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Firm Kanhaiyalal Vs. Dineshchandra - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMadhya Pradesh High Court
Decided On
Case NumberCivil Revn. No. 575 of 1957
Judge
Reported inAIR1959MP234
ActsCode of Civil Procedure (CPC) , 1908 - Sections 20; Contract Act, 1872 - Sections 4 to 6
AppellantFirm Kanhaiyalal
RespondentDineshchandra
Appellant AdvocateG.M. Chafekar, Adv.
Respondent AdvocateS.D. Sanghi, Adv.
DispositionRevision dismissed
Cases Referred(see Mohori Bibi v. Dhurmodas Ghose
Excerpt:
.....settled on telephone is in no way inconsistent with the provisions of the contract act or with the principles of justice, equity and good conscience. if then a contract settled by telephone is complete only when the acceptance is received by the offerer, the place where the contract is made would clearly be the place where the acceptance is received......made the offer from ranganj, it came to the knowledge of the plaintiff at ratlam and the defendant offeror received the notification of the acceptance at ramganj by plaintiff-offeree. if on the other hand, the offeror was the plaintiff at ratlam, then it was communicated and received by the defendant at ramganj and the plaintiff received at ratlam the notification of the acceptance by the defendant. in either situation, the competent courts at ratlam and ramganj would both have jurisdiction to entertain the plaintiff's suit either because the offer was received there or because the acceptance was received and the contract was made there. the civil judge, first class, ratlam, has thus jurisdiction to entertain the suit, no matter whether the plaintiff or the defendant was the offeror. 13......
Judgment:
ORDER

P.V. Dixit, J.

1. The question raised in this revision petition is as to the jurisdiction of the Court of the Civil Judge, First Class, Ratlam, to try a suit instituted by the opponent for damages for breach of a contract to sell and deliver five wagons of Makka.

2. In his suit, the plaintiff has alleged that on 23-3-1955 the petitioner firm doing business at Ramganj Mandi, Rajasthan, made an offer to him on phone for the sale of five wagons of Makka at a certain rate; that the goods were to be delivered at Asarwa; and that subsequently the defendant failed to deliver the .stipulated Makka to the plaintiff-firm. On these allegations the plaintiff averred that the defendant had committed a breach of the contract and claimed damages to the extent of Es. 6,845-0-6. The plaintiff further pleaded that the contract was concluded in Ratlam and the payment in respect of the goods was also to be made in Ratlam and, therefore, the Ratlam Court had jurisdiction to try the suit. The defendant has admitted the contract. According to the defendant-firm, the offer was made by the plaintiff himself on phone; that the offer was accepted by the firm in Ramganj and the payment was also to be made in Ramganj; and that, therefore, the Ratlam Court had no jurisdiction to entertain the suit.

3. The Civil Judge, First Class, Ratlam, held that he had jurisdiction to entertain the suit as it was the defendant who made the offer from Ramganj and this offer was accepted by the plaintiff in Ratlam and that, therefore, the contract was concluded in Ratlam. He also found that the payment was to be made by the plaintiff to the defendant at Ramganj. But according to him as the contract was made at the place where the offer was accepted, namely, Ratlam, the suit had been properly filed in his Court, The defendant firm has now come up in revision to this Court.

4. It was urged by Mr. Chafekar, learned counsel for the petitioner, that even if the plaintiff's allegation that the offer was made by the defendant-applicant from Ramganj and was accepted by the plaintiff at Ratlam is accepted, the Ratlam Court would not have jurisdiction in this case of instantaneous communications as the contract was only complete when the acceptance was received by the defendant at Ramganj and that the contract was made at the place where the acceptance was received. Relying on Enfores, Ltd. v. Miles Far East Corporation, 1952-2 All ER 493, it was submitted that in this case as the parties negotiated over the telephone there was no binding acceptance until it had been received by the defendant at Ramganj, and as the contract could not, therefore, be said to have been made at Ratlam where the plaintiff received the offer and accepted it, the suit was not within the jurisdiction of the Ratlam Court.

In reply, Mr. Sanghi learned counsel for the opponent, contended that the making of an offer was a part of the cause of action and the offer was made where it was received; that in this case the offer was received by the plaintiff at Ratlam; and that, therefore, the cause of action arose within the jurisdiction of the Ratlam Court. In support of this contention, Mr. Sanghi relied on Premchand v. Moti Lall, AIR 1951 Bom 249; Baroda Oil Cakes Traders v. Par-shottarn, AIR 1954 Bom 491; Abroad Bux Alla Jovaya v. Fazal Karim, AIR 1940 Mad 49 and Clarke Brothers v. Knowles, 1918-1 KB 128.

5. In my opinion, the Court of the Civil Judge, First Class, Ratlam, has jurisdiction to entertain the plaintiff's suit. It is common ground that the contract was concluded on 23-3-1955 during the course of negotiations between the parties over a trunk-call. It is not necessary to consider whether, as the plaintiff alleged, the offer was made bv the defendant and it was accepted by the plaintiff or whether, as the defendant pleaded, it was the plaintiff who made the offer and he, that is the defendant, accepted it. For, whether the offer was made by one party or the other, in either case on the contentions advanced by the learned counsel appearing for the parties, Ratlam Court has jurisdiction to try the suit. Under Section 20(c), C.P.C. the accrual of a part of the cause of action is sufficient to give jurisdiction to the Court.

Now; there can be no doubt that an offer is a part of the cause of action (see Borthwick v. Walton, (1855) 24 LJCP 83 and Green v. Beach, (1873) 42 LJ Ex 151). Under Section 4 of the Contract Act, the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. If the offer is not complete unless and until it is communicated to the person to whom it is made, then it follows that the offer is completed not at the place from where it was sent but where it was received. In the instant case, if, as the plaintiff has alleged, it was the defendant who made the offer from Ramganj and it was received by him, that is the plaintiff, at Ratlam, then the offer was made at Ratlam where it came to the knowledge of the plaintiff. If, on the other hand, it was the plaitiff who made the offer from Ratlam and it came to the knowledge of the defendant at Ramganj, then the proposal was completed at Ramganj and not at Ratlam.

6. That the making of an offer is part of the cause of action and it is made where it is received and not at the place from where it was sent is a proposition which is supported by ample authority. In AIR 1954 Bom 491, the plaintiff sent a telegram from Baroda offering to purchase ground-nut cakes from the defendants who were residing and doing business at Kanpur; the defendants conveyed their acceptance to the plaintiff by a telegram despatched from Kanpur and the said acceptance reached the plaintiff at Baroda in due course. It was urged on behalf of the plaintiff that as the proposal had been sent from Baroda a part of the cause of action arose in Baroda. This contention was rejected by a Division Bench of the Bombay High Court holding that under Section 4 of the Contract Act the offer is made only when it is received. Gajendragadkar J. observed :

'The position under Section 4 is clear beyond doubt. A proposal which is made becomes complete only when its communication comes to the knowledge of the person to whom it is made. In other words, unless the proposal is communicated to the person to whom it is made, it is not complete, and in that sense is inchoate and inconclusive. If that be the position, the proposal can be said to have been made by the plaintiff to the defendants only when it comes to the knowledge of the defendants; and this incident takes place at Kanpur. that is to say, the proposal becomes complete at Kanpur and not at Baroda.'

In AIR 1940 Mad 49 also it was held that an offer is made at the place where it is received, and if it is made by post or telegram the place of despatch is not a material factor. To the same effect is the decision in AIR 1951 Bom 249. In all these cases, reliance has been placed on (1918) 1 KB 128. That was a case in which the plaintiffs carried on business at West Hartlepool. They bought from the defendant, who carried on business at Croydon, a quantity of glass and scrap wire. The contract was made entirely by correspondence through post.

When the defendant failed to deliver the goods, the plaintiffs instituted a suit in the West Hartlepool County Court. The question arose whether a part of the cause of action arose within the jurisdictions of the West Hartlepool County Court. By Section 74 of the County Courts Act 1888 it was provided that

'every action or matter.....may be commenced by leave of the Judge or Registrar......in the Court in the district which the cause of action or claim wholly or in part arose',

It was argued on behalf of the plaintiffs in that case that as the offer which the defendant accepted was made in a letter posted in West Hartlepool, part of the cause of action arose there. This contention was rejected by Lawrence J. by observing that

'the making of an offer is a part of the cause of action, but an offer is made where it is received, and that in this case was at Croydon',

Lush J. said :

'The material question is not where the offer was sent from but where it was made, and the making of the offer is proved by showing that it was received.'

On these authorities and on the provisions of Section 4 of the Contract Act itself, it cannot be doubted that if, as the plaintiff has alleged, the defendant made the offer from Ramganj, then the Court at Ratlam, where the offer was communicated and received by the plaintiff, has jurisdiction to entertain the suit.

7. The submission made by Mr. Chaphekar, learned counsel for the petitioner, that in this case of instantaneous communications where the parties negotiated over telephone the contract was only complete when the acceptance was received by the offerer and that it was made at the place where the acceptance was received is no doubt supported by the decision in 1955-2 All ER 493. That is the only case in which the question of the place where the contract is concluded when negotiations between the parties have been carried on over telephone or by Telex has been considered. In 1955-2 All ER 493 the plaintiffs were a London company and the defendants were an American Corporation with agents in Amsterdam.

Both the plaintiffs in London and the defendants' agents in Amsterdam had equipment known as 'Telex Service' whereby messages could be despatched by a teleprinter operated like a typewriter in one country and almost instantaneously received and typed in another. By this instrument the plaintiffs made an offer to the defendant agents to buy goods from them, and the latter accepted the offer. The plaintiffs alleged that the defendants had broken their contract and wished to serve a writ upon them. This they could do, although the defendants were an American Corporation with no branch in England, provided that the contract was made in England. The question arose whether under Order 11, Rule 1, R.S.C., the contract was made in London within the jurisdiction of English Court.

The plaintiffs contended that the contract was made in England and, therefore, came within R.S.C. Order 11, Rule 1, whereby the Court or a Judge may allow service of a writ outside the jurisdiction, where the action is one brought against a defendant for damages for breach of a contract made within the jurisdiction. The defendants said that the contract was not made in England but was made in Holland as they had accepted the offer in Holland. It was held by the Court of Appeal that the parties were in the same position as if they had negotiated in each other's presence or over the telephone; that there was no binding acceptance until it had been received by the plaintiffs, that this took place in London and the contract was made in England where the acceptance was received by the offerer. Explaining the necessity of applying the rule that acceptance is incomplete until received by the offerer in cases of contracts concluded during the course of conversation over the telephone, Denning, L. J. observed :

'Now take a case where two people make a contract by telephone. Suppose, for instance, that I make an offer to a man by telephone, and, in the middle of his reply, the line goes 'dead' so that I do not hear his words of acceptance. There is no contract at that moment. The other man may not know the precise moment when the line failed. But he will know that the telephone conversation was abruptly broken off, because people usually say something to signify the end of the conversation, If he wishes to make a contract, he must therefore get through again so as to make sure that I heard. Suppose next that the line does not go dead, but it is nevertheless so indistinct that I do not catch what he says and I ask him to repeat it. He then repeats it and I hear his acceptance. The contract is made, not on the first time when I do not hear, but only the second time when I do hear. If he does not repeat it, there is no contract. The contract is only complete when I have his answer accepting the offer.'

Parker L. J., after referring to the general rule that a binding contract is made at the place where the offerer receives notification of the acceptance, that is, where the offerer is, and after pointing out that where parties are at a distance and a contract is made through the post, the. balance of convenience dictates that the contract shall be deemed complete when the acceptance is handed to the Post Office, proceeded to say :

'Where, however, the parties are in each other's presence, or though separated in space, communication between them is in effect instantaneous, there is no need for any such rule of convenience. To hold otherwise would leave no room for the operation of the general rule that notification of the acceptance must be received. An acceptor could say : 'I spoke the words of acceptance in your presence, albeit softly and it matters not that you did not hear me'; or ; I telephoned to you and accepted and, it matters not that the telephone went dead and you did not get any message. Though in both these cases the acceptor was using the contemplated, or indeed the expressly indicated, mode of communication, there is no room for any implication that the offeror waived actual notification of the acceptance.'

8. It will be seen that in the case of 1955-2 All ER 493, the Court of Appeal did not treat contracts by instantaneous communications such as telephone or Telex in the same way as contracts by postal communications. It regarded a contract made by telephone or Telex as no different in principle from a contract negotiated by the parties in the actual presence of each other and, therefore, applied to the contract made therein by Telex the ordinary rule of the common law that the acceptance of an offer must be communicated to the offeror and the place where the contract is made is the place where the offerer receives notification of the acceptance by the offeror. The Court of Appeal declined to extend to contracts made by Telex the special rule governing contracts by post, that the contract is complete when the acceptance is handed over to the Post Office which is in effect the agent of the offeror for the purposes of communicating the acceptance.

9. The rule in England as laid down by this decision is, therefore, that in Telex or telephonic communications the parties arc to all intents and purposes in each other's presence and where a contract is negotiated by such instantaneous communications, there is no binding contract until notice of the acceptance is received by the offeror. Now, the important question is whether this rule can be ap-plied to contracts negotiated by telephone in India, which are governed by the Contract Act.

It has been held in numerous decisions that as the Act is not exhaustive, in cases where the terms of the Act do not apply the principles of English law, if applicable to Indian conditions, are applicable as rules of justice, equity and good conscience (see The Irrawaddy Flotilla Co. v. Bugwandas, 18 Ind App 121 and Jwaladutt v. Bansilal, 56 Ind App 174: AIR 1929 PC 132. When the terms of the Act apply, it is no doubt exhaustive so far as it goes (see Mohori Bibi v. Dhurmodas Ghose, ILR 30 Cal 539 (PC).) Therefore, when any matter cannot be brought within particular provisions of the Contract Act, then consistent with the provisions of the Act, it would be permissible to apply English principles in dealing with the matter.

10. In my judgment, so far as contracts negotiated by the parties in the actual presence of each other or by telephonic communications where they are for ail practical purposes virtually in each other's presence, are concerned, there can be no different rule in India. Under the Indian Contract Act also, a contract is concluded by the making of an offer and its acceptance. An offer is accepted when the acceptance is communicated (Section 3). Under Section 2(b) a proposal is said to be accepted when the person to whom it is made 'signifies his assent thereto.' This has to be read with the provisions of Section 4 as to when an acceptance is deemed to have been communicated in certain cases and of Section 7 as to an acceptance being absolute, unqualified and expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it has to be accepted.

Now, when the parties negotiate a contract orally in the presence of each other or over telephone and one of them makes an oral offer to the other, it is plain that an oral acceptance is expected, and the acceptor must ensure that his acceptance is audible, heard and understood by the offeror. The acceptance in such a case must be by such words which have the effect of communicating it. If the words of acceptance arc inaudible and have not been heard or understood by the offeror, then the acceptance is incomplete and no contract would be formed until the acceptor repeats his acceptance so that the offeror can hear it.

11. Section 4 of the Contract Act no doubt says that the communication of an acceptance is complete as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor, and as against the acceptor it is complete when it comes to the knowledge of the proposer. But it is obvious from the very language used in Section 4 about the completion of the communication of an acceptance that those provisions can have no applicability where the parties negotiate a contract in the presence of each other or over telephone. The object of 3s, 4 and 6 is to fix the point of time at which either party negotiating the contract is precluded from changing his mind, When the parties negotiate a contract face to face or over telephone, no question of revocation can possibly arise for in such instantaneous communications a definite offer is made and accepted at one and the same time.

But where the parties are at some distance and have to negotiate a contract by letter or messenger, there is necessarily an interval of time during which there is a possibility of the offeror as well as the acceptor changing his mind. Sections 4 to 6, therefore, are intended to fix the point of time at which either party is precluded from revoking the offer or acceptance. Section 4, when it speaks of the communication of an acceptance becoming complete as| against the proposer when it is put in course of transmission to him so as to be out of the power of the acceptor, and as against the acceptor when it comes to the knowledge of the proposer, necessarily contemplates two different points of time.

But it is easy to see that even on the application of the language of the material provisions of S. 4 to contracts negotiated personally or over telephone the communication of an acceptance is complete as against both the proposer and the acceptor almost if not completely at the same point of time. For acceptance by spoken words transmitted through, the medium permeating apace cannot be said to be 'effectually put in a course of transmission' to the proposer so as to be out of the power of the acceptor uttering the words of acceptance, unless they are loud enough to be audible to the proposer and are heard by him; and if the words of acceptance have been heard by the proposer, the acceptance comes to his knowledge.

Thus the effective emanation of acceptance from the acceptor and the proposer's knowledge of acceptance are instantaneous. There is thus no room for the applicability of the provisions of Section 4 relating to communication of acceptance to such contracts. In fact they were never intended to apply to contracts made by telephonic or by other modern methods of instantaneous communications, which unknown in 1872 when the Contract Act was enacted and were not in contemplation of the framers of the Act. If, as I think, the provisions of Section 4 about the completion of the communication of an acceptance cannot be applied to contracts made by telephone or by other communications which are virtually instantaneous, then the general rule that acceptance of an offer must be communicated to the offeror has to be followed in such contracts.

The application of this ordinary rule of law to contracts settled on telephone is in no way inconsistent with the provisions of the Contract Act or with the principles of justice, equity and good conscience. Nor does it lead to any strange and absurd results, In a contract negotiated orally by the parties in the presence of each other there can be no binding contract until the offeror receives the acceptance by hearing and understanding it. In contracts made by telephone, the parties are no doubt at a distance.

But communication is instantaneous and oral. The rule that acceptance is incomplete until received, heard and understood by the offeror would, therefore, govern contracts negotiated over the telephone no less than those settled in oral negotiations in the physical presence of the parties. If then a contract settled by telephone is complete only when the acceptance is received by the offerer, the place where the contract is made would clearly be the place where the acceptance is received.

12. The position then is that if the defendant made the offer from Ranganj, it came to the knowledge of the plaintiff at Ratlam and the defendant offeror received the notification of the acceptance at Ramganj by plaintiff-offeree. If on the other hand, the offeror was the plaintiff at Ratlam, then it was communicated and received by the defendant at Ramganj and the plaintiff received at Ratlam the notification of the acceptance by the defendant. In either situation, the competent courts at Ratlam and Ramganj would both have jurisdiction to entertain the plaintiff's suit either because the offer was received there or because the acceptance was received and the contract was made there. The Civil Judge, First Class, Ratlam, has thus jurisdiction to entertain the suit, no matter whether the plaintiff or the defendant was the offeror.

13. For these reasons, I am of the opinionthat the learned Civil Judge, First Class, Ratlamarrived at the right conclusion in holding that hehas jurisdiction to entertain the plaintiff's suit. Thisrevision petition is accordingly rejected. In the circumstances of the case I would leave the parties tobear their own costs.


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