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BHAGWANDAS GOVERDHANDAS KEDIA

V. M/S. GIRDHARILAL PARSHOTTAMDAS

 January 15, 2013 · by Vivek Kumar Verma · in Contract Law, Fundamental,!"er# ·

Bhagwandas Goverdhandas Kedia v. M/s. Girdharilal Parshottamdas

1$%% &'( 5)3

(S.3 and 4, place of formation of contract, postal rle!

FACTS:

Plaintiff offered to get certain goods supplied at Ahmedabad to defendants who accepted the

offer at Khamgaon. On defendants’ failure to supply requisite goods, plaintiff sued them atAhmedabad. Dispute arose as to where was contract formed- at Khamgaon where acceptance

was gien by defendants or at Ahmedabad where acceptance was receied by plaintiffs.

CONTENTION(S):

Defendants contended that according to the section !, " and # of $%A, the place where the offer

is accepted is the place where the contract is made and therefore Ahmedabad trial court did not

hae the &urisdiction to try the suit.

HELD:

Majority Judgment:

 An agreement does not result from mere intent to accept the offer: Acceptance must be by some

external manifestation (either by speech, writing, conduct in further negotiations, or any other

overt act) accompanied by its communication to the offeror (  Brogden v. Metropoliton Rly Co. )

unless expressly waived by him or impliedly by the course of negotiation to the contrary ( Carlill

v. Carbolic Smoke Ball  ).

 Entores v. Miles:  An offer was made from London by telex to a party in Holland and was duly

accepted through telex the !uestion arose as to which court had "urisdiction to try the dispute

between the parties. #enning L.$. observed that in case of instantaneous communications

between the parties, i.e. where parties are in each other%s presence or though separated in space

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are in direct communication with each other as for example by telephone or telex, contract is

complete when the acceptance of offer is duly received by the offeror and the contract is formed

where such acceptance is received.

 Adams v. Lindsell:  An offer was made by defendants by post to sell certain goods. &hough, the

acceptance was duly posted by plaintiff but, it reached defendants nearly after a wee' when

latter had already sold the goods to a third party. ourt ruled that when parties aren%t in each

other%s presence and communicate long distance either by post or telegram, both parties get

bound by contract as and when the acceptor puts the letter of acceptance in the course of

transmission to offeror so as to be out of his power to recall% (  postal rule ).

 But in India according to *.+ of A, application of -ostal ule results that acceptor is bound

only when the acceptance /comes to the 'nowledge of the proposer0 while proposer becomesbound much before when letter was /put in course of transmission to him as to be out of the

 power of acceptor to recall0. !S." doesn#t imply t$at t$e contract is %ormed &ua t$e proposer at 

one place and &ua t$e acceptor at anot$er place'. &he gap of time between posting of

acceptance and its coming into 'nowledge of proposer can be utilised by acceptor in revo'ing

his acceptance by speedier communication which will overta'e the acceptance (*.1 of A)

&he postal rule came into existence in Adams case for two prominent reasons:

&he rule was based on commercial e(pediency)empirical grounds: for if the defendants were

not bound by their offer till the acceptance by the plaintiffs is not received by them, then the

 plaintiffs ought not to be bound till after they had received the notification that the defendants

had received their acceptance and had assented to it and so it might go on ad infinitum.

*econdly, if the contract is not finally concluded till the intimation of the acceptance by the

 promisee to the promisor, then there may be instances that the promisor will deny the receiving

of any acceptance even though he may have received it. &his may lead to instances of fraud and

also delay in commercial transactions. 2urther, the satisfactory evidence of posting a letter is

 generally available as against of its having been received.

o 'e held that the contract act does not e(pressly deal with the place where a contract is

made. )he conersation oer telephone is analogous to the conersation when the parties

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are in presence of each other, wherein, the negotiations are concluded byintantaneou

!ee"# and therefore "ommuni"ation o$ t#e a""e!tan"e %e"ome a ne"eary !art o$

t#e "ontra"t and the e(ception to the rule on grounds of commercial ine(pediency is

inapplicable.

o *urther, in case of correspondence by post or telegram, a third agency interenes which is

responsible for effectie transmission of letters at eery instance, howeer, in case of

telephonic conersation, once the connection has been established, there is no need of any

third agency to transmit the correspondence between the parties.

'ence, as against cases of correspondence by post or telegram, in present case where there was

correspondence by telephone, contract was formed when acceptance was duly communicated tothe offeror and hence, at Ahmedabad.

Dienting O!inion (J& Hidayatu''a#):

o +tressing on literary interpretation of $ndian %ontract Act and not be moulded by nglish

dicta, 'idayatuallah held that when acceptor put his acceptance in transmission in form

of telephonic conersation to proposer as to be out of his power to recall According to

section # of the $ndian %ontract Act /01!, communication of acceptance was complete

and proposer was bound by contract so formed, howeer quic2 the transmission.

$t was obious that the word of acceptance was spo2en at Khamgaon and the moment the

acceptor spo2e his acceptance he put it in course of transmission to the proposer beyond his

recall. 'e could not reo2e acceptance thereafter, albeit the gap of time was so short that one can

say that the speech was heard instantaneously.

"#$%&'S%

) *. *+ere owin to ome -ault in tele.+one connection, t+e .ro.oer could not +ear t+e

acce.tor w+o in turn know or +a reaon to believe t+at t+e .ro.oer +an/t +eard t+e

acce.tance, i t+e contract -ormed Com.are t+e ituation wit+ t+e voice o- acce.tor

drowned in noie -rom an aircra-t w+en .eakin o- +i acce.tance to .ro.oer tandin in

-ront o- +im#

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' *. Communication in contem.lation o- #3 o- 'C& mean e"ective or reaonable

communication# 'n cae o- tele.+onic converation or -aceto-ace corre.ondence, contract

i -ormed only w+en communication o- acce.tance o- o"er i duly com.lete to t+e o"eror# 'n

.reent cae t+ere-ore, w+en t+e acce.tor know t+at communication o- acce.tance, w+ic+

wa neceary -or +im to do, .artie can/t be obectively taken a adidem and no contract

reult#

) +. '- in -act o- 41, due to ome -ault at t+e .ro.oer/ tele.+one end, t+e acce.tance i

not +eard by +im and +e doe not ak t+e acce.tor to re.eat +i acce.tance w+ile t+e

acce.tor reaonably believe t+at t+e acce.tance i communicated, will t+ere be a valid

contract

' +.  +e a..lication o- obective tet will reult into e6itence o- valid contract in t+i cae#& reaonable .eron in t+e .oition o- acce.tor would believe t+at o"eror +a +eard t+e

acce.tance and t+at t+e contract i -ormed# +ere-ore o"eror +ould be bound by contract

-or +i own -ault in not akin aain t+e acce.tor# 'n alternative, a Lord 7ennin aid in

8ntore v# 9ile, :oferor in such circumstances is clearly bound, because he will be

estopped rom saying that he didn’t receive the message o acceptance because o his own

ault #;

AD Di!ute

Disputes are sub&ect to time. $n eery stage of ciili3ation, where on the one

hand the technology gies pace to the business and on the other hand gies rise to the

disputes due to that technology. $n B$ag*andas +overd$andas kedia v. +ird$arilal 

 ,ars$ottamdas - Co /0  . +upreme %ourt held that in the case of telephonic

conersation, the position is the same as in the case where the parties are in the

 presence of each other, and the rule of a contract through post does not apply to such

contracts. $n case of acceptance sent by post, the contract is concluded when the letter 

of acceptance is posted, whereas in the case of acceptance by phone, the contract isdeemed to be complete when the offeror hears the acceptance at his end rather than

when the acceptor spea2s the words of acceptance. ach new technology creates new

types of disputes, as well as opportunities for new forms of dispute resolution. )he use

of the -4ail once found ery economic and easy to use. $t is profoundedly used by

eery one irrespectie of the olume of the business. )he beginning of disputes is not

far and it begins with the problem of contract ia -mail. )his forces parliament to

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enact the law i.e., $nformation )echnology Act, !555 and do amendment to some other 

laws too. 6ast decade saw the adent and increasing acceptance of irtual

enironment. $t transforms our thin2ing about the nature of human interaction and

relationships. )he creation of irtual identities, irtual locations 786s and irtual

meeting places, such as chat sites and cyber-cafes etc. had increased the limits of thesoereignty of a country. )he role of priate international law has increased

tremendously. Problem of choice of &urisdiction also changeth as per cyber-irtual-

territory. $nternet culture deelops through protocols, norms and languages. )his

irtual regime has its own tools to play with such as digital signature, ncrypted

language, digital authentication, password oriented priacy etc.

C#oi"e o$ Juridi"tion

9y choosing internet as the means of soling the AD8 dispute we find no

 problems of choice of &urisdiction. $rrespectie of time and place, with the help of 

$nteractie communications we can go for proceedings from any place of the world.

Alternatie dispute resolution serices ad&ust to new technology and proide better 

negotiation, mediation and other dispute resolution processes.

Predominantly the AD8 can use information technology in a systematic way to

sole the disputes in a more lucid and speedier way.

/.  )he computers ia e-mail are performing the wor2 of both, one, performing of 

contracts and second, management of contracts.

!.  %ommunications through telephone networ2s, and web conferencing

eliminated the difference of time and place. )he use of ideo-conferencing

facilities should be used as much as possible to not only sae the time but

energy too. )he future is of nanotechnology and robotics. )he use of 

information technology will proide necessary fairness, effectieness, and it is

economic too. 'ence, easily accessible and acceptable. )hus, after the

 &udgment

Aftereffects

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  A distinction is drawn between acceptance by instantaneous methods such as

tele(, telephone, and probably fa(, e-mail and electronic data interchange, and

acceptance by non instantaneous methods such as post, telegram, or 

telemessage. $nstantaneous methods, where the acceptor will generally 2now

that his communication has not arried at once and can try again, are sub&ect tothe general requirement that acceptance must be communicated to the offeror .

Place of %ontracting

  :hether the postal acceptance rule applies also determines where a contract is

made. $f the means of communication is by letter, telegram or telemessage, the

contract is complete when the letter is posted but when it comes to telemessage

then it was decided that the place of contract will be, the place where it is

dictated