Introduction to Communication and Acceptance of an Offer
This case study focuses on understanding the principles of communication, acceptance, and revocation of offers as outlined in Section 3 of the Indian Contract Act of 1872. Here’s a simplified breakdown:
- Communication of Offers: This section explores how an offer and its acceptance must be communicated to form a valid contract.
- Acceptance of Offers: It emphasizes the need for acceptance to be clear and communicated back to the person who made the offer.
- Revocation: This part deals with how and when an offer can be withdrawn before it is accepted.
Case Overview: Bhagwandas Goverdhandas Kedia Oil Mills vs. M/s. Girdharilal Parshottamdas and Co.
- Background: The case involves a contract made over a telephone call where Bhagwandas Goverdhandas Kedia Oil Mills (the appellant) agreed to supply seeds to M/s. Girdharilal Parshottamdas and Co. (the respondent).
- Contract Details:
- Acceptance: The contract was verbally agreed upon over the phone.
- Location: The acceptance occurred in Khamgaon, where both delivery and payment were also scheduled.
- Legal Issue: The appellant initiated a lawsuit in Ahmedabad due to their failure to supply the goods as agreed. The main contention was whether the Civil Court of Ahmedabad had the authority to hear this case, considering the contract was accepted in Khamgaon.
- Court’s Decision:
- The Civil Court of Ahmedabad ruled that it had jurisdiction over the case.
- Appeal: Dissatisfied, the appellant appealed to the High Court of Gujarat, which upheld the lower court’s decision.
- Further Action: Following the High Court’s decision, the appellant sought permission to appeal to the Supreme Court, submitting a special leave petition.
Read about Civil Appeal Analysis here.
Key Issues Addressed
Jurisdiction of Ahmedabad Court
- Is the Ahmedabad Court the right place to handle this case?
Formation of the Contract
- Was the contract established where it was accepted, or where the acceptance was confirmed?
Observation on Communication and Acceptance in Contract Law
The Supreme Court discussed Section 4 of the Indian Contract Act, focusing on how offers and acceptances are communicated:
- Communication of Proposals: The act of proposing (making an offer) is considered complete when the person receiving the proposal becomes aware of it.
- Communication of Acceptance:
- For the person making the offer (the proposer), acceptance is complete once it has been sent to them.
- For the person accepting the offer (the acceptor), it is complete when the proposer knows about it.
The Court noted that conversations over the telephone are similar to face-to-face discussions, where immediate responses are common. This means the acceptance of an offer made during a phone call is part of forming a contract and needs to be communicated directly during the conversation.
The majority of the judges agreed that if an offer is made over the phone, the location where the acceptance is heard by the offeror (the one who made the offer) determines the place of acceptance. This is typically where the offeror is located.
Conclusion
The rules for sending messages can vary depending on the method used.
- Postal Communication: A message is considered delivered as soon as it is put in the mailbox. This applies even if the recipient has not yet read it.
- Instantaneous Communication (like phone calls): A message must be received and acknowledged by the person making the initial offer for it to be considered complete. The agreement is officially made at the location of the person who started the conversation.
NOTE
Section 3: Communication, Acceptance, and Revocation of Proposals
This section outlines how proposals, their acceptance, and their revocation are handled:
- Communicating Proposals: Proposals are communicated through actions or failures to act that clearly indicate the intent to propose or that effectively convey the proposal.
- Accepting Proposals: Acceptances follow the same rule. They are considered communicated when actions or inactions clearly show the intent to accept or effectively convey acceptance.
- Revoking Proposals and Acceptances: The rules for revoking proposals and acceptances mirror those for making and accepting proposals. Revocations are recognized when the party’s actions or lack of action indicate the intent to revoke or effectively communicate the revocation.