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

Entores made an offer via Telex from London, which was accepted by Telex from Amsterdam. The Court of Appeal held that for instantaneous communications like Telex or telephone, a contract is complete when acceptance is received by the offeror, not when sent. The contract was therefore made in London where acceptance was received.

Facts

Entores Ltd, an English company, entered into negotiations with Miles Far East Corporation, an American corporation with agents including a Dutch company in Amsterdam. The parties communicated via Telex, a system allowing virtually instantaneous teleprinter communications. On 8th September 1954, the Dutch company made an offer via Telex for Japanese copper cathodes. Entores responded with a counter-offer from London. On 10th September 1954, the Dutch company confirmed acceptance of the counter-offer at £239.10s.0d. per longton. Entores subsequently sought to serve a writ for breach of contract on Miles in New York, claiming the contract was made in England.

Issues

The central issue was where the contract was made. Specifically, the Court had to determine whether the postal rule (acceptance complete upon posting) applied to instantaneous communications like Telex, or whether the general rule (acceptance complete upon receipt) should apply.

Judgment

Lord Justice Denning

Lord Justice Denning analysed the nature of instantaneous communications by considering various scenarios involving verbal communication, telephone, and Telex. He concluded that for instantaneous communications, the contract is only complete when acceptance is received by the offeror:

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.

He noted the importance of international consistency, observing that most European countries applied the same rule. He found the contract was made in London where the acceptance was received.

Lord Justice Birkett

Lord Justice Birkett agreed, stating that the postal rule cases had no application to Telex communications. He affirmed:

The ordinary rule of law, to which the special considerations governing contracts by post are exceptions, is that the acceptance of an offer must be communicated to the offeror and the place where the contract is made is the place where the offeror receives the notification of the acceptance by the offeree.

Lord Justice Parker

Lord Justice Parker concurred, citing Carlill v Carbolic Smoke Ball Co for the general proposition that acceptance must be notified to the offeror. He explained that the postal rule was an exception based on expediency, but where parties communicate instantaneously there is no need for such a rule:

So far as Telex messages are concerned, though the despatch and receipt of a message is not completely instantaneous the parties are to all intents and purposes in each other’s presence just as if they were in telephonic communication, and I can see no reason for departing from the general rule that there is no binding contract until notice of the acceptance is received by the offeror.

Implications

This case established the important distinction between postal acceptance and acceptance via instantaneous communications. For telephone, Telex, and by extension modern electronic communications, acceptance is effective only upon receipt by the offeror. This determines both when the contract is formed and where it is formed for jurisdictional purposes. The decision has significant implications for international commercial contracts using modern communication methods.

Verdict: Appeal dismissed. The Court of Appeal held that the contract was made in London where the acceptance was received via Telex, and therefore leave to serve the writ out of the jurisdiction was properly granted.

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