Trimex International Fze Limited v. Vedanta Aluminium Limited
2010 (1) SCALE 574
(Formation of a contract)
Trimex offered, via an email, the supply of bauxite to VAL which, after several exchanges of e-mails, was subsequently accepted by latter, confirming the supply of 5 shipments of bauxite from Australia to India. Though a draft contract had also been prepared but it yet needed to be formalised. After VAL received first consignments of goods, it requested Trimex to hold back next consignment of goods so as to enable them to check bauxite’s utility value. However, on same day, ship owners nominated the ship for loading the cargo. Later when contract was cancelled by Trimex, it claimed damages paid to ship owners from VAL which latter refused by denying any contract.
Whether there was any valid subsisting contract between the parties in absence of any formal contract?
Once the contract is concluded orally or in writing, the mere fact that a formal contract has not been prepared by the parties does not affect either the acceptance of the contract so entered into or implementation thereof.
A contract is said to be concluded when parties agree as to the ‘essential terms’ of the contract though minor details can be left over for them to decide later, albeit subject to satisfaction of other requirements as provided by S.10: without such essential terms being decided, contract cannot be enforced by law as it is deemed to be incomplete.
- The SC held that all essential ingredients required for enforcing these kinds of shipment contracts were decided by parties including price, quantity, product specifications, delivery and payment terms, discharge port, shipment lots, demurrage rate, quality benchmark, applicable arbitration laws, etc. Further, minute to minute correspondences exchanged b/w the parties clearly show that both the parties were clearly aware of the various terms of the contract and were ad idem (S.13) w.r.t. those.
- Communication of acceptance, according to S.4, was complete as against VAL, as and when confirmation of 5 shipment lots came to the knowledge of Trimex. Further, the acceptance was unconditional and unqualified (S.7): “We confirm the deal for 5 shipments”.
Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)