'Whether there was a concluded contract between the parties

41. The main contention of the Respondent is that despite the signed Contract of 31 December 1999, there was in fact no contract concluded between the parties relating to the sale/purchase of the Product on 31 December 1999. The primary basis for its submission is that the parties were not consensus ad idem on all material terms thereof, namely that the terms of the Letter of Credit were not agreed to as of 31 December 1999.

42. The Respondent's case is that its bid to purchase the Product … was made on the basis that the format of the Letter of Credit was to be as per Claimant's tender [for a previous contract]. When the Claimant allegedly 'accepted' its bid, the Claimant did so on the basis that the Letter of Credit shall be in accordance with the Tender terms. This, the Respondent said, it had rejected in its letter to the Claimant on 28 December 1999 when it stated in para. 2 thereof that:

1. ….we require accommodation to fix suitably the delivery schedule. All we can assure you is we will endeavour to complete the lifting of the contracted quantity not later than middle of February 2000 in two or more lots. We have no doubt, you will appreciate this situation is beyond our control and we will have your understanding to maintain delivery schedule as we stipulate in our bid.

2. [Respondent] will give a clean L/C promptly receipt of signed contract and this L/C will be strictly similar to the one we had provided to you against [the earlier contract]. We have had several contracts with you in the past and have always lived up with the commitment we made. We once again request you to waive the Red Clause requirement in the L/C as you did in the past. We reassure you, you will have no difficulty and [Respondent] will fully perform the contract, as was always the case.

43. The Claimant responded to this by email of 29 December 1999 … seeking a commitment on delivery/shipping schedule i.e. in two lots, one in January 2000 and second by mid-February 2000. It did not respond on the issue of the Letter of Credit.

44. By its letter of 31 December 1999 … the Respondent confirmed that the first lifting would be during January 2000 and the balance would not be later than 15 February 2000. Again no mention of the Letter of Credit was made.

45. In the Respondent's submission, as of 31 December 1999, the date of the Contract, but prior to the signing of the same, the parties had agreed on the following material terms:

(i) Quantity 50,000 MT + 10% at Buyer's option.

(ii) Shipment or delivery schedule: one lot in January 2000 and balance by mid-February 2000.

(iii) Letter of Credit in the format provided under [the earlier contract]

(iv) Other terms as per Claimant' Standard Term and Conditions ("STC") except clauses 5.8.8.3 to 5.8.8.5.

46. The Respondent therefore said that it had proceeded on the footing that the Letter of Credit would be as per the format of [the earlier contract] with the Red Clause waived. As such when the Contract was sent to the Respondent, it signed the same on all pages until page 8 just short of the format of the Letter of Credit and deleted clauses 5.8.8.3 to 5.8.8.5. According to the Respondent … the Contract signed on the part of the Respondent was sent to its … agent … who forwarded it to the Claimant only on 5 January 2000. On that same day the Respondent instructed its bankers to establish the Letter of Credit in accordance with the format under [the earlier contract] and did not follow the format of the Contract.

47. The Respondent also made the point that until 7 January 2000, the Claimant had not in fact signed the Contract. This was evidenced in the Claimant's fax of 7 January 2000 … wherein the Claimant said:

In the meantime, we are sending the first page of the Contract duly signed at our side to enable you to open the Letter of Credit if you agree with our above proposal regarding the amendments.

48. Apart from the format of the Letter of Credit the Respondent also relied on the fact that the disagreement over clauses 5.8.8.5 was only resolved on 10 January 2000 when [Respondent's representative] agreed to accept its inclusion and re-signed page 4 of the Contract.

49. The Respondent emphasized that the signing of the Contract was a pre-condition of the conclusion of the contract. Reliance was placed on the testimony of [Claimant's marketing manager] who said that a signed contract was required. As the contract was first signed on 5 January 2000 by the Respondent, and 7 January 2000 by the Claimant and then re-signed by the Respondent on 10 January 2000, there was therefore no contract concluded as of 31 December 1999.

50. All said, the Respondent's position is that there was no contract that was finalized as at 31 December 1999 notwithstanding the signing of the Contract bearing that date. The parties were not ad idem on material terms of the Contract. It was only on 31 January 2000 that the Claimant accepted the Letter of Credit as earlier established by the Respondent on 7 January 2000. It emphatically rejected the possibility that the Claimant could be allowed to amend or add an alternative plea that the contract came into existence on 31 January 2000.

51. The Tribunal has difficulty accepting the Respondent's contentions. The Respondent has by its own admission accepted that as of 31 December 1999, parties had agreed on the material essential terms of a sale of goods contract viz. the specific goods, the quantity, the price, the delivery dates and the mode of payment.

52. The parties expressly informed each other that they were prepared to sign off the contract containing those terms. While there could be some uncertainty relating to the format of the Letter of Credit, the Claimant initially insisting on its format under the tender's terms whereas the Respondent insisted on the format it had earlier contracted with the Claimant, neither of the parties had intimated that if its format was not agreed there was in fact no contract. Instead both parties signed the Contract and considered themselves bound by the sale and purchase obligations.

53. While there can be no doubt that both parties wanted the signed Contract before proceeding to make preparations to perform it, the Respondent went too far when it said that because the Contract was not in fact signed on 31 December 1999 but at a later date, there was in fact no contract between the parties.

54. The Contract Act 1872 does not purport to require that a contract be in writing at the time it was said to have been made. The case of UOI v. Uttam Singh Duggal & Co. AIR 1972 Delhi 110 was cited by Respondent to support its contention that if a written contract was a pre-condition, no concluded contract could come into being if there was no signed contract. There can be no argument that the principle cited from that case is correct. Unfortunately for the Respondent there was no term in the agreement reached between the parties on 31 December 1999 that the contract would come into being only upon the signing of the Contract. An attempt was made to suggest that as it was the Claimant's practice that a signed contract be first obtained, it was a "precedent to concluding the contract" … This clearly cannot be so. There was nothing in the exchange between the parties that a signed contract was to be a condition precedent for the conclusion of an enforceable contract. [Claimant's marketing manager's] remarks that "On 31st when the contract terms were agreed that itself is a contract. But a signed contract is required" [Transcript …] could hardly be construed as a unilateral imposition of a condition precedent for the formation of a contract.

55. The Respondent also argued that even if an agreement had been reached on 31 December 1999, it was nevertheless not a contract under the Contract Act, 1872.

56. Section 2 (g) and (h) provide that:

(g) An agreement not enforceable by law is said to be void;

(h) An agreement enforceable by law is a contract;'

57. Section 10 provides that:

All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void …

58. The Tribunal accepts that there is a differentiation between an agreement and a contract under Indian law. An agreement that is void would not be considered a contract as in Kuju Collieries Ltd v. Jharkhand Mines Ltd & Ors (1974) 2 SCC 533 where the agreement to grant of a mining lease which was made without approval of the provincial authorities was held to be void and unenforceable agreement and not a contract under Indian law.

59. There can be no doubt that the parties had on 31 December 1999 believed that they were bound to each other, notwithstanding that there could well be some ambiguity (there was no uncertainty that payment by Letter of Credit was to be the mode of payment) as regards the Letter of Credit format. At no time did the parties intimate that they were not bound by the Contract because the Letter of Credit format was not fully settled. At all times, the Respondent had made specific reference to the "contract" … often assuring the Claimant that it intended to perform the "contract" and to lift the Product.

60. The Respondent attempted to show that these references to the term "contract" were nothing more than a reference to an "agreement" not amounting to a contract as defined under the Contract Act. The Tribunal accepts the Respondent's submission that whether the agreement is a contract is a matter of law and not the labels parties used.

61. Section 10 of the Contract Act describes a contract as an agreement "made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void". The Respondent has not shown how the agreement reached on 31 December 1999 lacked "free consent" or "lawful consideration", or had an "unlawful object" or that the agreement was void under any expressed provisions of the Contract Act.

62. The Tribunal therefore holds that there was a lawful and binding contract entered into by the parties on 31 December 1999 for the sale and purchase of the Product. The Respondent was obliged to lift the Product in accordance with the terms of the Contract save for such extensions of time as may be granted or agreed to between them for the lifting and delivery of the Product.

………

99. It cannot be disputed that the Letter of Credit is a separate and distinct contract between the issuing bank and the beneficiary [See Tarapore & Co. Madras v. V.O. Tractors Export Moscow (1969) 1 SCC 233; United Commercial Bank v. Bank of India (1981) 2 SCC 766; Federal Bank Ltd v. V.M. Jog Engineering Ltd (2001) 1 SCC 663 …]. The terms of the Letter of Credit are intended to facilitate and ensure payment for the goods under the underlying sale contract and must always be treated separately.

100. It could not be said that by accepting the Letter of Credit with the "latest shipment date" stated as 29 February 2000, the Claimant had agreed to permit delivery up to 29 February 2000 without a corresponding change in the terms of the Contract. As between the bank and the beneficiary, the Letter of Credit is documentary transaction. The "latest shipment date" would be the date that appears on the bill of lading or Mate's Receipt. This should, but may not always, correspond with the actual lifting of the Product from the Claimant's yard.'