Bhagwandas Goverdhandas Kedia Vs. M/S.
Girdharilal Parshottamdas and Co. & Ors [1965] INSC 171 (30 August 1965)
30/08/1965 SHAH, J.C.
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 long distance telephone. The offer was spoken by the
respondent at Ahmadabad and the acceptance was spoken by the appellants at
Khamgaon. Alleging breach of the said contract the respondents Mod a suit at Ahmadabad.
On the issue of jurisdiction raised by the appellants, the trial court found
that the Ahmadabad 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 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
respective 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 Ahmadabad,
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 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 commercial 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
Ahmadabad. 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 Ahmadabad,
Case-law considered.
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
& Companyhereinafter called "the plaintiffs"-commenced an action
in the City Civil Court at Ahmadabad 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 Ahmadabad, because the defendants had offered to sell cotton seed cake which
offer was accepted by the plaintiffs at Ahmadabad, and also because the
defendants were under the contract bound to supply the goods at Ahmadabad, and
the defendants were to receive payment for the goods through a Bank at Ahmadabad.
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 Ahmadabad 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 Ahmadabad to
purchase goods the Court at Ahmadabad 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 Ahmadabad 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 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 wellsettled 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, 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 therefore 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 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 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 judgment of the Court observed at p. 332 "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 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, Ahmadabad, 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
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 Ahmadabad and the acceptor, who is the defendant
(appellant here), was at Khamgaon in Vidarbha. The plaintiffs' suit has been instituted
at Ahmadabad. If the acceptance was complete and contract was made when the
appellant spoke into the telephone at Khamgaon, the Ahamadabad 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 Ahmadabad and
that was the place where the contract was made.
The rules to apply in our country are
statutory but the Contract 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 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 communicated 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 communication 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 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 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 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 (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;
(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 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 instantaneously)
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 ? 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 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 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 Ahmadabad. 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 681 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 Ahmadabad. 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 Ahmadabad
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 commercial circles to prove the dispatch of the
letters but very difficult to disprove a statement that the letter was 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 the
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 682 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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