Case
Comment
Bhagwan das Goverdhan das Kedia
vs M/s. Girdhari lal Parshottam das & Co.
Equivalent
citations: A.I.R. 1966 SC 543; 1966 SCR (1) 656
Author: S C
Bench: Shah,
J.C.
PETITIONER………………………………………………BHAGWANDAS
GOVERDHANDAS KEDIA
Vs.
RESPONDENT…………………………………………….M/S. GIRDHARILAL PARSHOTTAMDAS AND CO.ANDOTHERS
DATE OF
JUDGMENT:30/08/1965
Bench:
SHAH, J.C.
WANCHOO,
K.N.
HIDAYATULLAH,
M.
Introduction:
The case widened
the scope of communication of offer and acceptance.This case decided the
jurisdiction for bringing a suit when the agreement was made over a telephone.
This case resolved the issue of the jurisdiction arises at a place of the
offeror, i.e., a place where the acceptance is heard by the offeror with
instantaneous communication, contrary to communication by post.The Supreme
Court by a 2:1 majority stated that when a contract is made by telephone, the
place where the acceptance is intimated is the place (place of offeror) where
the contract is made.
Provisions
of Law involved:
The Indian
Contract Act, 1872- Section 2, 3, 4.
Issue:
Whether the
contract was formed at the place of acceptance, or where the acceptance was
received?
Facts:
The
respondent made an offer from Ahmedabad to the petitioner by telephone to
purchase certain goods (cotton seed cake) and the petitioner accepted the offer
at Khamgaon by telephone. The respondent commenced an action at Ahmedabad
against the petitioner for a decree of Rs. 31,150 on the plea that petitioner had
failed to supply the goods which they had agreed to supply under an oral
contract, negotiated between the parties by conversation on long distance
telephone.
Both the Trail
Court and the High Court held that when a contract is made by conversation on
the telephone the place where the acceptance of offer is intimated to the
offeror, is the place where contract is made, and therefore, the Civil Court at
Ahmedabad had jurisdiction to try the suit.
Contentions:
Petitioner’s
Arguments-
The
petitioner contended that in the case of a contract by conversation on
telephone, the place where the offer is accepted is the place where the
contract is made, and that Court alone has jurisdiction within the territorial
jurisdiction of which the offer is accepted and the acceptance is spoken into
the telephone instrument. It was submitted that the rule which determines the
place where a contract is made is determined by section 3 and 4 of the Indian
Contract Act, and applies uniformly whatever may be the mode employed for
putting the acceptance into a course of transmission, and that the decisions of
the Courts in United Kingdom, dependent not express statutory provisions but
upon the somewhat elastic rules of common law, have no bearing in determining
this question.
Respondent’s
Arguments-
The
respondent on other hand contended that making of an offer is part of the cause
of action in a suit for damages for breach of contract, and the suit lies in
the Court within the jurisdiction of which the offeror has made the offer which
on acceptance has resulted into a contract. Alternatively, they contend that
intimation of acceptance of the offer being essential to the formation of a
contract, the contract takes place where such intimation is received by the
offeror.
Background
on the issue:
In Adams v.
Lindsell (1818), it was ruled by the Court of King’s Bench in England that the
place of sending the letter is where the contract is made. This rule was
subsequently approved in Dunlop v. Vincent Higgins (1848) by the House of
Lords. In the present case too, the petitioner is claiming since letter was
send from Khamgaon, hence contract was made there.
This norm was not followed in the case Entores Ltd. v. Miles
Far East Corporation (1955). It was held in the Entores case that the rule
about instantaneous communications between parties is different from the rule
about the post. The contract in such case is complete when the acceptance is
received by the offeror and the contract is made at the place where the
acceptance is received.
Dissenting Part of Judgement:
Justice Hidayatullah gave a dissenting opinion, saying that
though Indian Contract Act is applicable in India, it was inspired by English
Contract Law. He stated that no modification has been done in the Indian
Contract Act since 1872 till 1966. He emphasized to consider the language of
the statute and intent of the law maker.Further he said that though we follow
common law, but it is not necessary that whatever happens in England needs to
be followed in India. Therefore, the Ahmedabad civil city court doesn’t have
jurisdiction to look into the matter.
Inference:
From reading of Section 4 of Indian Contract Act, 1872 it can
be understood that communication of acceptance is complete from the point of
view of Proposer when Acceptor has sent the acceptance in course of
transmission to Proposer and from the point of view of Acceptor when his
acceptance comes to the knowledge of the Proposer. By keeping in mind, the
Adams case and Dunlop case it can be inferred that the place from where
communication of acceptance is sent will be the place where contract is made.
But the Court looking upon the latest development in technology and English law
relied upon the Entores case and stated that since telephonic medium is an
instantaneous mode of communication, the place where contract is made should be
where the acceptance is heard.
Such a finding is important because it widened the scope of
communication of offer and acceptance.If there is a dispute regarding a
contract, then the Court under relevant jurisdiction is approached keeping in
mind the place of formation of contract.
Conclusion:
In the instant case, the Supreme Court by majority (Shah J.
and Wanchoo J.) held that the Contract Act does not expressly deal with the
place wherein a contract is made in case of telephonic conversation. In case of telephonic conversation in a sense
the parties are in presence of each other. The communication of speech is
instantaneous imitating offer and acceptance, rejection or counter offer. In
past the Posts and Telegraph Department had a general control over the
communication and based upon this system the place of formation of contract was
decided. But the Court said that this was not aground for assuming the analogy
of a contract made by post will govern the telephonic mode of making contracts.
The ruling in Entores case was followed by the Court. Therefore,acceptanceof
the offer is made at the offeror’s place when the communication is
instantaneous, i.e., through telephone.
Thus, it was held by the Supreme Court that the conversation
in contention resulted in the contract at Ahmedabad and not at Khamgaon.
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