Facts
On July 22nd 1959, Kedia Ginning Factory and Oil Mills (appellant) of Khamgaon entered into a contract over telephone to supply cotton seed cakes to M/s. Girdharilal Parshottamdas and Co. (respondents) of Ahmedabad.
- The respondents commenced an action against the appellant in the City Civil Court of Ahmedabad for failing to supply cotton seed cakes as per the aforementioned agreement.
- The City Civil Court of Ahmedabad held that it had jurisdiction as the acceptance of the offer was intimated to the offeree at Ahmedabad and that is where the contract was made.
The appellants filed a revision application in the High Court of Gujarat which was rejected. Then, the appellants preferred an appeal to the Supreme Court with special leave.
Law Points
- Sections 3 & 4 of ICA 1872
- The rule which determine the place, where contract is made
- Deals with communication , acceptance and revocation of proposals.
- Section 4 − —The communication of a
- proposal is complete when it comes to the knowledge of the person to whom it is made.
- Section 5 of ICA 1872 -Revocation of proposals and acceptances
- A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.
- An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.
- The respondents contended that the cause of action for the suit arose at Ahmedabad as the appellant’s offer to sell was accepted at Ahmedabad and the appellant was to be paid for the goods through a bank in Ahmedabad.
- The appellant contended that the respondents’ offer to purchase was accepted at Khamgaon; the delivery and payment of the goods were also agreed to be made in Khamgaon and the City Civil Court of Ahmedabad did not have jurisdiction to try the suit.
PRINCIPLES
- A contract unlike a tort is not unilateral.
- There should be meeting of minds for contract.
Entores Ltd. V. Miles Far East corporation [( 1955) 2 QB 327]
- The rule about instantaneous
communication ( telephone) −
- the contract is only complete when the acceptance is received by the offeror ( proposer) .
- Contract is made at the place where the acceptance is received
- Contract by post
- Acceptance is complete as soon as the letter is put into the post box.
- Place of acceptance is the place where contract is made .
- National savings bank association Hebbs’ case −
- The post was the common agent of both the parties
- The theory of expedition
- The acceptance was put in the course of transmission at Khamgaon and under the words of our statute I find it difficult to say that the contract was made at Ahmedabad where the acceptance was heard and not at Khamgaon where it was spoken
Judgement
The court held that the contract act does not expressly deal with the place where a contract has been made. As against cases of correspondence by post or telegram, in the present case of correspondence by a telephone, a contract was formed when acceptance was duly communicated to the offeror and hence at Ahmedabad.
