In this research paper there will be critical analysis of the case named
Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & co
indeed gave the decision that contracts formed by telephonic acceptance are
enforceable in the court of law. This article explains the contracts that are
being considered in the current world (I.e., smart contracts) and helps us
critically understand the remedies for breach of such contract.
This article helps us to understand different modes of communication which can
be used to communicate acceptance to form a contract and helps us understand the
difference in the way the court's authority is determined in terms of contracts
formed in traditional times and the contracts formed in modern times and
explains the applicability of section 4 of Indian Contract Act,1872 for
different forms of communication.
The distinction between 'postal rule
' and 'instantaneous rule' is made by
Supreme Court of India 'Bhagwandas Goverdhandas Kedia V. Girdharilal
Parshottamdas and Co.' and it was held that section 4 is applicable only in
non-instantaneous forms of communication and is not applicable in instantaneous
forms of communication. The term 'contract' is defined under section 2(h) of the
Indian Contracts Act. 1872.
It is defined as "Any agreement that is enforceable by law." For a legitimate
contract to be made, both parties must accept the promise's obligations, and the
agreement must be enforceable by law. This leads to the establishment of a
contract. The term 'Acceptance' is defined under section 2(b) of the Indian
Contract Act, 1872 defined as "when the person to whom the proposal is made
signifies his assent thereto, the proposal is said to be accepted."
It is essential that the acceptance must be communicated because without
acceptance it cannot be considered as a binding contract. Communication is
defined under section 2(a) and (b) which indeed says that the promisor must
signify his willingness and the Promisee must signify his assent.
The completion of communication is defined under section 4 of the Indian
Contract Act, 1872.Section 4 signifies that "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 and as against the
acceptor, when it comes to the knowledge of the proposer". It is well known to
us that for the formation of contract there must be offer being made and then
that offer made must be accepted by parties to a contract.
The ancient contract regulations did not anticipate the formation of contracts
through instantaneous modes of communication such as the telephone, fax etc.
which allows the formation of contracts between parties in distinct locations at
the same time. But in judgement of Bhagwandas Goverdhandas Kedias V. M/S
the Supreme Court of India indeed considered the
concept of telephonic conversation in the making of the contract.
The date of the Judgement was 30/08/1965.There were 3 judges who gave the
judgement they were as follows:
Shah, J.C. Wanchoo, K.N. Hidayatullah. The principal topic of conversation
centered on determining when the acceptance process will be deemed to have
reached its conclusion. With the introduction of Information Technology in the
21st century, individuals have switched to e-mails, faxes, phones, etc.
Initially, offer and acceptance were mostly done by letter, but today we have
faster, more convenient means of communication like email, which we call
With the shift in communication technologies, several concerns are brought
before the courts, such as when a contract is calculated and when it is
finalized. Telephone and telex services have been popular since the 1990s. It's
one thing to communicate acceptance via phone or immediate mode, but it's quite
another to send an acceptance letter via mail. Communication via mail is
complete when the letter is placed in the mailbox, whereas communication via
phone is complete when the offer is accepted and the contract is said to have
The law for the place of formation of contract which is made through telephonic
conversation was laid down in Bhagwandas Goverdhandas Kedia vs. Girdharilal
Pashottam Das & Co
. This case indeed resolved the issue of authority person
who makes an offer), I.e. a venue where the acceptance is heard by the offeror
immediately, rather than by mail.
Facts Of Bhagwandas Goverdhandas Kedia Vs. Girdharilal Pashottam Das & Co.
It was on 22nd July 1959 that Bhagwandas Govardhana's Kedia Oil Mills had indeed
agreed to supply cotton seed cakes to M/s Girdharlal Purshottama's and Co. Of
Ahmedabad over the phone. This offer made by the plaintiff was indeed accepted
by the defendant at Khamgaon over the phone.
The respondent I.e., the plaintiff indeed brought an action against the
appellant in the city civil court of Ahmedabad after the appellant failed to
supply seed cakes as per the agreement and thus the plaintiff demanded
compensation for their monetary loss incurred by it which were of Rs. 31,150. As
a result, the complaint was launched in Ahmedabad because the defendants
promised to sell cotton seed cake, and plaintiffs accepted the offer in
Contractually, the defendants were expected to deliver the products to Ahmedabad
and to collect payment for the commodities from an Ahmedabad bank. The defendant
first argued regarding the authority where the hearing of the case was going to
be taking place. The appellant's argument was that if the offer to purchase was
accepted at Khamgaon and the delivery was also accepted to be made in Khamgaon
then the civil court of Ahmedabad had no authority to try the suit for this
On these the plaintiff contended that the contract was struck when the
acceptance was communicated to him at Ahmedabad and thus the suit was within the
jurisdiction of Ahmedabad High Court. Thus, on the issue of jurisdiction the
trial court was of the view that the contract was to be formed at Khamgaon and
because of the offer made from Ahmedabad to purchase goods the court at
Ahmedabad could not be invested with the jurisdiction to enter the suit. Because
the offeror is told informally of an offer's acceptance at this place, a civil
court in Ahmedabad was judged competent to hear the case.
The defendants' request for a rehearing against the order directing the
litigation to proceed on the merits was denied in limine by the Gujarat High
Court. The Gujarat High Court has granted special permission to file this
Issues that were raised in the Bhagwandas Goverdhandas case:
Judgement Given by the Supreme Court of India:
- Which Court has the jurisdiction to try the case of under Indian
- The question of 'when' the contract was complete is to be examined and
finalized which would indeed help in fixing the liability of one party to
An appeal to the Supreme Court by a responder who claimed that the offer was a
basis for a claim of breach of contract was rejected. They cited the example of
Baroda Oil Cakes Traders vs. Purushottam
. AI R 1954 Bagulia, Narain Das
According to Born, such offer is not a component of the cause of action.
Justices J.C. Shah and K.N. Wanchoo concurred with the decision in Emtores
Ltd. v. Miles Far Eastern Corp
, ruling that in the case of instantaneous
transmission, the site where the acceptance was heard has jurisdiction and it
gave the decision that it is the acceptance that gives rise to the contract.
The communication of acceptance must be indicated by a certain type of external
manifestation which is indeed regarded to be sufficient by the court of law.
According to the ruling of the Supreme Court in this case, a contract is
considered to have been created when the offeror learns that the offer has been
accepted by the recipient.
Dissenting Judgement given by Justice Hidayatullah in this judgement:
A legally binding agreement is formed when the speaker's words are clearly heard
and comprehended. The only obstacle is determining exactly when and where the
contract was signed. When proving that the contract was made in Ahmedabad, as
opposed to Khamgaon, as the acceptance was heard, it is difficult to do so under
the terms of the Contract Act. Section 4 of the Act covers phone contracts, in
other words. Even if the Entores judgement was based on statutory
interpretation, it is unclear how the common law was used in this case. At
Khamgaon, where the acceptance speech was delivered, the agreement was made
In this case there was no mention of the contracts that are formed by other
means like the contracts formed on e-contracts and there was no mention of what
will happen if the receiver of the telephone were cut off by any third party who
had ill intention than under which section of the Indian Contract Act,1872 there
would be any remedy to the arty who had incurred loss due to it.
There was no mention of remedies for the breach of international contracts that
are formed between two different countries via telephone acceptance and under
which the court's authority would be the matter would be heard. This case does
not give any information regarding under which authority the suit will be filed
if the offeror is not able to hear the acceptance to the offer proposed by it
due to certain uncertain reasons.
This case does not discuss what will happen if offerree to a contract has
accepted consideration for the contract under the coercion of any third party to
the contract than is the offerree liable to pay compensation in terms of damages
suffered by the offeror or is the third party liable to pay for the damages
suffered and then under which court's authority can the case be filed.
Some of the old as well as recent cases in relation to Bhagwandas Goverdhandas
Judgement and one of the cases that talks about the contract formed by postal
service as the means of communication:
- Adams v Lindsell
In the letter that the defendants wrote to the plaintiffs on September 2
asking for a response "in the normal flow of mail," the defendants included
an offer to sell the plaintiffs some wool. Due to the fact that it was
addressed to the wrong location, the letter of offer was not delivered to
the plaintiffs until the 5th of September. Because of the delay of two days,
the defendants did not get their letter of acceptance until September 9
rather than September 6, which was the original due date. On September 8th,
the defendants parted ways with the wool and sold it to a third party.
In the case of Adams v. Lindsell, the court investigated the
situation in order to find out whether or not there was a contract to sell
the wool before it was sold on September 8. If the defendant accepted the
offer when it arrived at the place or when the defendant looked at it, there
would be no contract because the offer was accepted before it arrived at the
location. It would be considered a refusal of the offer if the property were
to be sold to a third party.
In certain other situations, the courts have decided that the proposals were
accepted immediately upon being received. Before the defendant in this case
sold their fleeces, there was already a binding agreement in existence, so
it does not matter how many times a letter was written to that person or how
often the letter was sent. Because of this, it was determined that the
defendant had broken the conditions of the agreement that they had made.
There were three consequences of Adams v. Lindsell judgement in
English Law they were, that a previously posted offer withdrawal would take
precedence over it if an acceptance that had been previously posted had not
yet been received by the offeree at the time that the offer was accepted.
- Linn v. Employers Reinsurance Corp.:
At a meeting in New York in 1926, the plaintiff's broker offered to set up
reinsurance contracts with the defendant's insurance business for a 5
percent commission on all policy premiums paid. The agent flatly refused
until he heard back from his superiors back in the office. When the
plaintiff returned to Philadelphia, the agent called New York to let them
know they could take the deal.
A year later, the defendant informed the plaintiff that it was no longer
obligated to the contract. Because of New York's Statute of Frauds, an oral
contract that is not completed within one year is not legal, the defendant
claims were made in Pennsylvania, and therefore New York's Act did not
apply. Assuming the acceptance of a contract is made where it is accepted,
not where the offeror hears it, it is presumed to have been made there.
To use the law of that state, the case was sent back to find out where the
defendant was when he accepted the offer and indeed this was the case that
gives us the preview of Pennsylvania in terms of contracts formed due to
telephonic acceptance but the decision given by the court was not in
consideration with that of the Bristish Law.
- A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies,
The contract between the parties in A.B.C. Laminart Pvt. Ltd. & Anr vs A.P.
Agencies, Salem stipulated that the Courts of Kaira will have authority to
try disputes arising from the contract. The Plaintiff filed a money-recovery
suit in the Salem District Court. Because the contract was partially
performed in Salem, the Madras High Court upheld the Salem Court's
In Special Leave to Appeal, the Supreme Court division bench stated there is
no agreement ad idem when words like "alone," "only," and "exclusive" are
employed, therefore it is easy to figure out why someone is being expelled.
To determine if other jurisdictions have been excluded from the case, the
facts and circumstances of the case must be considered. It is not a matter
of if, but when.
Both particular and general language were found to apply to Kaira by the
Court, despite the contract's general language being found to be
non-exclusive. However, even though the Court accepted that the clause was
legitimate and enforceable, it saw right through it and said that the Salem
Court had authority.
Following the decision in ABC Laminart, the courts were required to
investigate the possibility of an implied exclusion of the court's authority
based on the circumstances. It provided a lot of wiggle area for the
individual who wished to go against an exclusive authority provision and
assert their own authority.
- McCann v Snozone,
A staffing firm was hired by a company so that it could fill an open
position with an engineer. On the other hand, they did not disclose how much
they planned to pay him or when they intended to begin working together with
him. In a later statement, the business company clarified that the post had
not been offered to the candidate and that there had been no agreement to
collaborate in any capacity.
The candidate did not give up and instead went to the Employment Tribunal to
bring a claim against the company for breach of contract (ET). The
extraterrestrial alleges that when the organization offered him the
position, they entered into a contract that was legally binding.
For the employer to get out of the contract, they are required to provide
the employee with notice that they will be terminating their employment. Due
to the employees' failure to comply, they were responsible for paying
compensation of �3,000, which was the equal of one month's wage plus the
- Tonner v Delaporte
Even though they were granted nine months to move in, the Tonners had the
option of renting the home out on a standard residential lease until they
were ready to move in. During that time, they could have someone else live
there. One week prior to the settlement, the Tonners were given a standard
notice to vacate the property by the real estate agency representing the
The letter contained a one-month advance notice and a suggestion that the
property be inspected one more time before it was rented out again.
Additionally, the letter included a request that the property be inspected.
In the letter, neither the sales transaction nor any potential payments in
the future were mentioned. The Tonners thought that the Seller's Vacate
Letter was a hint that he was no longer interested in the transaction.
However, the Tonners were wrong. Tonners gave their bankers and accountants
the assurance in an email that they would "accept" the transaction even
though they were opposed to the general concept. Mr. Tonner claims that when
the real estate agent for the vendor called him and his wife to address the
Response Email, the agent told him, "It's what the owners want to do, and
it's their right." After the conversation over the phone, Mr. Tonner
verified the information in question by sending an email.
According to him, the Tonners had reached an agreement on a new residence,
and at this point, they were anticipating receiving their security deposit
back. The previous recommendation was related to tenancy, and it has
absolutely nothing to do with the fact that you are buying a house, the real
estate agent explained in an email. In addition to that, he gave them the
advice that they should "think about cancelling this purchase and getting
legal help prior to defaulting on the contract."
Within forty-eight hours following Tonners' refusal, the Vendor (via her
solicitors) was presumed to have accepted it. As a result, the Vendor
decided to call off the sale and claim a refund of the deposit as well as
damages for breach of contract (Notice of Termination). After the notice of
termination was provided, there was no effort made to find a solution that
would allow the agreement to continue.
Tonners did not take any action to ensure that their arrangement with the
Vendor would continue uninterrupted. Twenty months later, the property was
transferred at a loss of $500,000 to the original purchaser. As a result,
the vendor decided to file a lawsuit against the Tonners to recover the
difference in price as well as the costs associated with marketing the
property. This email was not a repudiation, according to the Supreme Court,
because it was not sent by the judge who made the original ruling
"The overall impression conveyed to an objective reasonable person was that
of a genuine misunderstanding," according to the court's ruling on the
alleged repudiation email. When Tonner sent an email to the Vendor, he had
no way of knowing the Vendor's true position, and the email had to be
interpreted considering this fact.
Consequently, Tonner's interpretation could not be objectively dismissed as
dishonest; the Vendor's true position had not yet been clarified, and Tonner
had to interpret it considering this fact. A reasonable assumption on the
side of both parties can be made, thus," It was determined that neither
party was at fault when the contract was signed, and orders were granted to
reimburse the Tonners' deposit.
- Electronic Contract Formation and Regulation
This article highlights the attempts made by the Information Technology
Act,2000 to address the issue and incorporate certain provisions on the
formation of E-Contracts and the article do emphasizes ever increasing
demand of formulation of specific rules without ambiguity to regulate
E-Contracts. The article does gives detailed information regarding
formation, authority and validity concerning Electronic Contracts.
- Smart Contact is Leasing.
This article explains blockchain technology and smart contracts in detail
and indeed discusses the legal issues related to Smart Contract and puts a
deep emphasis on legal validity and arbitrary agreements arising out of
smart contracts and importantly it helps us to understand how the smart
contracts are different from that of traditional and electronic contracts.
- International Contracts I: Jurisdictional Issues and Global
Commercial and Investment Governance.
This article gives a brief description of Electronic Contracts. As the
technology behind smart contracts improves, it will have an impact on a wide
variety of enterprises. As a direct consequence of this, a number of
different businesses have started conducting tests with this novel mode of
communication. This cutting-edge technology will soon be able to function to
its full potential. If attorneys are aware of changes that may have an
impact on their clients, they will be able to serve their clients more
effectively. In order to ensure that their client's wishes and goals are
met, transactional lawyers may wish to understand more about the components
of a prospective "smart contract technology." In the future, it is
anticipated that it will no longer be acceptable for attorneys to dispute in
court over the "four corners" of a contract. Instead, they will focus their
attention on the goals that are being pursued by the code itself.
- Blockchain and Beyond: Smart Contracts by Tsui N. G.
This article indeed helps us understand as the technology behind smart
contracts improves, it will have an impact on a wide variety of enterprises.
As a direct consequence of this, a number of different businesses have
started conducting tests with this novel mode of communication. This
cutting-edge technology will soon be able to function to its full potential.
If attorneys are aware of changes that may have an impact on their clients,
they will be able to serve their clients more effectively. In order to
ensure that their client's wishes and goals are met, transactional lawyers
may wish to understand more about the components of a prospective "smart
contract technology." In the future, it is anticipated that it will no
longer be acceptable for attorneys to dispute in court over the "four
corners" of a contract. Instead, they will focus their attention on the
goals that are being pursued by the code itself.
- Offer and Acceptance-A Centennial Survey by I.C. Saxena.
This article indeed helps us understand that in accordance with the Indian
Contract Act, there are strict guidelines for making and accepting an offer.
Some, but not all, of these rules are derived from English common law. In
the course of a century, these rules have broadened in scope. When it comes
to auction sales (especially those that are subject to official
confirmation), tenders, and phone talks, English law has decided on the
evolution of the distinction between an offer and an invitation to offer, as
well as how contracts are formed. As long as the Bhagwandas case isn't
different in India, most Supreme Court judges in the case believe that
English law should be followed in cases where the Act before it is silent.
If this were the case, it would discourage people from trying out methods
that aren't covered by English law. There are still a lot of new instances
for the courts to consider.
Ultimate guide to understanding blockchain, bitcoin,
cryptocurrencies, smart contracts and the future of money By Mark Gates.
This Book indeed helps us understand what does blockchain indeed means and how
does it works and what is the main difference between the blockchain and bitcoin
and also helps us understand what are the main benefits of using the blockchain
technology and also the disadvantages of using the blockchain technology and
indeed helps us kind the difference between the blockchain and finance industry
with respect to other industries and also the impact of blockchain technology in
India an also the future of blockchain and bitcoin in India and other countries
and also the role of E-contract in India and different countries.
Contract Law: Text, Cases, and Materials by Evan Mckendrick
Ewan McKendrick's Contract Law: Text, Cases, and Materials, Fifth Edition is a
comprehensive resource for all aspects of contract law. It is a one-stop shop.
This article will teach you everything about contract law that you need to know
as an undergraduate student. This book, which was written by an experienced
author who is also an expert in the subject area, is a favorite of both students
and teachers. This book is notable for the fact that just forty percent of it is
made up of text, while the remaining sixty percent is made up of cases and
additional resources. The combination of a textbook and an old-fashioned
casebook is like having the best of both worlds. Students acquire a deeper
comprehension of how the legal system operates because of the author's clear and
concise legal explanations and analyses. In addition, the author's inclusion of
excerpts from cases and other materials helps students gain a deeper
comprehension of how the best legal research should be conducted.
Law of Contract & Specific Relief by Avtar Singh:
Contract and Specific Relief, written by Dr. Avtar Singh, is a well-known and
widely read book on the subject of contract law. [Book] This book provides an
approachable and uncomplicated breakdown of the legal principles behind
commercial contracts. This book delves into a fresh area of the law pertaining
to contracts, which is not only informative but also fascinating.
Following the release of the eleventh edition of the work, the author has made a
great deal of changes to it as well as added new material to it. This book is
perfect for you if you are interested in learning how the legal landscape in
this area has evolved because of recent judicial decisions. A pledgee's right to
his pledged funds takes precedence over other rights and claims, and privity of
contract is required to obtain damages, for example if an agreement is
established by email and no one signed it. A pledgee's right to his committed
funds takes precedence over other rights and claims.
Legal Tech, Smart Contracts and Blockchain by Marcello Corrales, Mark Fenwick
and Helena Haapio.
According to law firms and in-house legal departments, the next generation of
"Legal Technology," particularly Blockchain-based technology and Smart
Contracts, will have a significant impact on the way in which all legal service
providers operate in the future. Smart Contracts are particularly noteworthy in
this regard. Legal technology businesses are already altering the legal
industry's landscape, either by enhancing the delivery of traditional legal
services or by fully displacing such services with novel technological
Everyone who is involved stands to benefit significantly from the continued
development of the legal business. It is difficult for many professionals and
trade associations, as well as technology suppliers and regulators, to keep up
with the rapid speed of technological change.
This has resulted to a "gap" in legislation that continues to widen over time.
It is not yet known how these new technologies will interact with procedures and
systems that are already in place, nor what the breadth, direction, or
implications of such interactions will be. On the other hand, the problem is
made worse by the growing need for solutions to contractual issues that are easy
to understand and use. On the other hand, the fact that it is necessary to
protect people who use these solutions makes the problems even worse. Legal
Design is a relatively new academic area that has gained traction in recent
years, and it has developed into an extremely helpful resource for people who
work in the field of legal technology as well as legal scholars.
The authors of the pieces that make up this collection of works are well-known
academics and professionals who are working on these issues in various parts of
the world. Their ideas are included here. In this class, the concepts of
blockchain technology and smart contracts will be broken down, and the course
will investigate how these two developments are changing the landscape of law,
business, and government.
Law Relating to Electronic Contracts by R.K. Singh:
This book explores in depth the theoretical underpinnings and practical
implications of electronic contracts. Focusing on the fundamentals helps us
better comprehend crucial e-contract case laws. Using examples and comparisons
from the UK and the US, it demonstrates that electronic contracts are lawful
from an Indian perspective. The Consumer Protection Act of 2015 is briefly
summarized in this book. A new chapter titled "e-auction or online auction" has
been added to this book. Various aspects of online auctions are discussed,
including whether or not the seller's website announcement is an offer or merely
an invitation to bid, and whether or not auction houses act as agents for the
The methodology that would be applied for this research is Doctrinal, Analytical
and Comparative research. In this research the primary sources of data are the
Constitution, Indian Contract Act, I.T. Act 2000, Judicial precedents, The
secondary sources of data do comprise of published books, journals, scholarly
articles, news releases, research reports are used.
- Is The judgement given in the Bhagwandas Goverdhandas Judgement
applicable in the current modern world where there are automated telephonic
- If any mistake or misunderstanding was carried out during communication
with the automated machine which is indeed important for the contract
formation then what is the remedy for it?
- Are the E-Contracts similar to contracts made on the telephone?
- Are there any amendments or improvements to be brought in the judgement
given in the Bhagwandas Goverdhandas Judgement?
- Was there any mention of Telephone Acceptance in the Indian Contracts
Act,1872 when it was drafted and if yes then under which section is it
drafted and if it is not drafted than which provision of the Indian Contract
Act,1872 was used before the judgement of Bhagwandas Goverdhan Das are there
any issues related to the provision?
- What is the point of view of people with respect to contracts carried
out in current world?
The purpose of the research is:
Statement of Problem:
- To find out any similarities between contracts formed by telephone
acceptance and those formed by E-Contracts
- To find out the issues related to the contracts that are most common in
the current world and the remedies for the breach of such contracts.
- To find out the relationship between the Traditional contract and
- To understand the relationship between the contracts made by telephonic
acceptance and contracts made by telephonic means.
- To understand the issues related to sec. 4 of the Indian Contracts
- To understand the laws under which contracts that are formed in the
current world are governed.
The problems to be resolved from this research paper are that it will help us
find any similarities between the contracts formed by telephonic acceptance and
that of the contracts formed by electronic means and to find out the issues
related to the contracts that are most common in the current world and to find
the remedies to the issues related to the contracts that are common in the
From this research paper we will indeed understand the major difference between
the traditional and electronic contracts. It will address various issues related
to section 4 of the Indian Contract Act 1872, which indeed will help us to
differentiate between the This research paper indeed helps us to find the laws
under which the contracts that are formed in the modern world are governed.
Point Of view of people with respect to contracts that are with respect to
contracts that are carried out in current word.
According to several surveys one of the biggest hinderances of people's belief
in e-contract is the lack of trust of users in the legal binding, also there is
a lack of security of the electronic communication in general, also the internet
which is the medium for entering into electronic contract is not available to
the people at large, the number of items that can be bought online are limited
leading to and there are various legal issues relating the electronic contracts
causing an absolute hinderance in the minds of people regarding the legal issues
relating to e-contracts like there validation and recognition.
This issue arises as e-contract is indeed a new kind of privilege emerging from
technological advancements and there are few laws relating to it. There is no
mention of telephonic acceptance in E-contracts when the Indian Contracts
Act,1872 was drafted as the telephones did not exist at the time of drafting of
the Indian Contract Act, 1872.Section 4 of the Indian Contracts Act,1872 was
used before concept of contract formation by telephone acceptance came into
existence. Section 4 of the Indian Contract Act,1872 deals with the completion,
acceptance and revocation of a proposal and it indeed states that the completion
of a proposal is complete when it comes to the knowledge of the person for whom
it is made. Communication via postal services is mentioned in this section,
although no contracts are mentioned by current (instantaneous) modes of
As was rightly said by Denning L.J. in Entores Ltd. V. Miles Far East Corpn
that postal rule cannot be applied to instantaneous modes of communication such
as telephone and phone. There are some serious issues related to sec. 4 of the
Indian Contract Act,1872, like the lack of information regarding the modes of
communication as the section does not mention anything more about the current
modes of communication, it also does not describe what rule of communication
should be applied.
There is a slight difference between the contracts made on the telephone and
that on the E-contracts, the difference is in the essential element to a valid
The essential elements for the formation of a valid contract are offer,
acceptance, competency to contract, free consent, consideration.
All the essential elements required for the formation of contracts on the
telephone are similar to that of e-contracts but there is one additional element
that is essential for the formation of e-contract and it is the meeting of minds
by means of electronic modes incorporating the terms of valid contract.
Time and Place of Dispatch and Receipt of Electronic records and contracts
made on telephone acceptance:
Section 13 of the Information Technology Act lays out a basic framework for
determining when and where electronic records are sent and received, leading to
the development of E-contracts. Section 13 of the Indian Contract Act, 1872, is
read in conjunction with Section 4 of the Act. A computer resource outside the
control of the record's originator, or, if none is designated, any information
system selected by the offeror for that purpose, can accept electronic records.
Both the offeror and the acceptor have received the whole message of acceptance.
For ascertaining the formation of contracts by telephone regarding the time
Under Indian Law, the place where the offeree speaks to the offeror his
acceptance than at that place the contract is said to be formed but this is not
the case under English Law, when parties are at a distance and communicate an
offer and acceptance the place of completion of contract is complete when the
offeror receives the news of acceptance of the offer by the offeree.
In P.R. Transport Agency V. Union of India
, in this case the court held
that the contracts made by telephone, telex or fax are complete when and where
the acceptance is received. But there is essential for the acceptance to be
completed by telephone, telex etc. and it is the transmitting and receiving
terminals are at fixed points. But in the case of e-mail Anyone with an email
account can transmit data (acceptance) to anyone else. Once transmitted, it's
kept on a "server" that the receiver may access from anywhere in the world.
Neither the transmission nor receiving site is fixed. Section 13 (3) of the IT
Act covers no permanent transmission or receiving locations. It indeed considers
an electronic record received at the addressee's company.
What is going on in the current scenario with respect to Bhagwandas
Now there are smart contracts and Blockchain Technology are being practiced in
the modern world which are altogether different to that of traditional contracts
and are more advanced with the traditional contracts. It's true that the
blockchain is a form of data structure employed in some messed-up ledgers,
storing and transmitting data in packages called "blocks" that are genuinely
linked together in a digital chain.
Using this ledger, two or more parties can record their transactions and send a
copy to each other without the need for a third-party to approve the
transaction. There is always a new block created for each new transaction, which
contains all of the preceding blocks' information.
It is difficult to hack these blocks because they are linked and stored on
multiple nodes. Indian giant Tech Mahindra has already established its market by
adopting block chain technology across a wide range of sectors, including
banking, financial services, and the real estate industry, all of which have
benefited from the technology.
Smart Contracts are computerized transaction protocols that execute the terms of
a contract. Smart Contracts are different from E-contracts as in smart contracts
a code is an essential element of agreement itself. There are certain legal
limitations to that of the smart contracts they are as follows:
There are certain privacy issues related to E-contracts:
- Technical issue: the smart contracts are in general self-executing
in nature as they auto-operate based on some pre-determined conditions which
are fed into the computer in the form of codes while in case of traditional
contracts the parties to a contract may choose not to fulfill the pre-agreed
terms of a contract even at a cost of litigation or payment in terms of
judicial remedies and the smart contracts are related to only machines
whereas the traditional contract are related to humans as well.
In short, Smart contracts have limits in even mildly demanding settings,
making their ex-post uncertainty efficiency less than ordinary semantic
contracts. Smart contracts are programmes that know what to perform under
specific settings, eliminating "second thoughts" in unpredictable
situations. The per se definition of smart contracts undermines contracting
flexibility. Loss of flexibility might lead to unanticipated outcomes and
For illustration, since smart contracts can only be cancelled by the seller,
there is no way to get your money back even if a country Q bans herbal goods
from country P, goods are seized at customs because of changes in
regulations, or a country Q declares war on country P, even if the contract
is cancelled, you'll still be out the money you paid.
This illustration indeed helps us to see the merits and demerits of smart
contracts and find the difference between the traditional contracts and
smart contracts as the merits are that one of the two contracting parties
one of the parties are getting their money paid irrespective of the
condition. This might not be the case in traditional contracts as the
contract will be cancelled and the parties to a contract won't receive their
The demerits of smart contracts are that one of the parties is forced to pay
causing tremendous loss to that party when the contract is cancelled.
Another illustration is that of a vending machine that distributes things
when money is input is one of the most basic examples of a smart contract.
In a smart contract, the terms of the agreement between the buyer (Promisee)
and seller (Promisor) are directly written into lines of code. This code is
found in a distributed and decentralized blockchain network.
In addition, the code contains information that guides the transaction and
ensures that it is monitored and irreversible. Smart Contracts are valid
under section 10 A of the Information Technology Act 2000. It is quite
important to note that E-contracts are also known as Smart Contracts. The
Traditional Contracts indeed require someone to enforce them whereas the
Smart contracts are programs that execute exactly as they are set up (coded,
programmed) by their creators.
Challenges that are faced by (Smart Contracts) E-contracts are the
competency of parties to a contract, in these the parties forming the
contract online do not have any idea whether the party with whom it is
forming the contract is competent to form the contract because now-a-days a
child can also form an online contract by only clicking on 'I accept' option
which in general appears when the online contract is to be formed. Section
10,11 and 12 of the Indian Contract Act,1872 covers the topic relating to
capacity of the contract and a contract becomes void if the parties to a
contract are not competent to form the contract.
- The Free Consent of the party:
Free consent is a crucial element of a meaningful agreement. In online
agreements there is no extension for exchange. This is an amazing impediment
for the client. However, the alternative "live with or without it" exchange
is provided to the customer which is indeed a remedy to it. In the case of
LIC of India vs. Consumer Education and Research Center, the Supreme Court
of India made the statement that "a weaker party would not consent to have
the same bargaining power as a stronger party" in reference to "dotted-line
This was said in the context of the case. There is no other option for him
but to turn down the offer of the contract unless he is willing to take
either the administration or the commodities. He had no option except to
either agree to something that was completely ludicrous or resign from his
post as head of state till the end of his tenure. Because of this, the
consumer ought to proceed with caution while consenting to the conditions.
- Choice of Court Jurisdiction:
E-contracts may be used in a wide range of situations since businesses
operate all over the world. This might lead to occurrences being reported in
more suitable venues. Prohibiting infringement on property rights across a
wide range of topographical areas may be time-consuming and expensive. As a
result, all online agreements must take into consideration the decisions
made in party declarations.
For an online specialized service provider to be successful, they need limit
their presentation to a certain area. Seeing things this way, an online
specialized service provider has no choice but to engage in a dialogue with
a narrow set of people and material guidelines. Unless they click a button
that reads "I Agree," "I Accept," or "Yes," the client has no alternative
but to acknowledge the expert organization's Standard Terms and Conditions.
The consumer has no choice but to use this service.
- Theft of Identity:
The theft of identity is the wrongdoing of getting an individual or monetary
data of someone else to utilize their personality to submit extortion making
unapproved exchanges or buys. Data fraud may occur in a variety of ways, and
when it does, the victims are usually gravely damaged, suffer financial
losses, and face public disgrace. They charge the customer for illegal
operations and products, trapping the buyer in a financial quagmire and
allowing them to pose as consumers to obtain what they desire.
- Protection of data:
Innovation has made it easier for internet businesses and organizations to
gather and analyze massive amounts of data about people who just visit their
websites. As a result, there are many questions concerning how this
information will be utilized. Before the Internet, companies would
meticulously track the purchases of their clients. Now, though, they may
also track online pages that capture a customer's attention.
Numerous businesses, for instance, encourage their clients to sign up for
their services online by providing personal information. However, many
websites cease delivering services to users who do not register with them.
Even if the person who stands to gain from the benefit gives their consent
to enroll in the programme, there is no guarantee that the information they
supply will be used in any way.
It is widespread practice for companies to provide information on their
customers to a third party for the purpose of carrying out activities that
are unethical or that break the law.
Most of us have no idea that we have signed a contract since they have become so
commonplace in our everyday lives. By providing our personal information, making
an account, and clicking 'I accept' to certain provided terms and conditions
when using online platforms like Facebook, Instagram, Netflix, and others, we
enter into online agreements, whether consciously or naively.
Privacy concerns with Facebook:
Facebook has had privacy problems for a long time. When the company made money
by selling user information, there were times when people's privacy was broken.
A sting operation showed that the political consulting firm Cambridge Analytica
used the personal information of 50 million Facebook users to make psychometric
profiles. These profiles were then used in customized political apps, campaigns,
and ads. All over the world, fake news was also used to influence elections.
Concerns were raised about how Facebook handled data security, but the company
didn't do much to address them.
Privacy concerns with Instagram:
Instagram has three rules that are made up on the spot and violate the privacy
of its users. One of these is that Instagram owns all the content and photos
that are posted on its platform. It means that the account seems to belong to
the user, but Instagram owns the rights to the account. Instagram has the right
to share with third parties the personal information that its users give it. You
can't file a class action suit against Instagram, which means that you cannot
file a suit against Instagram as a group.
Privacy concerns with Netflix:
Netflix has two rules that are not fair and do not make sense. First, Netflix
can change its terms and conditions at any time without telling its users.
Second, Netflix can share personal information about its users without telling
them. It can also give out personal information about users without their
Remedies for the challenges faced by E-contracts:
In the instance of a breach of an e-contract, there is no explicit law, although
the Indian Contract Act 1872 provides precise provisions about remedies for the
breach of contract. There are two types of damages that might be sought in the
event of an E-contract breach. Damage and Quantum Merit are two of the options.
Specific Performance of contract and an injunction which prevents the other
party from breaching their contract, are also available in the Specific Relief
The sections under the Indian Contract Act 1872 which talks about the remedy for
damages for the breach of contracts are defined under sec. 73 and sec. 74 of the
Indian Contract Act,1872.
Sections 73-75 of the law, promulgated in the case of Hadley v. Baxendale,
define criteria for calculating damages. Ordinary damages are defined as losses
resulting from a breach of contract that happened in the normal course of
events, whereas exceptional damages are defined as losses resulting from
extraordinary circumstances within the criteria set in this judgement.
There are 3 clauses that talk about the remedial clause for breach of contract,
these clauses state what rights the non-contracting party has if the other party
breaches the contract. In the contracts for the sale of goods remedy clauses are
designed to limit the seller's liability for damages. They are as follows:
There are certain remedies for breach of contract, they are as follows:
- Arbitration Clauses:
An arbitration clause indeed states that the disputes arising under the
contract must be settled through arbitration rather than court litigation.
These clauses include the name of the organization that would indeed conduct
- Merger Clauses:
The Merger Clause states that the written document contains the entire
understanding of the parties. The main purpose of the merger clause is to
ensure that evidence outside the written document would not be admissible in
court to contradict or supplement the terms of the written agreement.
- Breach of contract:
The parties to a contract must keep their promises unless such performance
is dispensed or excused under the provisions of the act. Promises bind the
representatives of the promisor in case of death of such performance unless
a contrary intention appears from a contract.
When a contract is breached, the party who actually suffers is
entitled to compensation from the party who breached the contract for any loss
or damage caused thereby that would have naturally arisen in the usual course of
things from such breach or which the parties, in fact, knew when they made the
contract. There are two ways to handle this damage: liquidated and unliquidated.
If a contract includes a penalty clause for a breach of contract, the party
claiming the breach is entitled to a predetermined amount of liquidated damages,
but unliquidated damages are the damages that must be paid even if no actual
damage or loss can be proven to have occurred as a result.
- Specific Performance:
The remedy of specific performance is based on the
principle of equity. A party to a contract who must face damages due to breach
of contract by the other party than the party who has faced the damage has the
option to file a suit for specific performance. Pursuant to the Act's Section 16
(c), the claimant must allege and demonstrate that he performed or has always
been ready and willing to execute the essential conditions of the contract,
except those elements whose performance has been prohibited or renounced by
For example, A is the proud owner of a piece of property. His
agreement of sale to B was unregistered, but he was paid 50,000/- as an advance
from the sale price, which was $1,000,000/-. Within three months after signing
the agreement of sale, A must sign a Regd. Sale deed. That is not the case here,
however, as A declined to sign a Regd. Sale Deed and sold C the land for more
money. A can be sued by B based on a specific action.
When a party to a contract negates the terms of the contract,
then the court may, by issuing an 'injunction order,' restrain him from doing
what he promised not to do so. For Example, N, a film star agreed to act for a
particular producer for one year. During the year she contracted to act for some
other producer, thus she can be restrained by filing a suit for injunction.
There are two types of injunctions, they are temporary and permanent
injunctions. Temporary Injunction are those which remain in force until
specified time or till date of next hearing of the case or until further orders
of the court.
It is important to note that such injunctions are to be granted at any stage of
the suit and such suits for injunction are governed by Order 39 of the Code of
Civil Procedure,1908 and not by Specific Relief Act,1963. The Permanent
Injunction is contained in a decree passed by a court after fully hearing the
case. Such an injunction perpetually prohibits the defendants from asserting a
right or committing an act which would be contrary to the rights of plaintiff.
It is based on ending a suit.
Case law related to Permanent Injunction is the case of the case of Jujhar
Singh vs. Giani Tilok Singh
, a son's request for a perpetual injunction to
prohibit his father, the Karta of the Hindu Undivided Family (HUF), from selling
HUF property was denied. It was not maintainable because the son, who was also a
coparcener, had the option of opposing the transaction and having it voided in a
lawsuit filed after the sale was completed.
One of the recent cases related to temporary injunction was Rajesh Kumar
Gandhi v/s. Mukesh Dutt
, in this case the plaintiff has prayed to restrain
the defendants and his legal heirs/attorneys/servants from approaching contact
with the customers of the plaintiff till the pendency of the present suit. A
memorandum signed by the plaintiff and the defendant on February 1, 2021 forms
the basis of the plaintiff's plea. The defendant was a former employee of the
plaintiff who departed the plaintiff on January 28, 2021.
In India there are no laws and regulations related to E-contracts, but still the
e-contracts are regulated by various laws in unification, the laws that provide
legal status to the E-contracts are as follows:
Enforcement of laws according to Indian Contract Act.1872:
The Indian Contract Act 1872, regulates the way in which the contracts are
formed and enacted in India so it is mandatory for every agreement that is going
to be formed to fulfill the sections mentioned in the Act respectfully.
With the development in technology in the current world if the acknowledgement
of offer is sent by any electronic medium by the parties, then the contract
formed would be legitimate and enforceable because regardless of the information
been sent through a database the affirmation of will is the most important which
can be implemented and is enforceable.
Enforcement of laws according to Indian Evidence Act, 1872:
At this point in the process, the status of evidence is accorded to all evidence
that is either presented, noted, or saved via a technical device. Take, for
example, a voice memo that was recorded using a recording device. This will
serve as an illustration. This evidence system is now undergoing expansion,
which will result in the addition of more advanced audio recording capabilities,
computerized cameras, improved camcorders, and videoconference capabilities.
When electronic proof began to be generated or stored digitally, there was a
significant change in basic assumptions in the way that data and correspondence
are managed. Evidence in the form of an electronic contract might be categorized
in accordance with the applicable law in several diverse ways. The tolerance of
electronic records is discussed in Section 65B, whereas the assumptions
underlying electronic records are addressed in Sections 85A, 85B, 88A, and 85C.
Improvements or amendments that could be brought about in the Bhagwandas
The policy implication of this decision is difficult to be made out because this
case was heard in 1966.The Indian Contract Act,1872 has been amended a lot of
times since 1966.The amendments that are to be brought are there must be clear
mention regarding the authority where a suit will be formed in the cases where
the offerre is made to accept the consideration for the contract under coercion.
There must be a remedy if there is any hinderance in the communication of the
acceptance of the consideration which indeed leads to the formation of the
contract from the offeree's side (I.e. there is a hinderance in the
communication of acceptance from the offeree's side) the hinderance can be like
there is cut in the telephonic line of the offerre due to which the acceptance
to the consideration is not transmitted to the offeror and there must be proper
distinction under which court's jurisdiction can the plaintiff party file a suit
There must be clear distinction between authority of suit filed by telephonic
acceptance and e-contracts and there must be remedies for the breach of contract
for the contracts that are formed by the automated telecommunicators that are
mostly used in the current world for the formation of contract.
According to me there must be uniform laws made for governing the E-contracts in
India. There must be uniform laws governing E-contracts as well all same laws
for telephonic acceptance over the world.
This thing is suggested after the mention of the case Linn v. Employers
as in this case it was held that acceptance of an
offer by telephone is complete where the acceptance is complete whereas in India
and England the when an offer is accepted via telax, a legally enforceable
contract is created when the person who made the offer receives the message.
There is a need for a proper guidance model that is to be launched by the
government to remove the fear of fraud committed in E-contracts and there is a
need to form proper guidelines regarding the contracts formed by automated
There is a dire need for proper codified laws to be made for the governance of
E-contracts in India and the required amendments which are suggested above are
also to be brought about in contracts that are formed by telephonic acceptance.
Written By: Sudeep Dilip Kothavade