Entores v Miles Far East Corp [1955] 2 QB 327

KEY POINTS

• In the context of instant messaging, such as Telex in this case, the usual postal rule of acceptance did not apply. Instead, acceptance was deemed to occur when the Telex message was received. As a result, the contract was established in London.

• The contract is deemed valid only upon the receipt of the acceptance by the offeror, and the contract is considered formed at the location where the acceptance is received.

FACTS

• The plaintiff, Entores Ltd, a company based in England, sent an offer by telex to the defendant, Miles Far East Co, a company based in Amsterdam, for the purchase of goods. The offer was accepted by telex by the defendant, who received and confirmed the acceptance in Amsterdam.

• However, a dispute arose as to the formation of the contract, as the plaintiff contended that the contract was concluded in England upon sending the acceptance, while the defendant argued it was formed in Amsterdam upon receiving the acceptance.

• Since the contract was not fulfilled, Entores sought to sue the owner of Miles Far East Co for damages. However, being a UK-based controlling company, Entores could only initiate the legal action in the UK if it could demonstrate that the contract was formed within the UK, specifically in London, rather than in Amsterdam.

• The issue in this case is which between Dutch or English law is applicable.

JUDGMENT

• English law shall prevail in this case.

COMMENTARY

• The ruling in Entores v Miles Far East Co serves as an essential guide for contract law practitioners, especially in the era of instant communication. It clarifies that the instantaneous communication rule prevails when determining the moment of acceptance for contracts concluded via telephone, telex, or similar methods.

ORIGINAL ANALYSIS

• Plaintiff, in the UK, made an offer to Defendant in Holland by telex and Defendant accepted by telex message. Plaintiff claimed that the contract was to be governed by UK jurisdiction and Defendant claimed it was in Dutch jurisdiction. CA said that it was to be in UK jurisdiction because in cases of instantaneous communication (UNLIKE postal communication) the contract only has effect once it is received.

• This is because of the general rule that a contract has effect once acceptance is communicated, whereas postal acceptance is an exception for policy reasons. Telex is analogous to phone conversation: if someone phoned acceptance but there was a glitch in the phone and one couldn’t hear the acceptance then there would be no contract - why should it be different for telex?

• In cases of instantaneous communication, a communication breakdown only voids the acceptance of the offer where it is the offeree who should have detected and rectified the problem.

Lord Denning’s Examples

• If a noisy aircraft drowns out the spoken acceptance in a conversation where both are present, the offeree’s acceptance is void and must be repeated.

• If a phone goes dead before acceptance is completed, the acceptance is void and must be repeated.

• If the offeror’s fax runs out of ink and can’t print the offeree’s acceptance, the acceptance is valid and there is contract.

• He also said that where neither party is at fault and the acceptance is not received by the offeror, there is no contract i.e. the simultaneity rule favours the offeror.

RELATED CASES

• Brinkibon v Stahlag Steel