Entores Ltd v Miles Far East Corpn

For contracts negotiated through substantially instantaneous communications, including telephone and Telex, acceptance ordinarily takes effect only when received by the offeror. The contract is therefore made where that acceptance is received.

The postal acceptance rule is an exception founded on waiver, commercial convenience and the delay inherent in post. It does not govern instantaneous communications. Where non-receipt results from the offeror’s fault and the acceptor reasonably believes that acceptance was received, the offeror may be estopped from denying receipt.

An English company obtained leave to serve an American corporation outside the jurisdiction in an action for breach of a contract for copper cathodes. A Master granted leave, and Donovan J dismissed the corporation’s appeal.

The relevant negotiations took place by Telex between London and Amsterdam. A counter-offer sent from London was accepted by a message received there. The corporation appealed on the ground that the contract was made in Holland rather than England.

The central issue was where a contract concluded through virtually instantaneous Telex communications is made for the purpose of service outside the jurisdiction.

1. Appeal dismissed unanimously, with costs. Denning, Birkett and Parker LJJ held that the contract was made in London because the acceptance was received there. The case therefore fell within the rule permitting service outside the jurisdiction for an action concerning breach of a contract made within the jurisdiction.

2. Denning LJ held that instantaneous communications stand on a different footing from post. A contract made by Telex is complete only when the offeror receives the acceptance, and it is made at the place of receipt. If a telephone line fails or a Telex message is not received, no contract ordinarily arises until the acceptance is successfully repeated.

3. Birkett LJ agreed that the ordinary rule requires acceptance to be communicated to the offeror. The postal cases did not apply to Telex communications. Receipt by the London Telex machine notified the offeror of acceptance and completed the contract in London.

4. Parker LJ likewise applied the ordinary notification rule stated in Carlill v Carbolic Smoke Ball Co. The postal rule is an exception arising because the offeror expressly or impliedly waives actual notification and accepts another method of acceptance. Its justification is convenience where parties communicate at a distance. That justification does not extend to communications which are, in practical terms, instantaneous.

5. Denning LJ added that an offeror whose own fault prevents actual receipt may be estopped from denying receipt where the acceptor reasonably believes that the message arrived. Without fault by the offeror, reasonable belief alone does not complete the contract.

6. Denning LJ also considered that later contractual variations were accepted by conduct in London and inclined to the view that English law governed because England had the closest connection. The court refused leave to appeal.

1. Court of Appeal: Dismissed the defendants’ appeal unanimously, with costs, and refused leave to appeal.
2. High Court (Donovan J): Dismissed the defendants’ appeal from the Master’s order.
3. Master: Granted the plaintiffs leave to serve notice of the writ on the defendants outside the jurisdiction.