Bhagwandas Goverdhandas Kedia v. M/s. Girdharlal Parshottamdas & Co.

Facts

A buyer at Ahmedabad telephoned a seller at Khamgaon and offered to buy goods, which the seller accepted in the same telephone conversation. The seller failed to supply and the buyer sued for damages, raising the question of which court had jurisdiction. This depended on where the contract was made.

Issues

• Where is a contract formed when offer and acceptance are made by telephone?
• Does the postal rule of S4 (acceptance complete when put in course of transmission) apply to instantaneous communications?

Arguments

The seller argued that under S4 acceptance is complete when put into a course of transmission, so the contract was made at Khamgaon where he spoke his acceptance. The buyer argued that receipt of intimation of acceptance is essential for instantaneous communication, so the contract was made at Ahmedabad where he heard it.

Held

The majority held that the rule in Entores v. Miles Far East applies in India for instantaneous communication: the contract is complete only when and where the acceptance is received by the offeror. The S4 'course of transmission' rule is confined to non-instantaneous communications such as post and telegram, where intervention of a third agency justifies it. The contract was therefore made at Ahmedabad where the buyer heard the acceptance; the minority would have applied S4's text literally to all modes.

Ratio decidendi

When acceptance is communicated by an instantaneous medium (telephone, telex), the contract is made at the place where and when the acceptance is actually received by the offeror; the postal/transmission rule in S4 is limited to non-instantaneous communication.

Significance

The leading Indian authority on place and time of contract formation for instantaneous communication, adopting Entores; foundational for modern electronic and telephonic contracting.

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