Introduction

• This case is based on the communication and acceptance of an offer.
• It deals with Section 3 of the Indian Contract Act, 1872 (ICA) which talks about the communication and acceptance and revocation of the proposals comes into the question.

Facts

• In this case the appellant Bhagwandas Goverdhandas Kedia Oil Mills had agreed to supply the seeds to the respondent M/s. Girdharilal Parshottamdas and Co. over a telephone.
• The contract was accepted over the phone at Khamgaon and delivery and payment of the goods were also at Khamgaon.
• The appellant brought a suit against the respondent in Ahmedabad for appellant’s failure in the supply of goods.
• It was contended that the Civil Court of Ahmedabad had no jurisdiction over the suit as acceptance was made at Khamgaon and it was held by the Court of Ahmedabad that the Court had jurisdiction over the Court.
• Now the appellant had filed an appeal before the High Court of Gujarat, which was rejected, and the special leave petition was filed before the Supreme Court.

Issues Involved

• Whether the Ahmedabad Court had jurisdiction over the suit?
• Whether the contract was formed at the place of acceptance or at the place acceptance is received?

Observation

• The SC observed that Section 4 of the ICA deals with the Communication and Acceptance of the offer and states that the communication of a proposal is complete when it comes to the knowledge of the person and the acceptance of the proposal as against the proposer is complete when it is put in a course of transmission to him and in case of the acceptor when it comes to the knowledge of the proposer.
• The conversation over telephone is analogous to the conversation when the parties are in presence of each other, wherein, the negotiations are concluded by instantaneous speech and therefore communication of the acceptance becomes a necessary part of the contract.
• The majority held in favour of respondent by stating that if the offer is made by a telephone the place of acceptance will be the place where the communication of acceptance is received by the person who made the offer, or we can say the place where the offeror is present.

Conclusion

• The rule for communication through an instantaneous mode between the parties is different from the rule of communication through the post.
• In case of communication through the post, the communication is said to be complete when the letter of communication is put in the post box, whereas, in case of telephone and other modes of instantaneous communication, the contract is said to be made when the communication of acceptance is received by the person who makes the offer (offeror) and the place of contract formation is the place where the offeror is present.

Notes

Section 3 of ICA: Communication, acceptance and revocation of proposals.—

The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.