Brinkibon v Stahlag Steel [1983] 2 AC 34

KEY POINTS

• Affirming Entores v Miles Far East Co., with the exception of the postal rule, which states that a contract is formed when and where the response is mailed to the post office, a contract is made when and where the acceptance is received if communication is immediate.

FACTS

• Brinkibon, a UK company, entered into a contract with Stahlag Stahl, an Austrian company, for the sale of steel.

  • The negotiations between the two parties involved a series of telex communications.

  • The acceptance of Stahlag's offer was communicated by Brinkibon to Stahlag via telex, a form of long-distance communication, to Stahlag's office in Vienna, Austria.

• After the agreement was made, a dispute occurred between the parties, and Brinkibon moved to sue Stahlag.

  • However, they needed to prove that the contract was created in England in order to serve legal papers on a party who was outside of England’s jurisdiction, which could only be done if the contract was created in England.

JUDGEMENT

• The court ruled in favour of Stahlag Steel. The contract was formed in Vienna.

COMMENTARY

• Especially for international trade and contract formation, this case has real-world ramifications. 

• It was emphasised that in order to ascertain the applicable law and the validity of a contract, parties engaging in cross-border transactions must be aware of where and how acceptance happens during instantaneous communication.

ORIGINAL ANALYSIS

• Defendant, in Austria, made a counter-offer to Plaintiff, in the UK, which was accepted by telex message.

• HL held that the contract was within Austrian jurisdiction since, with instantaneous communications, the contract was formed where and when the acceptance was communicated. 

Lord Wilberforce

• Telex is instantaneous communication and there is a general rule that contracts formed by instantaneous communication have effect where and when the offer is accepted, and:

Where it appears to be within the mutual intention of the parties that contractual exchanges should take place in this way

• This is the case here.

• However the rule is NOT universal - e.g.:

  • Cases where the recipient is not the principal offeror but a messenger/ agent with limited authority

  • When the message doesn’t reach the principal immediately, such as a telex message outside office hours

  • Where the machine is operated through 3rd parties

  • Where there is a default at the recipient’s end.

• In these cases, the point at which acceptance takes effect is determined with reference to the parties’ intentions, sound business practice, where the risks ought to lie etc. i.e. a case-by-case basis.

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CW: this draws a distinction between what CW terms “two-way” instantaneous communication i.e. where the “conditions of simultaneity are met”- i.e. where both parties are present and the general rules apply; and “one-way” instantaneous communications where the general rule might not apply if the recipient at the other end is not present to receive the acceptance.

She says the courts are moving towards an approach of “when a reasonable offeror would access the message, taking account of all circumstances”. In Tenax SS Co Ltd v The Brimnes (1975) the court held that a revocation of an offer, sent by telex, would be effective as soon as it was received on the telex machine if sent during normal office hours to the place of business, whether or not it remained unread. 

RELATED CASES

• Entores v Miles Far East Co.