Entores Ltd v Miles Far East Corporation [1955] EWCA Civ 3 (17 May 1955)

An English company sent an offer by telex to Holland; the acceptance was telexed back to London. The court held that for instantaneous communications, a contract is formed where and when acceptance is received, establishing London as the place of contract.

Facts

The plaintiffs, Entores Ltd., were an English company based in London. The defendants, Miles Far East Corporation, were an American corporation with agents in Amsterdam, Holland. The plaintiffs in London made an offer by Telex to the defendants’ agents in Amsterdam for the purchase of a quantity of copper cathodes. The defendants’ agents in Amsterdam sent a Telex message back to the plaintiffs in London accepting that offer. A dispute later arose between the parties, and the plaintiffs sought to bring an action for breach of contract in the English courts. To do so, they required leave to serve notice of the writ out of the jurisdiction. Under the Rules of the Supreme Court, this could be granted if the contract was made within the jurisdiction (i.e., in England).

Issues

The central legal issue was to determine where the contract was formed. This required the court to decide whether the established ‘postal rule’ of acceptance (where a contract is formed at the moment and place the letter of acceptance is posted) applied to instantaneous forms of communication like Telex. If the postal rule applied, the contract would have been made in Amsterdam where the acceptance was sent. If it did not apply, and acceptance was only effective upon receipt, the contract would have been made in London where the acceptance was received.

Judgment

Lord Denning’s Reasoning

Lord Justice Denning delivered the leading judgment, analysing the rules of offer and acceptance through various analogies to distinguish between instantaneous and non-instantaneous communication. He reasoned that the underlying principle for the postal rule was that the acceptor had done all they could and had no way of knowing if their acceptance had reached the offeror. This was not the case with instantaneous methods.

He used the following illustrations:

• If two people make a contract by shouting across a river and the reply is drowned out by an aircraft, no contract is formed. The offeree must repeat their acceptance to ensure it is heard.
• Similarly, if a telephone call is used and the line goes dead during the acceptance, the offeree must call back to complete the contract.

He applied this logic to Telex, which he categorised as a form of instantaneous communication. If the teleprinter line went dead, the sender would know and would have to resend the message. The onus is on the communicator to ensure their message is received. He contrasted this with the post, stating:

My conclusion is, that the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offeror: and the contract is made at the place where the acceptance is received.

Lord Denning also considered a scenario where the non-receipt of the message is the fault of the offeror, for example, if their Telex machine was out of ink. In such a case, the offeror might be estopped from claiming they did not receive the acceptance. However, in the present case, there was no such fault; the communication was successful and instantaneous.

So far as Telex messages are concerned, though the dispatch and receipt are virtually instantaneous, the rule is, I think, a little different from the rule about the post. The sender is not sure that his message has been received until he gets the answer back.

The court concluded that since Telex was an instantaneous method of communication, the postal rule did not apply. The contract was therefore completed when the acceptance was received by the plaintiffs in London.

Concurring Judgments

Lord Justice Birkett and Lord Justice Parker agreed with Lord Denning. Parker L.J. emphasised that the exception of the postal rule should not be extended to new methods of communication and that the general principle—that acceptance must be communicated to the offeror—should apply.

Implications

The decision in Entores established the ‘receipt rule’ for instantaneous communications. It created a crucial distinction between instantaneous methods (like telephone and Telex) and non-instantaneous methods (like posting a letter). This principle has become foundational in modern contract law, extending to faxes and, with some judicial development, to email and other forms of electronic messaging. The case provides legal certainty by confirming that for near-instant transactions, the contract is formed at the location of the offeror, which helps determine jurisdiction and the governing law of the contract in an increasingly globalised commercial environment.

Verdict: Appeal dismissed. The judgment granting leave to serve the writ out of the jurisdiction was affirmed.

Source: Entores Ltd v Miles Far East Corporation [1955] EWCA Civ 3 (17 May 1955)