CONTRACT-I DRAFT

CASE ANALYSIS ON

Bhagwandas Goverdhandas Kedia

Vs.
M/s. Girdharilal Parshottamdas & Co. and Ors.
AIR 1966 SC 543

SUBMITTED TO SUBMITTED BY

MS. KUMUD MALVIYA ANAMIKA

ROLL NO : 1682014

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 TABLE OF CONTENTS

1. Facts of the case

2. Issues raised

3. Arguments

4. Judgment

5. Case analysis

1. FACTS OF THE CASE –

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The Plaintiff – M/s. Girdharilal Parshottamdas & Company commenced an
action in the city civil court at Ahmedabad for decree of Rs 3150/-.

The case was filed against the Kedia Ginning Factory and Oil Mills of
Khamgoan, hereinafter referred to as the Defendant.

The plea was that the Defendants had failed to supply cotton seed cake
which they had agreed to supply under an oral contract dated July 22, 1959
negotiated between the parties by conversation over telephone.

Defendant had offered to seed cotton seed cake which was accepted by the
Plaintiff at Ahmedabad.

The Plaintiff submitted that the cause of action for the suit arose at
Ahmedabad, as the offer was accepted at Ahmedabad and the payment was
to be received through a bank of Ahmedabad.

The Defendant contended that the Plaintiff had by a message communicated

by telephone offered to purchase cotton seed cake and the Defendant had
accepted the offer at Khamgaon, that under the contract deliver of goods
contracted for was to be made at Khamgaon, price was to be paid at
Khamgaon and that no part of the cause of action for the suit had arisen
within the territorial jurisdiction of City Civil Court Ahmedabad.

2. ISSUE RAISED –

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Whether the suit should be filed within the territorial jurisdiction of City
Civil Court Ahmedabad or not?

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3. ARGUMENTS –

On behalf of Plaintiff

The Plaintiff contended that making an offer is a part of cause of action in a

suit for damages for breach of contract, and suit lies in the court within
jurisdiction of which the offeror has made the offer which on acceptance has
resulted into a contact.

Acceptance and intimation of acceptance of offer are both necessary to result

in a binding contract. In the case of a contract which consists of mutual
promise, the offeror must receive intimation that the offeree has accepted his
offer and had signified his willingness to perform his promise.

By this rule the Plaintiff contended that this applies to those contracts is
ordinary rule which regards a contract as complete only when an acceptance
is intimated to proposer. In case of a telephonic conversation each party is
able to hear the voice of other. There is an instantaneous communication of
speech intimating offer and acceptance, rejection or counter offer.
Intervention of an electric impulse which results in instantaneous
communication of message from one distance does not alter the nature of
conversation so as to make it analogous to that of a offer and acceptance
through a post or by telegraph.

On behalf of Defendant

The Defendant contended that in 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 the court alone has jurisdiction within the
territorial jurisdiction of which the offer is accepted and is spoken into the
phone instrument. It was submitted that the rule which determines the place
where the contract is determined by Section 3 and 4 of the Indian Contract

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Act, 1872, and applies uniformly.

Intimation of acceptance of offer being essential to formation of contract, the

contract takes place where such intimation is received by the offeror.

By the rule, the Defendant contended that it applies in case of contracts

made by conversation on telephone.

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4. JUDGMENT –

Majority View :

In the light of the facts of the case, Hon’ble Mr. Justice J. C. Shah &
Hon’ble Mr. Justice K. N. Wanchoo delivered the Majority View and held
that the Trial Court was justified in taking the view that a part of the cause of
action arose within the jurisdiction of the City Civil Court Ahmedabad,
where acceptance was communicated by telephone to Plaintiff.

Dissenting View :

The Hon’ble Mr. Justice M. Hidayatullah delivered the Dissenting View with
the further remarks. At the time of telephonic conversation the proposers
who are Plaintiff in the suit were at Ahmedabad and the Acceptor, who is the
Defendant was at Khamgaon in Vidharbha.

It was observed that if the acceptance was complete and contract was made
when Defendant spoke in the telephone at Khamgaon, the Ahmedabad court
would lack jurisdiction to try the suit. It would have the jurisdiction
otherwise if the acceptance was complete only on the reception of speech at
Ahmedabad and that was the place where the contract was made.

It was observed by Justice Hidayatullah that Lord Denning in the Entores

case has held:

“When a contract is made by post it is clear law throughout the

common law countries that the acceptance is complete as soon as the
letter is put into the post box, and that is where the contract is made”.

Coming to the question of telephone, Prof. Winfield has expressed the

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opinion that the rule which has been accepted for letters and telegrams
should not be extended to communication by telephone.

It was pointed out by Justice Hidayatullah that in Canada in Carroww

Towing Co. vs. The Ed Mc William (46 D.L.R. 506), it was held,
summarizing:

“Where a contract is proposed and accepted over the telephone, the

place where the acceptance takes place constitutes the place where
the contract is made. Acceptance over the telephone is of the same
effect as if the person accepting it had done so by posting a letter, or
by sending off a telegram from that place.”

In the opinion of Justice Hidayatullah, the language of Section 4 of the

Indian Contract Act covers the case of communication over the telephone as
follows:

 Communication when complete –

The communication of a proposal is complete when it comes to the

knowledge of person to whom it is made.

 Communication of Acceptance is complete –

As against the Proposer, when it is put in a course of transmission to

him, and as against the Acceptor, when it comes to the knowledge of
Proposer.

5. CASE ANALYSIS –
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The present case of Bhagwandas Goverdhandas Kedia Vs. M/s. Girdharilal
Parshottamdas & Co. and Ors. reported in AIR 1966 SC 543, deals with the
act of failure of contract as a result thereof. In the lights of facts stated by
both the interested parties, one issue has been specifically highlighted, i.e.
whether the suit should have been filed within the territorial jurisdiction of
City Civil Court Ahmedabad or not?

This case deals with Section 3 & 4 of Indian Contract Act, 1872. The
position of law is as follows:

A contract unlike a tort is not unilateral. If there is no meeting of minds, no

contract may result. There should not only be an offer by one party,
acceptance of that offer by the other party, but there should also be an
intention to accept it. And the acceptance must be communicated to the
offeror or proposer. In this case all these ingredients were present.

Now coming to the case of communication over telephone, Section 4 of the

Indian Contract Act, 1872, is applicable to the facts of the case, which may
be quoted at this stage:

The communication of a proposal is complete when it comes to the

knowledge of person to whom it is made.

Communication of Acceptance is complete –

As against the Proposer, when it is put in a course of transmission to him,

As against the Acceptor, when it comes to the knowledge of Proposer.

Thus, in conclusion, as per the analysis, the Dissenting View taken by

Hon’ble Mr. Justice Hidayatullah, is therefore apt as it was concluded that
the contract was complete at Khamgaon.

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