Contract is executed at multiple places. Where should the suit for breach be filed?

The Foundation: Section 20(c) and the Cause of Action

Section 20(c) of the Code lays down that a suit may be instituted in a court within whose jurisdiction the cause of action, wholly or in part, arises. The cause of action in a contract suit is not a single event — it is a bundle of facts that, taken together with the applicable law, gives the plaintiff the right to sue. In suits arising out of contracts, the cause of action extends across multiple facts: the making of the contract, the terms governing performance, the act of breach, the place of performance, and the communication of repudiation. Each of these is a distinct fact that may arise in a different place, and each such place may independently ground the jurisdiction of the court there situated.

The important starting point is that the place where the cause of action arises "in respect of any contract must be determined with reference to the terms of the original contract itself and not by subsequent negotiation." This means one cannot create jurisdiction artificially by later correspondence or conduct — the jurisdictional analysis is rooted in what the contract originally contemplated.

Where a Contract is "Executed" — The Multi-Locational Problem

A modern commercial contract is rarely a simple act done in one place by two parties sitting across a table. It is frequently the product of an offer made at one place, acceptance communicated from another, and formal documentation signed or exchanged at a third. Each of these stages has been treated by the courts as a potentially distinct jurisdictional peg.

The Place of Offer. It is settled that the mere making of an offer does not, by itself, form part of the cause of action for damages for breach of contract. The law does not treat the offeror's location as a jurisdictional anchor, since the offer alone creates no binding obligation. A student must remember this clearly — the place where A makes an offer to B is, in itself, insufficient to found jurisdiction.

The Place of Acceptance — The Critical Connecting Factor. The contract comes into existence at the place where acceptance is communicated. This is the most important jurisdictional peg in a multi-locational contract. The Supreme Court in Bhagwandas Goverdhandas Kedia v. M/s Girdharilal Parshottamdas & Co. (AIR 1966 SC 543) settled the law decisively — where acceptance is communicated by telephone, the contract is made at the place where the acceptance is heard, i.e., where the offeror receives the acceptance. The court exercising jurisdiction at that place has a sound claim to try the suit. In contracts concluded by correspondence, a contract is made at the place where the letter of acceptance is posted. That postal location is thus a potential forum.

Going further, where an offer is accepted at Delhi, it would mean the contract was entered into at Delhi and jurisdiction would lie with Delhi courts — even if formal documentation and signatures were obtained at a different place such as Jhansi. The act of acceptance, not the act of formalisation, creates the contract and determines the primary jurisdictional connection.

Performance, Breach, and Place of Payment

The cause of action in a breach of contract suit extends beyond the moment of formation to the moment and place of breach. A suit for breach of contract can be filed at the place where the contract was made, and it can also be filed at the place of performance, which is equally part of the cause of action. This is a significant broadening of the plaintiff's options when a contract has multiple places of execution.

Specific rules have crystallised through judicial practice:

• Where money is expressly or impliedly payable at a particular place, that place is a forum of action. The place of payment has an organic connection to the contract and is as much a part of the cause of action as the place of signing.

• Where no place of payment is agreed upon, payment would be owed at the place where the creditor resides and works for gain — and that court therefore has jurisdiction.

• In the case of banking contracts, the obligation to repay arises at the branch where the account is kept, and the cause of action arises there.

• The revocation of a contract is itself part of the cause of action in a suit for breach, and the court at the place where revocation is communicated acquires jurisdiction.

The Illustration from Section 20

The Code itself provides a remarkably instructive illustration that directly addresses this problem. A resides at Delhi, B at Agra. B borrows money from A at Benaras and passes a promissory note payable at Benaras. A may sue B either at Benaras, where the cause of action arose, or at Agra, where B resides. But A cannot sue at Delhi, where A himself resides. Now, if the promissory note were made at Benaras but made payable at Amritsar, a part of the cause of action would arise at Benaras where the note was passed and a part at Amritsar where it was made payable — and A could, at his option, sue at either Benaras or Amritsar. This illustration elegantly captures the principle that when a contract is spread across places, every place that hosts an integral fact of the cause of action becomes a potential forum.

The Plaintiff's Right of Choice and the Concept of Substantial Cause of Action

When multiple places are involved, the plaintiff acquires a corresponding range of forums. Section 20(c) permits him to sue at any place where any part of the cause of action arises. The Supreme Court has, however, laid down an important qualification — a court's endeavour should be to locate the place where the cause of action has substantially arisen, rather than permitting the plaintiff to invoke a forum on the basis of a trivial or incidental connection. A remote or manufactured link to a particular place will not suffice. The connection must be to a material and integral fact without which the plaintiff's case cannot be maintained.

The Effect of Jurisdiction Clauses in Multi-Locational Contracts

Commercial contracts executed at multiple places often contain a jurisdiction clause — an agreement selecting a particular court to the exclusion of others. The law on this is settled. When more than one court has jurisdiction under Section 20 (as is usually the case in a multi-locational contract), the parties are entirely free to agree that disputes shall be tried exclusively before one of those courts. Such an agreement does not contravene Section 28 of the Contract Act and is not against public policy. However, three important limitations apply:

• The chosen court must be one that would otherwise have had jurisdiction under the Code — parties cannot by consent confer jurisdiction on a court that has none.

• The ouster clause must be clear and unambiguous. Where words like "shall alone have jurisdiction," "only," or "exclusively" are used, other courts are validly ousted. A permissive clause that merely names a place without exclusive language does not take away the concurrent jurisdiction of other courts.

• Where the cause of action arose in a place other than the chosen court, and all connecting factors substantially pointed to that other place, the courts have inferred that the jurisdiction clause was intended to be exclusive even without explicit language — as happened where the purchase order was placed at Bombay, accepted at Bombay, advance payment made at Bombay, and final payment was to be made at Bombay, leaving Delhi with no real part of the cause of action.

A Practical Summary of the Forums Available

Where a contract is executed at multiple places, the plaintiff may, subject to any exclusive jurisdiction clause, institute the suit in any of the following courts:

• The court at the place where the offer was accepted (the place of contract formation)

• The court at the place where the contract was to be performed (delivery, payment, service)

• The court at the place where the breach occurred or was communicated

• The court at the place where payment was expressly or impliedly due

• The court within whose jurisdiction the defendant resides or carries on business

Each of these is an independent basis of jurisdiction. The only constraint is that the plaintiff cannot sue in a court having no connection whatsoever with the facts — and where a jurisdiction clause has validly excluded certain courts, that clause governs the plaintiff's choice. What the Code does not permit, and what the courts have firmly rejected, is the plaintiff founding jurisdiction on nothing more than his own place of residence. The suit must go where the facts took place, not where the plaintiff finds it most convenient to litigate.