Bhagwandas Goverdhandas Kedia Vs.

Girdharilal Parshottamdas and

Co. and Ors.

Hon’ble Judges/Coram: J.C. Shah, K.N. Wanchoo and M. Hidayatullah, JJ.

Decided On: August 30th, 1965

FACTS:

The plaintiffs, Messrs. Girdharilal Parshottam Das and Company offered to buy
cotton seed cake from the defendants, Kedia Ginning Factory and Oil Mills of
Khamgaon. The resultant contract was negotiated over long distance telephone and
took final shape on July 22nd, 1959 as an oral contract. The defendants failed to
supply the cotton seed cake which they had agreed to supply under the oral
contract. An action in the City Civil Court at Ahmedabad was instituted against the
defendants. It was the contention of the plaintiffs that the contract was concluded in
Ahmedabad, hence the City Civil Court had jurisdiction over the matter. The
defendants contended that the contract was concluded in Khamgaon, and hence the
City Civil Court at Ahmedabad had no jurisdiction over the matter. Hence, the
question of jurisdiction arose.

ISSUE:

Where is the contract formed, where it is concluded through instantaneous modes of

communication?

JUDGMENT:

The defendants contended that in case of a contract made over a telephonic

conversation, the place where the offer is accepted is where the contract is made,
and the court within whose territorial jurisdiction the offer is accepted and
acceptance spoken into the telephone has jurisdiction over matters pertaining to the
concluded contract. The plaintiffs on the other hand argued that making of an offer
constitutes a part of the cause of action and therefore the court within the
jurisdiction of which the offer was made has jurisdiction over the contract. In the
alternative it was argued that intimation of acceptance being essential to the
formation of a contract, the contract is only concluded when the intimation is
received by the offeror.
The court in no uncertain terms rejected the first contention of the plaintiffs by using
case laws to demonstrate that mere making of an offer does not form part of a
cause of action for damages for breach of contract. The court observed that the
Indian Contract Act, 1872 does not talk of the place where a contract is made but
only talks of when a contract is said to be made. The court brought about the
distinction in contracts made inter presentes and contracts made inter absentes, and
used ss. 2, 3 and 4 of the Contract Act to show that different rules applied to a
contract made when the parties are in the presence of each other and when the
parties are not in the presence of each other. When the parties are in the presence
of each other, the contract is concluded when the acceptance is notified to the
offeror, whereas when the parties are not in presence of each other, and the
contract is being formed using non-instantaneous modes of communication, the
contract is formed when the acceptance is put in the course of transmission so as to
be out of the power of the acceptor.

The court observed that in the case of a telephonic conversation, the parties are in a
sense in the presence of each other. There is instantaneous communication of
speech intimating offer and acceptance from a professional certified in a Corporate
Communication Training. The court relied on the judgment given by the English
Court of Appeal in Entores Ltd. v. Mills Far East Corporation [(1955) 2 Q.B.D 327], in
which it was held that in cases of instantaneous communication the contract is only
complete when the acceptance is received by the offerer and the contract is made at
the place where acceptance is received.

The court observed that with regard to the essential nature of a telephonic
conversation, the parties are in a sense in the presence of each other and
negotiations are concluded by instantaneous communication. Communication of
acceptance is thus an essential part of formation of contract, and the exception to
the rule imposed on the ground of commercial expediency is inapplicable.

HELD:

In cases where contract is to be concluded through instantaneous modes of

communication, the contract will only be concluded when the acceptance of the offer
reaches the offeree, and the exception for non-instantaneous modes of
communication will not apply. Court, therefore, held that contract concluded at
Ahmedabad and City Civil Court has the jurisdiction over the matter.