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SECTION II. THE EFFECT OF BREACH "It must be observed that, even if one of the parties wrongfully repudiates all further liability or has been guilty of a fundamental breach, the contract will not automatically come to an end. Since its termination is the converse of its creation, principle demands that it should not be recognised unless this is what both parties intend. The familiar test of offer and acceptance serves to determine their common intention. Where A and B are parties to an executory contract and A indicates that he is no longer able or willing to perform his outstanding obligations, he in effect makes un offer to B that the contract shall be dischargcd. Therefore, B is presented with an option. He may either refuse or accept the offer. More precisely, he may either affirm the contract by treating it as still in force, or on the other hand he may treat it as finally and conclusively discharged. The consequences vary according to the choice that he perform.

The fundamental breach as pointed out by the Tribunal is stated to be in respect of handing over the site and as per the definition of 'site' the quarries also.

32. In (1976) 1 All ER 225 it has been clearly stated that if the party refuses to accept the breach as discharge of the contract, it is intact and the contract remains in being for the future for both sides. Each party has a right to sue for the future or damages for post.

33. Now we examine the documentary evidence on record. We have also examined the contract clauses in this behalf. The findings recorded by the Tribunal in paras 13 and 17 do not take into consideration the clauses of contract in respect of extension of time. The initial period of contract was for twelve months but the same was extended on the request of the contractor and the span of the contract was extended for a period of 29 months. The applicant-claimant having accepted the extension and the State having openly stated that the extension is granted subject to the right of the State to impose penalty clearly means that the contractor very well knew the nature of the order passed and should not have been any doubt that the State had in any way admitted the defaults. On the other hand, the action of the contractor in accepting the extensions amounts to waiver and the fundamental breach prescribed to the State become meaningless as the Court did not consider the effect of the extensions granted under the agreement. When the contract-agreement provides for extension, the time limit provided for completion of 12 months is not essence of the contract. In such executory contracts the work is bound to spill over due to various contingencies and as such the agreement itself provides for extension. The contractor having accepted the extentions his grievance that he could not give a progress during the rainy season and as such the State should be held responsible for the defaults cannot be accepted. Nor it is correct to say that the site or whole site was not handed over.

42. The applicant cannot get the escalation merely on the ground that the contract was extended. In view of the specific clauses of the agreement he was not entitled to get any escalation on any ground whatsoever. The parties who enter into executory contract are supposed to abide by and mere turn of events do not entitle them to get escalation. We may refer to the decision of the Supreme Court in Continental Construction Co. Ltd. v. State of Madhya Pradesh, AIR 1988 SC 1166: (1988) 3 SCC 82. In para 8 of the judgment it has been pointed out that vide Cls. 2.16 and 2.4 the contractor had to complete the work irrespective of rise in price of materials and also rise in labour charges at the rates stipulated in the contract. It was pointed out in view of the specific contract clauses that the claimant was not entitled to any extra claim on account of escalation. Same is the situation in the present case where there was specific deletion of the contract Clause 32-A no escalation could be granted to the claimant.