Full Judgment Text
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PETITIONER:
BHAGWANDAS GOVERDHANDAS KEDIA
Vs.
RESPONDENT:
M/S. GIRDHARILAL PARSHOTTAMDAS AND CO. ANDOTHERS
DATE OF JUDGMENT:
30/08/1965
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
WANCHOO, K.N.
HIDAYATULLAH, M.
CITATION:
1966 AIR 543 1966 SCR (1) 656
ACT:
Indian Contract Act, 1872, ss. 2, 3, 4-Contract when
complete-Offer and Acceptance by telephone-Acceptance
complete where spoken or where heard ?
HEADNOTE:
The respondents entered into a contract with the appellants
by longdistance telephone. The offer was spoken by the
respondent at Ahmedabad and the acceptance was spoken by the
appellants at Khamgaon. Alleging breach of the said
contract the respondents Mod a suit at Ahmedabad. On the
issue of jurisdiction raised by the appellants, the trial
court found that the Ahmedabad Court had jurisdiction to try
the suit. The High Court rejected the appellant’s revision
petition in limine whereupon by special leave, he came to
this Court.
HELD : (i) Making of an offer at a place which has been
accepted elsewhere does not form part of the cause of action
in a suit for damage-, for breach of contract. Ordinarily
it is the acceptance of offer and intimation of that
acceptance which result in a contract. The intimation must
be by same external manifestation which the law regards as
sufficient. [660 C-E]
Baroda Oil Cakes Traders v. Purshattam Naravandas and Anr.
I.L.R. [1954] Bom. 1137 and Sepulechre Brothers v. Sait
Khushal Das Jagjivan Das Mehta, I.L.R. [1942] Mad. 243,
referred to.
(ii) On the general rule that a contract is concluded when
an offer is accepted and acceptance is intimated to the
offerer, is engrafted an exception based on grounds of
convenience which has the merit not of logic or principle in
support, but of long acceptance by judicial decision. The
exception may be summarised as follows : When by agreement,
course of contract or usage of trade, acceptance by post or
telegram is authorised, the bargain is struck and the
contract is complete when the acceptance is put into a
course of transmission the offeree by posting a letter or
dispatching a telegram. [662 G-H]
(iii) The rule that applies to acceptance by post of
telegram does not however apply to contracts made by
telephone. The rule which applies to contracts by telephone
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is the ordinary rule which regards a contract as complete
only when acceptance is intimated to the purchaser. In the
case of a telephonic conversation in a sense the parties are
in the presence of each other, each party is able to hear
the voice of the other. ’Mere is an instantaneous
communication of speech intimating offer and -acceptance,
rejection and counter-offer. Intervention of an electrical
impulse which results in the instantaneous communication of
messages from a distance does not alter the nature of the
conversation so as to make it analogous to that of an offer
and acceptance through post or by Telegram. [664 A-B]
It is true that the Posts and Telegraphs Department has
general control over communication by telephone and
especially over long distance Telephones, but that is not a
ground for assuming that the analogy of a
657
contract made by post will govern this mode of making
contracts. In the case of correspondence by post or
telegraphic communication, a third agency intervenes and
without the effective intervention of that third agency,
letters or messages cannot be transmitted. In the case of a
conversation by telephone, once connection is established
there is in the normal course no further intervention of
another agency. Parties holding conversation on the
telephone are unable to see each other; they are also
physically separated in space, but they are in the hearing
of each other by the aid of a mechanical contrivance which
makes the voice of one heard by the other instantaneously
and communication does not depend on external agency. [664
D-E]
Emtores Ltd. v. Miles Far Eastern Corp. [1955] 2 Q.B.D. 327
relied on.
(iv) In the administration of the law of contracts the
courts in India have generally been guided by the rules of
English common law applicable to contracts, when no
statutory provision to the contrary is in force. The courts
in the former Presidency towns by the terms of their respec-
tive letters patents, and the courts outside the Presidency
towns by Bengal Regulation III of 1793, Madras Regulation 11
of 1802 and Bombay Regulation IV of 1837, and by diverse
Civil Courts Acts were enjoined in cases where no specific
rule existed to act according to ’law and equity’ in the
case of chartered High Courts and elsewhere according to
’justice, equity and good conscience’ which expressions have
been consistently interpreted to mean the rules of English
common law, so far as they are applicable to the Indian
Society and circumstances. [664 G-H]
(v) The draftsmen of the Indian Contract Act did not
envisage use of the telephone as a means of conversation
between parties separated in space and could not have
intended to make any rule in that behalf. The trial Court
wag right in the view which it took 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 the plaintiffs. [666 D-F]
Per Hidayatullah, J. (dissenting) (i) In the Entores case
Lord Denning no doubt held that acceptance given by
telephone was governed by the principles applicable to oral
acceptance where the parties were in the presence of each
other and that the analogy of letters sent by post could not
be applied. But the Court of Appeal was not called upon to
construe a written law which brings in the inflexibility of
its own language. It was not required to construe the words
found in s. 4 of the Indian Contract Act, namely, "The
communication of an acceptance is complete as against the
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proposer when it is put in a course of transmission to him,
so as to be out of the power of the acceptor." [667 C-F]
Entores Ltd. v. Miles Far East Corporation. [1955] 2 Q.B.D.
327, distinguished.
(ii) The law under consideration was framed at a time when
telephone, wireless, Telstar and Early Bird were not
contemplated. If time has marched and inventions have made
it easy to communicate instantaneously over long distance
and the language of our law does not fit the new conditions
it can be modified to reject the old principles. But it is
not possible to go against the language by accepting an
interpretation given without considering the language of our
Act. [681 H]
(iii) The language of s. 4 of the Indian Contract Act,
covers a case of communication over the telephone. Our Act
does not provide separately for post, telegraph, telephone,
or wireless. Some of these were unknown in 1872 and no
attempt has been made to modify the law. it may be presumed
that the language has been considered adequate to,
658
cover cases of these new inventions. It is possible today
not only to speak on the telephone but to record the spoken
words on a tape and it is easy to prove that a particular
conversation took place. Telephones now have television
added to them. The rule about lost letters of acceptance
was made out of expediency ’because it was easier in com-
mercial circles to prove the dispatch of letters but very
difficult to disprove a statement that the letter was not
received. If the rule suggested on behalf of the plaintiffs
is accepted it would put a very powerful defence in the
hands of the proposer if his denial that he heard the speech
could take awry the implications of our law that acceptance
is complete -as soon as it is put in course of transmission
to the proposer. [681 D-G]
(iv) Where the acceptance on telephone is not heard on
account of mechanical defects there may be difficulty in
determining whether at all a contract results. But where
the speech is fully heard and understood there is It bindin
contract, and in such a case the only question is -.is to
the place where the contract can be said to have taken
peace. [678 G-H]
(v) In the present case both sides admitted that the
acceptance was clearly heard -,it Ahmedabad. The acceptor
was in a position to say that the communication of the
acceptance in so far as he was concerned was complete when
he (the acceptor) put his acceptance in transmission to him
(the proposer) as to be out of his (the acceptor’.,,,) power
of recall in terms of s. 4 of the Contract Act. It was
obvious that the word of acceptance was spoken at Khamgaon
and the moment the acceptor spoke his acceptance he put it
in course of transmission lo the proposer beyond his recall.
He could not revoke acceptance thereafter. It may be that
the gap of time was so short that one can say that the
speech was heard instantaneously, but if we are to put new
inventions into the frame of our statutory law we are bound
to say that the acceptor by speaking into the telephone put
his acceptance in the resource of transmission to the
proposer. [680 E-H]
The contract was therefore made at Khamaon and not
Ahmedabad,
Case-law considered.
JUDGMENT:
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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 948 of 1964.
Appeal by special leave from the judgment and order dated
July 24, 1964 of the Gujarat High Court in Civil Revision
Application No. 543 of 1964.
A. V. Viswanatha Sastri, Bishan Narain, S. Murthy and B. P.
Maheshwari, for the appellant.
G. B. Pai, J. B. Dadachanji, O. C. Mathur and Ravinder
Narain, for the respondents.
The Judgment of Wanchoo and Shah, JJ. was delivered by Shah,
J. Hidayatullah, J. delivered a dissenting Opinion.
Shah, J. Messrs Girdharilal Parshottamdas & Company-
hereinafter called "the plaintiffs"-commenced an action in
the City Civil Court at Ahmedabad against the Kedia Ginning
Factory Oil Mills of Khamgaon-hereinafter called "the
defendants" for
659
a decree for Rs. 31,150/- on the plea 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 on long
distance telephone. The plaintiffs submitted that the cause
of action for the suit arose at Ahmedabad, because the
defendants had offered to sell cotton seed cake which offer
was accepted by the plaintiffs at Ahmedabad, and also
because the defendants were under the contract bound to
supply the goods at Ahmedabad, and the defendants were to
receive payment for the goods through a Bank at Ahmedabad.
The defendants contended that the plaintiffs had by a
message communicated by telephone offered to purchase cotton
seed cake. and they (the defendants) had accepted the offer
at Khamgaon, that under the contract delivery of the goods
contracted for was to be made at Khanigaon. price was also
to be paid at Khamgaon and that no part of the cause of
action for the suit had arisen within the territorial
jurisdiction of the City Civil Court Ahemedabad.
On the issue of jurisdiction, the Trial Court found that the
plaintiffs had made an offer from Ahemedabad by long
distance telephone to the defendants to purchase the goods
and that the defendants had accepted the offer at Khamgaon,
that the goods were under the contract to be delivered at
Khamgaon and that payment was also to be made at Khamgaon.
The contract was in the view of the Court to be performed at
Khamgaon, and because of the offer made from Ahemedabad to
purchase goods the Court at Ahemedabad could not be invested
with jurisdiction to entertain the suit. But the Court held
that when a contract is made by conversation on telephone,
the place where acceptance of offer is intimated to the
offeror, is the place where the contract is made, and
therefore the Civil Court at Ahmedabad had jurisdiction to
try the suit. A revision application filed by-the
defendants against the order, directing the suit to proceed
on the merits, was rejected in limine by the High Court of
Gujarat. Against the order of the High Court of Gujarat,
this appeal has been -preferred with special leave.
The defendants contend that in the 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
Court alone has jurisdiction within the territorial
jurisdiction of which the offer is accepted and the
acceptance is spoken into the telephone instrument. It is
submitted that the rule which determines the place where a
contract is made is determined by ss. 3 & 4 of the Indian
Contract Act. and applies uniformly whatever may be the mode
660
employed for putting the acceptance into a course of
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transmission, and that the decisions of the Courts in the
United Kingdom, dependent not upon express statutory
provisions but upon the somewhat elastic rules of common
law, have no bearing in determining this question. The
plaintiffs on the other hand contend that making of an offer
is a part of the cause of action in a suit for damages for
breach of contract, and the suit lies in the court within
the jurisdiction of which the offeror has made the offer
which on acceptance has resulted into a contract.
Alternatively, they contend that intimation of acceptance of
the offer being essential to the formation of a contract,
the contract takes place where such intimation is received
by the offeror. The first contention raised by the
plaintiff is without substance. Making of an offer at a
place which has been accepted elsewhere does not form part
of the cause of action in a suit for damages for breach of
contract. Ordinarily it is the acceptance of offer and
intimation of that acceptance which result in a contract.
By intimating an offer, when the parties are not in the
presence of each other, the offeror is deemed to be making
the offer continuously till the offer reaches the offeree.
The offeror thereby merely intimates his intention to enter
into a contract on the terms of the offer. ’Me’ offeror
cannot impose upon the offeree an obligation to accept, nor
proclaim that silence of the offeree shall be deemed
consent. A contract being the result of an offer made by
one party and acceptance of that very offer by the other,
acceptance of the offer and intimation of acceptance by some
external manifestation which the law regards as sufficient
is necessary.
By a long and uniform course of decisions the rule is well-
settled that mere making of an offer does not form part of
the cause of action for damages for breach of contract which
has resulted from acceptance of the offer: see Baroda Oil
Cakes Traders v. Purshottam Narayandas Bagulia and Anr(1).
The view to the contrary expressed by a single Judge of the
Madras High Court in Sepulchre Brothers v. Sait Khushal Das
Jagjivan Das Mehta ( 2 ) cannot be accepted as correct.
The principal contention raised by the defendants raises a
problem of some complexity which must be approached in the
light of the relevant principles of the common law and
statutory provisions contained in the Contract Act. A
contract unlike a tort is not unilateral. If there be no
"meeting of minds" no contract may result. There should
therefore be an offer by one party, express or implied, and
acceptance of that offer by the
(1) I.L.R. [1954] Bom. 1137.
(2) I.L.R. [1942] Mad. 243.
661
other in the same sense in which it was made by the other.
But an agreement does not result from a mere state of mind :
intent to accept an offer or even a mental resolve to accept
an offer does not give rise to a contract. There must be
intent to accept and some external manifestation of that
intent by speech, writing or other act, and acceptance must
be--communicated to the offeror, unless he has waived such
intimation, or the course of negotiations implies an
agreement to the contrary.
The Contract Act does not expressly deal with the place
where a contract is made. Sections 3 & 4 of the Contract
Act deal with the communication, acceptance and revocation
of proposals. By s. 3 the communication of a proposal,
acceptance of a proposal, and revocation of a proposal and
acceptance, respectively, are deemed to be made by any act
or omission of the party proposing, accepting or revoking,
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by which he intends to communicate such proposal, acceptance
or revocation, or which has the effect of communicating it.
Section 4 provides :
"The communication of a proposal is complete
when it comes to the knowledge of the person
to whom it is made.
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;
as against the acceptor, when it comes to the
knowledge of the proposer.
The communication of a revocation is complete-
as against the person who makes it, when it is
put into a course of transmission to the
person to whom it is made, so as to be out of
the power of the person who makes it;
as against the person to whom it is made, when
it comes to his knowledge."
In terms s. 4 deals not with the place where a contract
takes place, but with the completion of communication of a
proposal, acceptance and revocation. In determining the
place where a contract takes place, the interpretation
clauses in s. 2 which largely incorporate the substantive
law of contract must be taken into account. A person
signifying to another his willingness to or to abstain from
doing anything, with a view to obtaining
66 2
the assent of that other to such act or abstinence is said
to make a proposal : cl. (a). When the person to whom the
proposal is made signifies his assent thereto, the proposal
is said to be accepted. A proposal when accepted, becomes a
promise: cl. (b), and every promise and every set of
promises, forming the consideration for each other is an
agreement: cl. (e). An agreement enforceable at law is a
contract: cl. (k). By the second clause of s. 4 the
communication of an acceptance is complete as against the
proposer, when it is put in a course of transmission to him,
so a,, to be out of the power of the acceptor. This implies
that where communication of an acceptance is made and it is
put in a course if transmission to the proposer, the
acceptance is complete as against the proposer : as against
the acceptor, it becomes complete when it comes to the
knowledge of the proposer. In the matter of communication
of revocation it is provided that as against the person who
makes the revocation it becomes complete when it is put into
a course of transmission to the person to whom it is made,
so as to be out of the power of the person who makes it, and
as against the person to whom it is made when it comes to
his knowledge. But s. 4 does not imply that the contract is
made qua the proposer at one place and qua the acceptor at
another place. The contract becomes complete as soon as the
acceptance is made by the acceptor and unless otherwise
agreed expressly or by necessary implication by the adoption
of a special method of intimation, when the acceptance of
offer is intimated to the offeror.
Acceptance and intimation of acceptance of offer are there-
fore both necessary to result in a binding contract. In the
case of a contract which consists of mutual promises, the
offeror must receive intimation that the offeree has
accepted his offer and has signified his willingness to
perform his promise. When parties are in the presence of
each other, the method of communication will, depend upon
the nature of the offer and the circumstances in which it is
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made. When an offer is orally made, acceptance may be
expected to be made by an oral reply, but even a nod or
other act which indubitably intimates acceptance may
suffice. If the offeror receives no such intimation. even
if the offeree has resolved to accept the offer, a contract
may not result. But on this rule is engrafted an exception
based on grounds of convenience which has the merit not of
logic or principle in support, but of long acceptance by
judicial decisions. If the parties are not in the presence
of each other, and the offeror has not prescribed a mode of
communication of acceptance, insistence upon communication
of acceptance of the offer by the offeree would be found
663
to be inconvenient, when the contract is made by letters
sent by post. In Adams v. Lindsell(1) it was ruled as early
as in 1818 by the Court of King’s Bench in England that the
contract was complete as soon as it was put into
transmission. In Adams’s case(1) the defendants wrote a
letter to the plaintiff offering to sell a quantity of wool
and requiring an answer by post. The plaintiff accepted the
offer and posted a letter of acceptance, which was delivered
to the defendants nearly a week after they had made their
offer. The defendants however sold the goods to a third
party, after the letter of acceptance was posted but before
it was received by the defendants. The defendants were held
liable in damages. The Court in that case is reported to
have observed that "if the defendants were not bound by
their offer when accepted by the plaintiffs till the answer
was received, they the plaintiffs ought not to be bound till
after they had received the notification that the defendants
had received their answer and assented to it. And so it
might go on ad infinitum. The rule Adam’s case(1) was
approved by the House of Lords in Dunlop and others v.
Vincent Higgins and others(1). The rule was based on
commercial expediency, or what Cheshire calls "empirical
grounds". It makes a large inroad upon the concept of
consensus, "a meeting of minds" which is the basis of
formation of a contract. It would be futile however to
enter upon an academic discussion, whether the exception is
justifiable in strict theory, and acceptable in principle.
The exception has long been recognised in the United Kingdom
and in other countries where the law of contracts is based
on the common law of England. Authorities in India also
exhibit a fairly uniform trend that in case of negotiations
by post the contract is complete when acceptance of the
offer is put into a course of transmission to the offeror :
see Baroda Oil Cakes Traders’ case(1) and cases cited
therein. A similar rule has been adopted when the offer and
acceptance are by telegrams. The exception to the general
rule requiring intimation of acceptance may be summarised as
follows. When by agreement, course of conduct, or usage of
trade, acceptance by post or telegram is authorised, the
bargain is struck and the contract is complete-when the
acceptance is put into a course of transmission by the
offeree by posting a letter or dispatching a telegram.
The defendants contend that the same rule applies in the
case of contracts made by conversation on telephone. The
plaintiffs
(1) 1 B. & Ald. 681.
(2) 1 H.L.C. 381.
(3) I.L.R. [1954] Bom. 1137.
p/65.14
6 64
contend that the rule which applies to those contracts is
the ordinary rule which regards a contract as complete only
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when acceptance is intimated to the proposer. In the case
of a telephonic conversation, in a sense the parties are in
the presence of each other : each party is able to hear the
voice of the other. There is instantaneous communication of
speech intimating offer and acceptance, rejection or
counter-offer. Intervention of an electrical impulse which
results in the instantaneous communication of messages from
a distance does not alter the nature of the conversation so
as to make it analogous to that of an offer and acceptance
through post or by telegraph.
It is true that the Posts & Telegraphs Department has
general control over communication by telephone and
especially long distance telephones, but that is not a
ground for assuming that the analogy of a contract made by
post will govern this mode of making contracts. In the case
of correspondence by post or telegraphic communication, a
third agency intervenes and without the effective
intervention of that third agency, letters or messages
cannot be transmitted. In the case of a conversation by
telephone, once a connection is established there is in the
normal course no further intervention of another agency.
Parties holding conversation on the telephone are unable to
see each other : they are also physically separated in
space, but they are in the hearing of each other by the aid
of a mechanical contrivance which makes the voice of one
heard by the other instantaneously, and communication does
not depend upon an external agency.
In the administration of the law of contracts, the Courts in
India have generally been guided by the rules of the English
common law applicable to contracts, where no statutory
provision to the contrary is in force. The Courts in the
former Presidency towns by the terms of their respective
letters patents, and the courts outside the Presidency towns
by Bengal Regulation III of 1793, Madras Regulation II of
1802 and Bombay Regulation TV of 1827 and by the diverse
Civil Courts Act were enjoined in cases where no specific
rule existed to act according to "law or equity" in the case
of chartered High Courts and else, where according to
justice, equity and good conscience-which expressions have
been consistently interpreted to mean the rule, of English
common law, so far as they are applicable to the Indian
society and circumstances.
665
In England the Court of Appeal has decided in Entores Ltd.
v. Miles Far East Corporation(1) that:
"where a contract is made by instantaneous
communication, e.g. by telephone, the contract
is complete only when the acceptance is
received by the offeror, since generally an
acceptance must be notified to the offeror to
make a binding contract;"
In Entores Ltd’s case(") the plaintiff made an offer from
London by Telex to the agents in Holland of the defendant
Corporation, whose headquarters were in New York, for the
purchase of certain goods, and the offer was accepted by a
communication received on the plaintiff’s Telex machine in
London. On the allegation that breach of contract was
committed by the defendant Corporation, the plaintiff sought
leave to serve notice of a writ on the defendant Corporation
in New York claiming damages for breach of contract. The
defendant Corporation contended that the contract was made
in Holland. Denning L. J., who delivered the principal
judcment of the Court observed at p. 332
"When a contract is made by post it is clear
law throughout the common law countries that
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the acceptance is complete as soon as the
letter is put into the post box, and that is
the place where the contract is made. But
there is no clear rule about contracts made by
telephone or by Telex. Communications by
these means are virtually instantaneous and
stand on a different footing.",
and after examining the negotiations made in a contract
arrived at by telephonic conversation in different stages,
Denning L. J., observed that in the case of a telephonic
conservation the contract is only complete when the answer
accepting the offer was made and that the same rule applies
in the case of a contract by communication by Telex. He
recorded his conclusion as, follows :
"that the rule about instantaneous
communications between the parties is
different from the rule about the post. The
contract is only complete when the acceptance
is received by the offeror : and the contract
is made at the place where the acceptance is
received."
It appears that in a large majority of European countries
the rule based on the theory of consensus ad idem, is that a
contract
(1) [1955] 2 Q.B.D. 327.
666
takes place where the acceptance of the offer is
communicated to the offeror, and no distinction is made
between contracts made by post or telegraph and by telephone
or Telex. In decisions, of the State Courts in the United
States, conflicting views have been expressed, but the
generally accepted view is that by "the technical law of
contracts the contract is made in the district where the
acceptance is spoken". This is based on what is called "the
deeply rooted principle of common law that where the parties
impliedly or expressly authorise a particular channel of
communication, acceptance is effective when and where it
enters that channel of communication." In the text books
there is no reference to any decision of the Supreme Court
of the United States of America on this question : America
Jurisprudence, 2nd Edn., Vol. 17, Art. 54 p. 392 and
Williston on Contracts, 3rd Edn. Vol. 1 p. 271.
Obviously the draftsman of the Indian Contract Act did not
envisage use of the telephone as a means of personal
conversation between parties separated in space, and could
not have :intended to make any rule in that behalf. The
question then is -whether the ordinary rule which regards a
contract as completed ,only when acceptance is intimated
should apply, or whether the exception engrafted upon the
rule in respect of offers and acceptances by post and by
telegrams is to be accepted. If regard be had to the
essential nature of conversation by telephone, it would be
reasonable to hold that the parties being in a sense in the
presence of each other, and negotiations are concluded by
instantaneous communication of speech, communication of
acceptance is a necessary part of the formation of contract,
and the exception to the rule imposed on grounds of
commercial expediency is inapplicable
The trial Court was therefore right in the view which it has
taken 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 the plaintiffs.
The appeal therefore fails and is dismissed with costs.
Hidayatullah, J. Where and when is the communication of an
acceptance complete under the Indian Contract Act, when
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parties complete their contract by long distance telephone ?
On the answer to this question depends the jurisdiction of
the court trying the suit giving rise to this appeal. A
contract was made ,on the telephone and the proposer
complains of its breach by the acceptor. We are hardly
concerned with the terms of the
667
contract and they need not be mentioned. At the time of the
telephonic conversation the proposers who are plaintiffs in
the suit (respondents here) were at Ahmedabad and the
acceptor, who is the defendant (appellant here), was at
Khamgaon in Vidarbha. The plaintiffs’ suit has been
instituted at Ahmedabad. If the acceptance was complete and
contract was made when the appellant spoke into the
telephone at Khamgaon, the Ahamedabad court would lack
jurisdiction to try the suit. It would, of course, be
otherwise if the acceptance was complete only on the
reception of the speech at Ahmedabad and that was the place
where the contract was made.
The rules to apply in our country are statutory but the Con-
tract Act was drafted in England and the English Common law
permeates it; however, it is obvious that every new
development of the Common law in England may not necessarily
fit into the scheme and the words of our statute. If the
language of our enactment creates a non-possumus adamant
rule, which cannot be made to yield to any new theories held
in foreign courts our clear duty will be to read the statute
naturally and to follow it. The Court of Appeal in England
in Entores Ltd. v. Miles Far East Corporation(1) held that a
contract made by telephone is complete only where the
acceptance is heard by the proposer (offeror in English
Common law) because generally an acceptance must be notified
to the proposer to make a binding contract and the contract
emerges at the place where the acceptance is received and
not at the place where it is spoken into the telephone. In
so deciding, the Court of Appeal did not apply the rule
obtaining in respect of contracts by correspondence or
telegrams, namely, that acceptance is complete as soon as a
letter of acceptance is put into the post box or a telegram
is handed in for dispatch, and the place of acceptance is
also the place where the contract is made. On reading the
reasons given in support of the decision and comparing them
with the language of the Indian Contract Act I am convinced
that the Indian Contract Act does not admit our accepting
the view of the Court of Appeal.
Sir William Anson compared the proposal (offer in English
Common law) to a train of gun-powder and the acceptance to a
lighted match. This picturesque description shows that
acceptance is the critical fact, even if it may not explain
the reason underlying it. It is, therefore, necessary to
see why the rule about acceptance by post or by telegram was
treated as a departure from he general rule of law that
acceptance must be communicated
(1) [1955] 2 Q.B.D. 327.
668
The rule about acceptance by post or telegram is adopted in
all countries in which the English Common law influence is
felt and in many others and, as will be shown later, the
Indian Contract Act gives statutory approval to it. That
rule is that a contract is complete when a letter of
acceptance, properly addressed and stamped is posted, even
if the letter does not reach the destination or having
reached it is not read by the proposer. The same principle
applies to telegrams. See Cowan v. O ’Conner(1), Tinn v.
Hoffman & Co.(1). The first question is whether the general
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rule or the special rule applies to contracts made on the
telephone and the second what is the position under the
Indian Contract Act. The answer to the first question is
that there is difference of opinion in the countries of the
world on that point and to the second that the Indian
Contract Act does not warrant the acceptance of the decision
in the Entores case(1). To explain the true position, as I
understand it, I may start from the beginning.
A contract is an agreement enforceable by law and is the
result of a proposal and acceptance of the proposal. The
proposal when accepted becomes a promise. Now it may be
conceded, that, as Bowen L. J. said in Carlill v. Carbolic
Smoke Ball Co.(1)
"........as an ordinary rule of law an
acceptance of an offer made ought to be
notified to the person who makes an offer, in
order that the two minds may come together".
or, as Anson puts it, acceptance means in general a communi-
cated acceptance. This is the English Common law rule and
is also accepted in the United States, Germany and France.
The communication must be to the proposer himself unless he
expressly or impliedly provides that someone else may
receive it. According to our law also (s. 7) in order to
convert a proposal into a promise the acceptance must be
absolute and unqualified and in the manner prescribed or in
some usual and reasonable manner. The intention to accept
must be expressed by some act or omission of the party
accepting. It must not be a mental acceptance proportion in
mention retentum-though sometimes silence may be treated as
acceptance. Section 3 of our Act says that the com-
munication of acceptance is deemed to be made by an act or
omission of the party by which he intends to communicate
such acceptance or which has the effect of communicating it.
(1) [1888] 20 Q.B.D. 640.
(3) [1955] 2 Q.B.D. 327.
(2) (1873) 29 L.T. 271, 274, 278.
(4) (1893)1 Q.B.D. 256 at 269.
669
The difficulty arises because proposals and acceptances may
be in praesentes or inter absentes and it is obvious that
the rules must vary. In acceptance by word of mouth, when
parties are face to face, the rule gives hardly any trouble.
The acceptance may be by speech, or sign sufficiently
expressive and clear to form a communication of the
intention to accept. The acceptance takes effect instantly
and the contract is made at the same time and place. In the
case of acceptance inter absentes the communication must be
obviously by some agency. Where the proposer prescribes a
mode of acceptance that mode must be followed. In other
cases a usual and reasonable manner must be adopted unless
the proposer waives notification. Cases in the last
category are offers of reward for some service (such as
finding a lost purse or a stray dog (Williams v. Carwardine)
(1) or fulfilling some condition, such as trying a medicine
(Carlill v. Carbolic Smoke gall Co.-supra). The offer being
to the whole world, the acceptance need not be notified and
the contract is made when he condition is fulfilled.
Then come cases of acceptance by post, telegraph, telephone,
wireless and so on. In cases of contracts by correspondence
or telegram, a different rule prevails and acceptance is
complete as soon as a letter of acceptance is posted or a
telegram is handed on for dispatch. One way to describe it
is that acceptance is complete as soon as the acceptor puts
his acceptance in the course of transmission to the proposer
so as to be beyond his power to recall. Acceptance by post
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or telegram is considered a usual mode of communication and
it certainly is the most often allowed. But letters get
lost or miscarried and telegrams get grabled. What should
happen if the letter got lost in the post or the telegraphic
message got mutilated or miscarried ? It was held as early
as 1813 in Adams v. Lindsell(1) that even in such a
contingency acceptance must be taken to be complete as soon
as the letter is posted and not when it is delivered. It
was observed :
"For if the defendant were not bound by their
offer when accepted by the plaintiffs till the
answer was received, then the plaintiffs ought
not to be bound till after they had received
the notification that the defendants had
received their answer and assented to it; and
so it might go on ad infinitum".
of course, if it is contemplated that the acceptance will be
by post, what more can the acceptor do than post the letter
? The
(1) 4 B &A 621.
(2) [1813] 106 E.R. 250.
670
above question was asked by Lord Cottenham in Dunlop v.
Higgins(1) and the Lord Chancellor also asked the question :
How can he be responsible for that over which he had no
control ?"
Dunlop v. Higgins(1) is the leading case in English Common
law and it was decided prior to 1872 when the Indian
Contract Act was enacted. Till 1872 there was only one case
in which a contrary view was expressed (British and American
Telegraph Co. v. Columbus)(1) but it was disapproved in the
following year in Harris’ case(3) and the later cases have
always taken a different view to that in Colson’s case. In
Henthorn v. Fraser (4) , Lord Hescehell considered that
Colson’s case must be considered to be overruled. Earlier
in 1879 4 Ex. D. 216 (Household Fire Insurance Co. v.
Grant) Bramwell L.J. was assailed by doubts which were
answered by Thesiger L.J. in the same case :
"A contract complete on the acceptance of an
offer being posted but liable to being put an
end to by any accident in the post, would be
more mischievous than a contract only binding
on the parties upon the acceptance actually
reaching the offeror. There is no doubt that
the implication of a complete, final and
absolutely binding contract being formed as
soon as the acceptance of an offer is posted
may in some cases lead to hardship but it is
difficult to adjust conflicting rights between
innocent parties. An offeror, if he chooses,
may always make the formation of the contract
which he proposes, dependent on the actual
communication to himself of the acceptance.
If he trusts to the post, and if no answer is
received, he can make enquiries of the person
to whom the offer was addressed.......... On
the other hand if the contract is not finally
concluded except in the event of the
acceptance actually reaching the offeror, the
door would be opened to the perpetration of
fraud; besides there would be considerable
delay in commercial transactions; for the
acceptor would never be entirely safe in
acting upon his acceptance until he had
received notice that his letter of acceptance
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has reached its destination."
2,2
(1) (1948) 9 E.R. 805.
(3) (1872) L.J.C. 625.
(2) (1871) 6 Ex. 108.
(4) (1892) 2 Ch. 27.
671
It is hardly necessary to multiply examples.
It is sufficient to point out that Lord
Denning (then Lord Justice) in the Entores
case also observes :
"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."
Although Lord Romilly M.R. in Hebbs’ case(1) said that the
post office was the "common agent" of both parties, in the
application of this special rule the post office is treated
as the agent of the proposer conveying his proposal and also
as his agent for receiving the acceptance. The principles
which underline the exceptional rule in English Common law
are:
(i) the post office is the agent of the
offeror to deliver the offer and also to
receive the acceptance;
(ii) no contract by post will be possible, as
notification will have to follow notification
to make certain that each letter was duly
delivered;
(iii) satisfactory evidence of posting the
letter is generally available;
(iv) if the offeror denies the receipt of the
letter it would be very difficult to disprove
his negative; and
(v) the carrier of the letter is a third
person over whom the acceptor has no control.
It may be mentioned that the law in the United States is
also the same. In the American Restatement (Contract : _
74) it is stated that a contract is made at the time when
and the placewhere the last act necessary for its formation
is performed. In the Volume on Conflict of laws, _ 326
reads :
"When an offer for a bilaterial contract is
made in one state and an acceptance is sent
from another state to the first state in an
authorized manner the place of contracting is
as follows :-
(a) if the acceptance is sent by an agent of
the acceptor, the place of contracting is the
state where the agent delivers it;
(1) (1857) L.R. 4 Eq. 9,12.
672
(b) if the acceptance is sent by any other
means, the place of contracting is the state
from which the acceptance is sent."
Comment on these clauses is
"(a) When acceptance is authorized to be sent
by mail, the place of contracting is where the
acceptance is mailed.
(b) When an acceptance is to be sent by
telegraph, the place of contracting is where
the message of acceptance is received by the
telegraph company for transmission."
Professor Winfield (writing in 1939) said that this rule
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prevailed in Canada, South Africa, New South Wales. Dealing
with the European countries he said that three systems are
followed : (1) -the system of Information under which the
offeror must be notified and the contract is formed only
when the offeror is so informed. This prevailed in Belgium,
Italy, Spain, Roumania, Bulgaria and Portugal; (2) The
system of declaration, under which the contract is formed
from the moment when the recipient of the offer declares his
acceptance, even without the knowledge of the offeror. This
system is divided into three theories :
"(i) theory of declaration stricto sensu, that
is to say, declaration alone is sufficient;
(ii) theory of expedition, that is to say,
the sending of the acceptance by post is
enough though not a bare declaration;
(iii) theory of reception that is to say, the
reaching of the letter is the decisive factor
whether the letter is read or not.
The theory of reception as stated here is accepted in
Germany Austria, Czechoslovakia, Sweden, Norway, Denmark,
Poland and the U.S.S.R. Prof. Winfield however, concludes :
"But the greater majority of states accept
either the theory of declaration stricto sensu
or the theory of expedition. Among many
others Dr. de Visscher (in his article in
Revue de Droit International (1938) "Du
moments de lieu de formation yes contracts par
correspondence en adroit international prive")
mentions Brazil, Egypt, Spain (Commercial
Code), Japan, Morocco, Mexico........
France.......... in
673
1932.......... decided in favour of expedition
theory."
(3) The mixed or Electric system : In this the contract is
formed when the acceptance is received but it relates back
to the time when the acceptance was sent.
We now come to the question of telephone. Prof. Winfield
expressed the opinion that the rule which has been accepted
for letters and telegrams should not be extended to
communications by telephone. He favoured the application of
the general rule that an acceptance must be communicated.
He asked a question if the line is in such bad working order
that the offeror hears nothing and if the parties get in
touch again and the offer is cancelled before it is
accepted, will there be a contract? He answered :
"It is submitted that there is no
communication until the reply actually comes
to the knowledge of the offeror. In the
first place, the telephone is much more like
conversation face to face than an exchange of
letters ............ the risk of mistake over
the telephone is so great compared to written
communications that businessmen would demand
or expect a written confirmation of what is
said over the telephone."
In this opinion Professor Winfield found
support in the American Restatement (Contract
: _ 65)
"Acceptance given by telephone is governed by
the principles applicable to oral acceptance
where the parties are in the presence of each
other;"
but he conceded that the decided cases in the
United States are to the contrary. Williston
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(Contracts) at p. 238 gives all of them. In
the decided cases the analogy of post and
telegraph is accepted for telephones and it is
observed :
"The point decided by these cases related to
the place of a contract rather than its
existence, but the decision that the place
where the acceptor speaks is the place of the
contract necessarily involves the conclusion
that it is the speaking of the acceptor, not
the hearing of the offeror which completes the
contract." (See Traders G. Co. v. Arnold P.
Gin Co.-Tex Civ. App. 225 S.W. 2d. 1011).
No doubt the decided cases are of the State courts but it is
hardly of be expected that a decision on such a point from
the Supreme
67 4
Court of the United States would be easily available. The
Swiss Federal Code of obligations, it may be mentioned,
provides (Art. 4) "Contracts concluded by telephone are
regarded as made between parties present if they or their
agents have been personally in communication."
Williston whose revised edition (1939) was available to Dr.
Winfield, observed that a contract by telegram suggested
analogies to a contract by correspondence but a contract
over the telephone was more analogous to parties addressing
each other in praesentes and observed :
"A contract by telephone presents quite as
great an analogy to a contract made when the
parties are orally addressing one another in
each other’s presence. It has not been
suggested that in the latter case the offeror
takes the risk of hearing an acceptance
addressed to him. The contrary has been
held.......... If then it is essential that
the offeror shall hear what is said to him, or
at least be guilty of some fault in not
hearing, the time and place of the formation
of the contract is not when and where the
offeror speaks, but when and where the offeror
hears or ought to hear and it is to be hoped
that the principles applicable to contracts
between parties in the presence of each other
will be applied to negotiations by telephone."
The Entores case fulfilled the hope expressed
by Williston and Professor Winfield. Before I
deal with that case I may point out that in
Canada in Carrow Towing Co. v. The Ed My
Williams(1),
it was held, as the headnote correctly
summarizes :
"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."
Similarly, in the Restatement (Conflict of
Laws) the comment in 326, partly quoted
before, is :
(c) when an acceptance is to be given by
telephone, the place of contracting is where
the acceptor speaks his acceptance;
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(1) 46 D.L.R. 506.
67 5
(d) when it is by word of mouth between two
persons standing on opposite sides of a state
boundary line, the place of contracting is
where the acceptor speaks at the time he makes
his acceptance.
(e) This rule does not apply to an offer
which requires for acceptance actual
communication of consent to the offeror. In
that case, the place of contracting is where
the acceptance is received in accordance with
the offer.
64 in the Volume on Contract says
"An acceptance may be transmitted by any means
which the offeror has authorized the offeree
to use and, if so transmitted, is operative
and completes the contract as soon as put out
of the offeree’s possession, without regard to
whether it ever reached the offeror, unless
the offer otherwise provides." (Emphasis
supplied).
It may be mentioned that in an old English
case (Newcomb v. De Roos) (1) HUI J. observed:
"Suppose the two parties stood on different
sides of the boundary line of the district :
and that the order was then verbally given and
accepted. The contract would be made in the
district in which the order was accepted."
This case was expressly dissented from in the Entores case
to which I now proceed. I have quoted at length from
Professor Winfield, Williston and the American Restatement
because they lie beneath the reasons given by the Court of
Appeal.
The question in the Entores case(1) was whether under the
Rules of the Supreme Court the action was brought to enforce
a contract or to recover damages or other relief for or in
respect of the breach of a contract made within the
jurisdiction of the Court (or. 11 r. 1). As the contract
consisted of an offer and its acceptance both by a telex
machine, the proposer being in London and the acceptor in
Amsterdam, the question was whether the contract was made at
the place where the acceptor tapped out the message on his
machine or at the place where the receiving machine
reproduced the message in London. If it was in
(1) (1859) 2 B & E 271.
(2) [1955] 2 Q.B.D. 327.
676
London a writ of Summons could issue, if in Amsterdam no
writ was possible. Donovan J. held that the contract was
made in London. The Court of Appeal approved the decision
and discussed the question of contracts by telephone in
detail and saw no difference in principle between the telex
printer and the telephone and applied to both the rule
applicable to contracts made by word of mouth.
Unfortunately no leave to appeal to the House of Lords could
be given as the matter arose in an interlocutory proceeding.
The leading judgment in the case was delivered by Lord
Denning (then Lord Justice) with whom Lord Birkett (then
Lord Justice) and Lord Parker (then Lord Justice) agreed.
Lord Birkett gives no reason beyond saying that the ordinary
rule of law that an acceptance must be communicated applies
to telephonic acceptance and not the special rule applicable
to acceptance by post or telegraph. Lord Parker also
emphasizes the ordinary rule observing that as that rule is
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designed for the benefit of the offeror, he may waive it,
and points out that the rule about acceptance by post or
telegraph is adopted on the ground of expediency. He
observes that if the rule is recognized that telephone or
telex telecommunications (which are received instantane-
ously) become operative though not heard or received, there
will remain no room for the general proposition that
acceptance must be communicated. He illustrates the
similarity by comparing an acceptance spoken so softly as
not to be heard by the offeror when parties are face to
face, with a telephone conversation in which the telephone
goes dead before the conversation is over.
Lord Denning begins by distinguishing contracts made by
telephone or telex from contracts made by post or telegraph
on the ground that in the former the communication is
instantaneous like the communication of an acceptance by
word of mouth when parties are face to face. He observes
that in verbal contracts, there is no contract if the speech
is not heard and gives the example of speech drowned in
noise from an aircraft. The acceptance, he points out, in
such cases must be repeated again so as to be heard and then
only there is a contract. Lord Denning sees nothing to
distinguish contracts made on the telephone or the telex
from those made by word of mouth and observes that if the
line goes dead or the speech is indistinct or the telex
machine fails at the receiving end, there can be no contract
till the acceptance is properly repeated and received at the
offeror’s end. But he adds something which is so important
that I prefer to quote his
own words
67 7
" In all the instances I have taken so far,
the man who sends the message of acceptance
knows that it has not been received or he has
reason to know it. So he must repeat it.
But, suppose that he does not know that his
message did not get home. He thinks it has.
This may happen if the listener on the
telephone does not catch the words of
acceptance, but nevertheless does not trouble
to ask for them to be repeated : or the ink on
the teleprinter fails at the receiving end,
but the clerk does not ask for the message to
be repeated : so that the man who sends an
acceptance reasonably believes that his
message has been received. The offeror in
such circumstances is clearly bound, because
he will be estopped from saying that he did
not receive the message of acceptance. It
is his own fault that he did not get it. But
if there should be a case where the offeror
without any fault on his part does not
receive the message of acceptance-yet the
sender of it reasonably believes it has got
home when it has not-then I think there is no
contract." (Emphasis supplied)
Lord Denning thus holds that a contract made on the
telephone may be complete even when the acceptance is not
received by the proposer. With respect I would point out
that Lord Denning does not say where the contract would be
complete in such a case. If nothing is heard at the
receiving end how can it be said that the general rule about
a communicated acceptance applies ? There is no
communication at all. How can it be said that the contract
was complete at the acceptor’s end when he heard nothing ?
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If A says to B, "Telephone your acceptance to me" and the
acceptance is not effective unless A has heard it, the
contract is not formed till A hears it. If A is estopped by
reason of his not asking for the reply to be repeated, the
making of the contract involves a fiction that A has heard
the acceptance. This fiction rests on the rule of estopped
that A’s conduct induced a wrong belief in B. But the
question is why should the contract be held to be concluded
where A was and not on the analogy of letter and telegram
where B accepted the offer ? Why, in such a case, not apply
the expedition theory ?
Even in the case of the post the rule is one of assumption
of a fact and little logic is involved. We say that the
proposal was received and accepted at the acceptor’s end.
of course, we could have said with as much apparent logic
that the proposal was made
678
and accepted at the proposer’s end. It is simpler to put
the acceptor to the proof that he put his acceptance in
effective course of transmission, than to investigate the
denial of the proposer. Again, what would happen if the
proposer says that he heard differently and the acceptor
proves what he said having recorded it on a tape at his end
? Would what the proposer heard be the contract if it
differs from what the acceptor said ? Telegrams get garbled
in transmission but if the proposer asks for a telegram in
reply he bears the consequences. As Ashurst J. said in
Lickbarrow v. Mason(1)
"Whenever one of two innocent parties must suffer by the act
of a third, he who has enabled such person to occasion the
loss must sustain it."
Other difficulties may arise. A contract may be legal in
one ,state and illegal in another. Williston reports one
such case (Mullinix v. Hubbard) (1) in which the legality of
a bargain dealing in cotton futures was held to be governed
by New York law when orders were telephoned from Arakansas
where such dealings were illegal, to New York city where
they were legal. What happens when the acceptor mistakes
the identity of the proposer ? One such case (Tideman & Co.
v. McDonalo) (3 ) has led to much institutional discussion
(See 39 Hary. L. R. 388 :and (1926) 4 Tex L. Rev. 252)
quoted by Williston.
It will be seen from the above discussion that there are
four -classes of cases which may occur when contracts are
made by telephone : (1) where the acceptance is fully heard
and understood; (2) where the telephone fails as a machine
and the proposer does not hear the acceptor and the acceptor
knows that his acceptance has not been transmitted; (3)
where owing to some fault at the proposer’s end the
acceptance is not heard by him and he does not ask the
acceptor to repeat his acceptance and the acceptor believes
that the acceptance has been communicated; and (4) where the
acceptance has not been heard by the proposer and he informs
the acceptor about this and asks him to repeat his words. I
shall take them one by one.
Where the speech is fully heard and understood there is a
binding contract and in such a case the only question is as
to the place where the contract can be said to be completed.
Ours is that kind of a case. When the communication fails
and the -acceptance is not heard, and the acceptor knows
about it, there
(1) (1787) 102 E.R. 1192. (2) G.F. (2nd) 109
C.C.A. 8.
(3) 275 S.W. 70 (Tex Civ. App.)
6 7 9
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is no contract between the parties at all because
communication means an effective communication or a
communication reasonable in the circumstances, Parties are
not ad idem at all. If a man shouts his acceptance from
such a long distance that it cannot possibly be heard by the
proposer he cannot claim that he accepted the offer and
communicated it to the proposer as required by s. 3 oil our
Contract Act. In the third case, the acceptor transmits his
acceptance but the same does not reach the, proposer and the
proposer does not ask the acceptor to repeat his message.
According to Lord Denning the proposer is bound because of
his default. As there is no reception at the proposer’s
end, logically the contract must be held to be complete at
the proposer’s end. Bringing in considerations of estopped
do not solve the problem for us. Under the terms of s. 3 of
our Act such communication is good because the acceptor
intends to communicate his acceptance and follows a usual
and reasonable manner and puts his acceptance in the course
of transmission to the proposer. He does not know that it
has not reached. The contract then results in much the same
way as in the case of acceptance by letter when the letter
is lost and in the place where the acceptance was put in
course of transmission. In the fourth case if the acceptor
is told by the offeror that his speech cannot be heard there
will be no contract because communication must be effective
communication and the act of acceptor has not the effect of
communication it -and he cannot claim that he acted
reasonably.
We are really not concerned with the case of a defective
machine because the facts here are that the contract was
made with the machine working perfectly between the two
parties. As it is the proposer who is claimigi that the was
complete hi.-, end, s. 4 of our Act must be read because it
creates t special rule. It is "a rather peculiar
modification of the rule applicable to acceptance by post
under the English Comnion law Fortunately the language of
s. 4 covers acceptance telephone wireless etc. The section
may be quoted at this stage
"4. Communication when complete.
The communication of a proposal is complete
when it comes to ,he knowledge of the person
to whom it is made.
The communication of an acceptance is
complete,.
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;
sup/65 15
68 0
as against the acceptor, when it comes to the
knowledge of the proposer.
It will be seen that the communication of a proposal is
complete when it comes to the knowledge of the person to
whom it is made but a different rule is made about
acceptance. Communication of an acceptance is complete in
two ways-(1) against the proposer when it is put in the
course of transmission to him so as to be out of the Power
of the acceptor; and (2) as against the acceptor when it
comes to the knowledge of the proposer. The theory of
expedition which was explained above has been accepted.
Section 5 of the Contract Act next lays down that a proposal
may be revoked at any time before the communication of its
acceptance is complete as against the proposer, but not
afterwards and an acceptance may be revoked at any time
before the communication of the acceptance is complete as
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against the acceptor, but not afterwards. In the third
case in my above analysis this section is bound to furnish
difficulties, if we were to accept that the contract Is only
complete at the proposer’s end.
The present is a case in which the proposer is claiming the
benefit of the completion of the contract at Ahmedabad. To
him the acceptor may say that the communication of the
acceptance in so far as he was concerned was complete when
he (the acceptor) put his acceptance in the course of
transmission to (the proposer) so as to be out of his (the
acceptor’s) power to recall. It is obvious that the, word
of acceptance was spoken at Khamgaon and the moment the
acceptor spoke his acceptance hi, put it in course of
transmission to the proposer beyond his recall. He could not
revoke his acceptance thereafter. It may be that the gap of
time was so short that one can say that the speech was heard
instantaneously, but if we are to put new inventions into
the frame of our statutory law we are bound to say that the
acceptor by speaking into the telephone put his acceptance
in the course of transmission to the proposer, however quick
the transmission. What may be said in the English Common
law, which is capable of being moulded by judicial dicta, we
cannot always say under our statutory law because we have to
guide ourselves by the language of the statute. It is
contended that the communication of an acceptance is
complete as against the acceptor when it comes to the
knowledge of the proposer but that clause governs cases of
acceptance lost through the fault of the acceptor. For
example, the acceptor cannot be allowed to say that he
shouted
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his acceptance and communication was complete where noise
from an aircraft overhead drowned his words. As against him
the communication can only be complete when it comes to the
knowledge of the proposer. He must communicate his
acceptance reasonably. Such is not the case here. Both
sides admit that the acceptance was clearly heard at
Ahmedabad. 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. It is plain that the law was framed at
a time when telephones, wireless, Telstar and Early Bird
were not contemplated. If time has marched and inventions
have made it easy to communicate instantaneously over long
distance and the language of our law does not fit the new
conditions it can be modified to reject the old principles.
But we cannot go against the language by accepting an
interpretation given without considering the language of our
Act.
In my opinion, the language of s. 4 of the Indian Contract
Act covers the case of communication over the telephone.
Our Act does not provide separately for post, telegraph,
telephone or wireless. Some of these were unknown in 1872
and no attempt has been made to modify the law. It may be
presumed that the language has been considered adequate to
cover cases of these new inventions. Even the Court of
Appeal decision is of 1955. It is possible today not only
to speak on the telephone but to record the spoken words on
a tape and it is easy to prove that a particular
conversation took place. Telephones now have television
added to them. The rule about lost letters of acceptance
was made out of expediency because it was easier in com-
mercial circles to prove the dispatch of the letters but
very difficult to disprove a statement that the letter was
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not received. If the rule suggested is accepted it would
put a very powerful defence in the hands of the proposer if
his denial that he heard the speech could take away the
implications of our law that acceptance is complete as soon
as it is put in course of transmission to the proposer.
No doubt the authority of the Encores case is there and Lord
Denning recommended an uniform rule, perhaps as laid down by
he Court of Appeal. But the Court of Appeal was not called
upon to construe a written law which brings in the
inflexibility if its own language. It was not required to
construe the words The communication of an acceptance is
complete as against the
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proposer, when it is put in a course of transmission to him,
so as to be out of the power of the acceptor."
Regard being had to the words of our statute I am compelled
to hold that the contract was complete at Khamgaon. It may
be pointed out that the same result obtains in the Conflict
of laws as understood in America and quite a number of other
countries such as Canada, France, etc. also apply the rule
which I have enunciated above even though there is no
compulsion of any statute. I have, therefore, less
hesitation in propounding the view which I have attempted to
set down here.
In the result I would allow the appeal with costs.
ORDER
In view of the opinion of the majority the appeal is
dismissed with costs.
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