CONTRACTS I CRE PROPOSITION

DATED AUGUST 9, 2022

Dayal Dairy LLP operates in the production of dairy products like milk, ice cream, flavoured
milkshakes etc., and run various factories in Uttarakhand for production of the same.
Focussing on business expansion, they decided to purchase a Carbonated Slush Machine,
producing 50-60 litres of ice cream mix per hour, for their factory in Kashipur. Given the
COVID-19 Pandemic, they looked for online suppliers of this product (Fig.1), wherein they
found Dev Engineering Pvt. Ltd. as a reliable and suitable supplier.

Given that their primary place of taking orders was their website, Mr. Dhawan, the purchase
manager from Dayal Dairy, requested a call back, was allotted an enquiry number, and was
soon put in touch with Mr. Chawla, the supply relations manager at Dev Engineering. They
exchanged multiple emails, an extract of which has been given on the next page.

After this final email, Dayal Dairy LLP also sent a token amount of Rs. 12,000/- (1% of the
contractual consideration), as an amicable sign of nearing the end of contractual finalisation.
However, a week before the contract was set to be signed, the partners of Dayal Dairy LLP
discovered an embezzling fraud in their partnership, and the partnership went into
liquidation. Dev. Engineering Pvt. Ltd, however, had already purchased the raw material and
completed production of the Carbonated Slush Machine, given the constant assurances by
Mr. Dhawan and the near-certainty of a final contract and the post-contract conduct of Dayal
Dairy LLP.

Being blindsided by this new development, Dev Engineering filed a suit in the Kashipur Civil
Court claiming performance of the contract and argued that the letter of intent email
constituted as an acceptance of the offer by Dev. Engineering, and that this letter of intent can
be the basis of contractual obligations. It was on the basis of these assurances that that Dev.
Engineering entered into production of the machine, and it did not have any other current
buyer for it as well. Dayal Dairy, on the other hand, argued that such letter of intent, a mere
facility document, does not constitute a binding contract and was conditional upon fulfilment
of a number of factors, which did not reach the stage of finality and conclusion. Argue.

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 Fig. 1 – Description of Online Seller’s website, primary place of business

To: supply@devengineering.com
From: directorpurchases@dayaldairy.com
Subject: Letter of Intent | Arrangement of facility documents and contract of purchase

Dear Mr. Chawla,

I am referring to enquiry no. CSM/183640271/2022, for the carbonated slush machine for
Dayal Dairy LLP. I am happy to inform you that the terms of the agreement were found
agreeable, in principle, to the partners of my firm, and they believe that the circumstances are
opportune to start the process of finalising the contract. At the same time, the final agreement
is yet to be finalised, and therefore, I have been authorised to write this letter of intent to you,
for the purposes of this purchase.

It has been noted by the partners of my firm that certain terms of the mode of payment and
delivery schedules are yet to be finely agreed over, yet for all practical purposes, we can think
of this contract as finalised.

Regards

Mr. Dhawan, Purchase Manager, Dayal Dairy

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Fig. 2 – Recital of the final pre-dispute email exchange

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