Hey learners,
In the age before emails and instant messages, business deals were often struck over letters and telephone calls. One such business conversation took place between two traders — Bhagwan Das Goverdhan Das Kedia, a merchant dealing in jute, and Girdhari Lal & Co., another trading firm.
During a telephone conversation, an offer was made and acceptance was communicated verbally. Both parties believed a valid contract had been formed. But when a dispute arose, a simple yet complex question emerged:
👉 Where does a contract made over the telephone actually come into existence — at the place where the offer was accepted, or where the acceptance was heard?
What appeared to be a routine commercial deal turned into a landmark legal battle defining how contracts are formed in modern communication.
Bhagwan Das Goverdhan Das Kedia v. Girdhari Lal & Co. (1966) Case Details
| Particular | Information |
|---|---|
| Case Name | Bhagwan Das Goverdhan Das Kedia v. Girdhari Lal & Co. |
| Court | Supreme Court of India |
| Year | 1966 |
| Citation | AIR 1966 SC 543 |
| Area of Law | Contract Law |
| Core Topic | Communication of acceptance |
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Facts of the Case
- The parties entered into negotiations for a jute transaction.
- The offer and acceptance were communicated over the telephone.
- Later, a dispute arose regarding performance of the contract.
- The key controversy was about jurisdiction — which court had authority to hear the dispute.
- This depended on where the contract was considered to have been completed.
Legal Issues Before the Court
- When acceptance is communicated by telephone, where is the contract formed?
- Does the postal rule of acceptance apply to telephone conversations?
- Is a contract complete when acceptance is spoken or when it is heard?
Arguments of the Parties
Plaintiff’s Arguments
- The contract was completed at the place where acceptance was spoken.
- Jurisdiction should lie at the place of the acceptor.
Defendant’s Arguments
- Acceptance must be received and heard to be effective.
- The contract was completed where the acceptance was heard, not spoken.
Judgment
The Supreme Court held that:
- A telephone conversation is an instantaneous form of communication.
- The postal rule does not apply to telephone contracts.
- Acceptance is complete only when it is heard by the offeror.
- Therefore, the contract is formed at the place where acceptance is received, not where it is spoken.
Legal Principle (Ratio Decidendi)
- In instantaneous modes of communication (telephone, telex, fax, email), acceptance is effective only when it reaches the offeror.
- The postal rule applies only to non-instantaneous communication like letters.
Why This Case Is Important
- It clarified how contracts are formed using modern communication methods.
- It distinguished between postal communication and instantaneous communication.
- The ruling remains highly relevant in today’s digital contract environment.
The case of Bhagwan Das Goverdhan Das Kedia v. Girdhari Lal & Co. modernised Indian contract law by recognising that technology changes how agreements are formed. By holding that acceptance must be heard to complete a contract, the Supreme Court ensured clarity, fairness, and certainty in commercial dealings.
This judgment continues to guide courts whenever contracts are formed through telephone, email, or other instant communication methods, making it one of the most practical contract law precedents in India.