Union of India v. Maddala Thathiah, AIR 1966 SC 1724

This Supreme Court case explains standing offers in tender contracts. A tender is a continuing offer. Each specific supply order acts as acceptance and creates a separate binding contract. The buyer may cancel the unaccepted part of the standing offer, but not orders already placed.

• Advertisements for tenders are invitations to offer, not offers.
• A formal order with quantity and date concludes a contract.
• Cancellation can operate prospectively, not to undo concluded orders.

1. Could the railway authority cancel the contract without justification under a “cancel anytime” clause?
2. Do standing offers allow cancellation of orders already placed with definite terms?

• Invitation to Offer: Tender advertisements invite bids; they are not offers.
• Standing/Continuing Offer: A tender kept open can be accepted in parts by placing orders.
• Acceptance by Order: A formal order with definite quantity and delivery date creates a concluded contract.
• Revocation Limit: The buyer may revoke the standing offer for future supplies, not concluded orders.

The Supreme Court dismissed the appeal and restored the High Court’s decision. It held that the tender was a standing offer. The buyer could cancel the outstanding part where no formal order had been placed. But where an order specified definite quantity and a delivery date, a separate contract arose which could not be cancelled under a general “cancel anytime” clause.

1. Tender = Standing Offer: It can be accepted from time to time by placing orders.
2. Order = Acceptance: Each order with definite terms forms a concluded contract.
3. Cancellation Limits: Only future, unaccepted portions of a standing offer may be revoked.

Procurement, public or private, often runs on tenders. This case shows how to read cancellation clauses and when a supply order locks in obligations. It protects suppliers from retroactive cancellations.

• Invitations to tender are not offers.
• Standing offer can be revoked for future—not for concluded orders.
• A formal order with quantity + date = binding contract.

Mnemonic: T-O-D = Tender → Order → Deal.

1. Tender: A continuing offer.
2. Order: Definite terms = acceptance.
3. Deal: Concluded contract cannot be cancelled casually.

Issue: Could the Railways cancel the contract entirely under a “cancel anytime” clause?

Rule: Tender is a standing offer; acceptance occurs via formal orders with definite terms; concluded orders are binding.

Application: The clause allowed cancelling only the outstanding part. Orders already placed created separate contracts.

Conclusion: Only the unaccepted balance could be cancelled; concluded orders stood.

Invitation to Offer

A request for bids; no immediate intent to be bound.

Standing Offer

A continuing offer that may be accepted from time to time by placing orders.

Acceptance

Final expression of assent; here, a formal supply order with clear terms.