Facts: Place of Contract | A, who was in Shimla, made an offer to B residing “at Delhi over the telephone for sale of 1000 boxes of apples of 10 Kgs. each at the rate of Rs. 100/- per kg. B accepted the offer.....Is the suit instituted by 'A' ......

Question: Facts: Place of Contract | A, who was in Shimla, made an offer to B residing “at Delhi over the telephone for sale of 1000 boxes of apples of 10 Kgs. each at the rate of Rs. 100/- per kg. B accepted the offer. It was agreed between them that 50% of the consideration will be paid in advance by wire transferring the money to A’s account with his bank in Shimla within 2 days.

The consignment was to reach Delhi most definitely by the end of the following week since the season for apples was drawing to a close. A breached the contract in as much as the consignment was late by 2 weeks. B, who had transmitted the advance sum, refused to lift the consignment. A instituted a suit in Shimla for the balance consideration.

Stand taken: B defended the suit on merits as well as on the ground that since the acceptance was intimated from Delhi the contract was concluded in Delhi and hence, the court in Delhi had jurisdiction to entertain and try the suit.

Poser: Is the suit instituted by ‘A’ in Shimla maintainable? Give short reasons. [DJS 2010]

Find the answer to the mains question only on Legal Bites. [Place of Contract | Facts: A, who was in Shimla, made an offer to B residing “at Delhi over the telephone for sale of 1000 boxes of apples of 10 Kgs. each at the rate of Rs. 100/- per kg. B accepted the offer… Poser: Is the suit instituted by ‘A’ in Shimla maintainable?]

Answer

Ordinarily, it is the acceptance of offer and intimation of that acceptance results in a contract.

The facts of the present case at hand have been borrowed from the landmark case law of Bhagwandas Goverdhandas Kedia v. M/S. Girdharilal Parshottamdas [1966 AIR 543] This famous case has widened the scope of rules regarding communication of offer and acceptance. The judgment was based on the point of law that what will be the jurisdiction to institute a suit for breach of contract when the contract was made over a telephone. It settles the law that where parties have not agreed to the place of jurisdiction, in such case the place of the proposer at whose place acceptance is being heard with instantaneous communication will be the place for the institution of the suit.

The facts of the case suggest that the defendant-appellant agreed to supply cottonseed cakes to the plaintiff-respondent of Ahmedabad over a telephone. The defendant failed to supply the seeds as per the agreement, so the respondents brought an action against the appellant in the City Civil Court of Ahmedabad.

The contention of the defendant was that offer to purchase was accepted at Khamgaon and the delivery and payment of the goods were also agreed to be made in Khamgaon so the Ahmedabad court had no jurisdiction to try the suit.

Two issues arise in such case:

1. Whether the Ahmedabad Civil Court had jurisdiction over the matter?
2. Whether the contract was formed at the place of acceptance, or where the acceptance was received?

The court accepted the rule of consensus ad idem and that the contract is made where the acceptance is spoken. Applying this, the contract was formed where the acceptance was initiated under its territorial jurisdiction i.e. Ahmedabad. As the communication of acceptance was made through the instantaneous mode of communication here by telephone, the contract gets formed where the acceptance was duly communicated to the offeror i.e. Ahmedabad.

In the case of Continental and Eastern Agencies v. Coal India Ltd, AIR 2003 Del 387, where the contract was entered into at Calcutta and communicated to the plaintiff at Delhi, and payment of commission was also made at Delhi. It was held that the courts at Delhi had jurisdiction to enforce the contract since a part of the cause of action had arisen there.

Thus, applying the aforesaid reasoning in the present case at hand, it is clear that the suit can be instituted at the place where communication of acceptance of offer was duly made through telephone i.e. Shimla. Thus, A’s suit in the court of Shimla is maintainable in the eyes of law.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X