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TMI Blog1965 (8) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... pted 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 investe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived 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 follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ......... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion 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 instantane- ously) become operative though not heard or received, there will remain no room for the general proposition that acceptance must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ails and the -acceptance is not heard, and the acceptor knows about it, there 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete 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 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. - - TaxTMI - TMITax - Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X
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