E-Mail and informal contracts are valid – SC held in “Trimex International FZE Limited, Dubai vs. Vedanta Aluminium Limited, India

E-Mail and informal contracts are valid – SC held in “Trimex

 International FZE Limited, Dubai vs. Vedanta Aluminium Limited, India

The Indian Contract Act, 1872: ss.4, 7 – Concluded contract containing arbitration clause - Valid

The  Hon’ble Supreme Court (SC) in a recent judgment in the case of “Trimex International FZE Limited, Dubai vs. Vedanta Aluminium Limited, India” in Re (2010) 3 SCC 1”. It was held that in the absence of signed agreement between the parties, it would be possible to infer from   various documents duly approved and signed by the parties in the form of exchange of emails, letter, telex, telegram and other means of communication. The Hon’ble Supreme Court has accepted the unconditional acceptance through emails and held the same to be a valid contract which satisfies the requirements of Section 4 and 7 of the Contract Act 1872 and further it satisfies Section 2(1)(b), 7 of the Arbitration and Conciliation Act 1996.  In the absence of a signed agreement inference can be from documents approved and signed by the parties in the form of exchange emails, letters, telegrams which come within Section 10 and 2(e) of the Contract Act 1972.

As per Section 4: The communication of a proposal is complete when it becomes to the knowledge of the person to whom it is made.

As per Section 7: In order to convert a proposal into a promise the acceptance must - be absolute and unqualified; and be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.

If respondent accepts the offer of petitioner following a very strict time schedule, he cannot escape from the obligations that flowed from such an action -

• Arbitration clause can be inferred from various documents duly approved and signed by the parties in the form of exchange of e-mails, letter, telex, telegrams and other means of tele-communication even in the absence of signed agreement -
• If no inference can be drawn from the facts that the parties intended to be bound only when a formal agreement had been executed, the validity of the agreement would not be affected by its lack of formality -
• On facts, the Commercial Offer carried no clause making the conclusion of the contract incumbent upon the Purchase Order -Therefore, the moment commercial offer was accepted by the respondent, the contract came into existence - Since the contract contained arbitration clause, petitioner made out case for appointment of arbitrator - Arbitration.

Petitioner's case was that on 15.10.2007, it submitted a commercial offer through e-mail for supply of Bauxite to the respondent. After exchange of several e-mails, respondent conveyed acceptance of offer through e-mail on 16.10.2007 confirming the supply of 5 shipments of Bauxite. Dispute arose and petitioner served arbitration notice on the respondent. Respondent rejected the arbitration notice stating that there was no concluded contract between them. Petitioner filed arbitration petition for appointment of arbitrator.

PUNITIVE DAMAGES FOR USING DECEPTIVE AND PHONETICAL SIMILAR TRADE MARK

Through a landmark judgement , the Delhi High Court held in a trade mark infringement verdict  that will help to hamper companies from employing deceptively and phonetically  analogues trade mark, the Delhi HC recently granted damages to the tune of Rs.1 lakh as punitive damages to a subsidiary of Pfizer.

For the first time in trade mark litigation history that punitive damages have been granted by the Court against Omax Healthcare though no actual damages have been corroborated or established.

The Delhi High court also granted an injunction restraining Omax Healthcare from manufacturing, marketing and distributing cough syrup under the mark 'Orex' or any mark deceptively similar to that of the Pfizer's Corex.


Subsidiary of Omex had initiated a legal suit for injunction, production of accounts and damages against the Omax Healthcare for branding and marketing their cough syrup under the mark 'Orex' being deceptively and  phonetically analogues to their registered mark being, 'Corex'.

As per trade mark law, any one employing  a mark, either deceptively,visually, phonetically and  analogues to that of a registered trademark thereby generating chaos in the minds of the customers, would end in damages for passing off and infringement. 


Deceitful usage of misleading mark tantamounts to fake misrepresentation to the general public. No one  is permitted to employ trade marks of opponents with an aim of arrogating their goodwill and standing in the market. Either enrichment upon the brand value created by others or colorable usage of marks is not allowable under the Act.

In spite of legal requirements, cough syrup being one of the most frequently sold syrups and is commonly available without prescription in the market. 

People staying in villages and possessing average intelligence might not be vigilant enough to ensure small details and products sold with phonetic and visual resemblance may cause perplexity among customers. Such defective usage could adversely affect the reputation of the registered trademark owner as quality of all cough syrups is not similar.

On the basis of the trademark jurisprudence in India and on the above said reasoning and, the Delhi HC granted injunction against the manufacture, sale and distribution of cough syrup of the defendants under the name of 'Orex' or any other name/mark which is deceptively and phonetically analogous to the registered mark 'Corex'.

Industry Sources observed that, "This move would generate preclusion in the minds of users resorting to infringing or fraudulent usage registered marks of well-known manufacturers and averting puzzlement in the minds of customers."

Is LOI ( Letter of Intent ) IS A CONTRACT?

Is LOI ( Letter of Intent ) IS A CONTRACT?

In Dresser Rand S.A. v. M/s. Bindal Agro Chemical Ltd. & Another, 2006 Vol. I Supreme Court Cases (SCC) page 751 at page 773 at paras 39 and 40, a two-Judge Bench of the Supreme Court of India emphasized that whether letters of intent rise to the level of being a contract hinges on the terms of the letter itself. It observed as under:- "It is now well settled that a letter of intent merely indicates a party’s intention to enter into a contract with the other party in future. 

A letter of intent is not intended to bind either party ultimately to enter into any contract. This Court while considering the nature of a letter of intent observed thus in Rajasthan Coop. Dairy Federation Ltd. v. Maha Laxmi Mingrate Marketing Service (Plaintiff) Ltd. [1996 (10) SCC p.408, Para 7]

“The letter of intent merely expressed an intention to enter into a contract …. There was no binding legal relationship between the appellant and Respondent 1 at this stage and the appellant was entitled to look at the totality of circumstances in deciding whether to enter into a binding contract with Respondent 1 or not.”

It is no doubt true that a Letter of Intent may be construed as a letter of acceptance if such intention is evident from its terms. It is not uncommon in contracts involving detailed procedure, in order to save time, to issue a letter of intent communicating the acceptance of the offer and asking the contractor to start the work with a stipulation that the detailed contract would be drawn up later. If such a letter is issued to the contractor, though it may be termed as a Letter of Intent, it may amount to acceptance of the offer resulting in a concluded contract between the parties. But the question whether the letter of intent is merely an expression of intention to place an order in future or whether is a final acceptance of the offer thereby leading to a contract, is a matter that has to be decided with reference to the terms of the letter. Chitty on Contracts (Para 2.115 in Vol.1, 28th Edn.) observes that where parties to a transaction exchanged letters of intent, the terms of such letters may, of course, negative contractual intention; but, on the other hand, where the language does not negative contractual intention, it is open to the courts to hold that the parties are bound by the document; and the courts will, in particular, be inclined to do so where the parties have acted on the document for a long period of time or have expended considerable sums of money in reliance on it.”

The said proposition has been quoted with approval in the latest judgment of Supreme Court of India in “Great Offshore Ltd. Vs. Iranian Offshore Engineering & Construction Company” decided on 25.08.2008.

CAN A BANK OR CREDITOR INITIATE LEGAL ACTION AGAINST GUARANTOR INSTEAD OF INITIATING PRINCIPAL DEBTOR?

The liability of the guarantor and principle debtors are co-extensive and not in alternative. 

The Supreme Court in United Bank of India Vs Satyawati Tondon and others {(2010) 8 SCC 110; Decided on 26.07.2010} observed and held that the legal position that the liability of the surety/guarantor is co-extensive with the principal debtor, unless it is otherwise provided by the contract and that a creditor is not bound to, exhaust his remedy against the principal debtor before suing the surety/guarantor.

In Bank of Bihar Ltd. v. Damodar Prasad (1969) 1 SCR 620, SUPREME COURT CONSIDERED AND ANSWERED IN AFFIRMATIVE the question whether the bank is entitled to recover its dues from the surety and observed:

"It is the duty of the surety to pay the decretal amount. On such payment he will be subrogated to the rights of the creditor under Section 140 of the Indian Contract Act, and he may then recover the amount from the principal. 

In State Bank of India v. M/s. Indexport Registered and others (1992) 3 SCC 159, SUPREME COURT HELD THAT THE DECREE-HOLDER BANK CAN EXECUTE THE DECREE AGAINST THE GUARANTOR WITHOUT PROCEEDING AGAINST THE PRINCIPAL BORROWER.

In Industrial Investment Bank of India Limited v. Biswanath Jhunjhunwala (2009) 9 SCC 478, this Court again held that the liability of the guarantor and principal debtor is co-extensive and not in alternative.

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