiming damages under another head: that by reason of the contract in this case they cancelled other contracts of some steel constructions in tanagil Extension and other private schemes, and that they lost the profits that they were expecting to make out of them. In my opinion these losses are not directly arising from the breach, nor were they in the contemplation of the parties. The damages awardable are those for the damage directly arising from the breach of the contract that had the breach not been committed, plaintiffs would have not suffered. Plaintiffs cancelled the other jobs before the breach, as their tender in this case was accepted; they thought of concentrating on it, in order to make out profits from this job alone. It is not possible to consider this item in enhancement of the damages awardable above. Plaintiffs are entitled to decree for the sum of £S.4, 881 with court fees pro rata.

                                              (Judgment for the plaintiffs)