Entores Ltd v Miles Far

East Corporation

Presented byAshutosh

Sharma

introduction

Date - 17th May 1955.

Place - Room 392, Royal Courts of Justice, and 2,N new Square, Lincoln's Inn. London, W.C.2.

Between - ENTORES LIMITED -v- MILES FAR EAST CORPORATION

BAIL II Citation Number - [1955] EWCA Civ 3

appeared on behalf of the Appellants - MR GERALD GARDINER, Q.C. and MR S.B.R. COOKE(Defendants)

appeared on behalf of the Respondents - MR MAURICE LYELL, Q.C. and MR DENNIS LLOYD(Plaintiffs)

Facts

Entores was a London-based trading company that sent an offer by telex for the purchase of copper cathodes from a company based in Amsterdam. The Dutch company sent an acceptance by telex. The contract was not fulfilled and so Entores attempted to sue the owner of the Dutch company for damages. The controlling company, Miles Far East Corp, was based in the US and under English law Entores could only bring the action in the US (serve notice of writ outside the jurisdiction) if it could prove that the contract was formed within the jurisdiction, i.e. in London rather than Amsterdam.

Explanation

A series of telex messages were sent between Entores Ltd, an English company, and Miles Far East Corporation, a Dutch company. Miles Far East Corporation made an offer to supply cathodes to Entores Ltd. Entores Ltd made a counter offer to buy cathodes from Miles Far East Corporation at a price of £239 10s a ton. The offer was accepted by Miles Far East Corporation sending a Telex from Holland. The issue before the court was 'Where was the contract made?'. This was important because Entores Ltd wished to sue Miles Far East Corporation in the English courts but could only do so if the contract was made in England and not in Holland.

Rule

Acceptance on receipt of notice principle. However, it was ruled that it would make no sense for an instantaneous reply to an offer to be deemed to be accepted at the place of origination of acceptance, because this would conflict with the law as regards acceptance by telephone, etc.

two people make a contract by word of mouth in the presence of one another. Suppose, for instance, that I shout an offer to a man across a river or a courtyard but I do not hear his reply because it is drowned by an aircraft flying overhead. There is no contract at that moment.

BUTIf he wishes to make a contract ? he must wait till the aircraft is gone and then shout back his acceptance so that I can hear what he says

Judgment

Denning LJ, delivering the leading judgment.He said that the postal rule could not apply toinstantaneous communications, such astelephone or telex:

if a phone line "went dead" just before the offeree said "yes", it would be absurd to assume that the contract was formed and the parties would not have to call each other back. The same applied to telex. Since the contract was therefore only formed when and where the telex was received, the place of formation was London.

conclusion

The contract is only complete when the acceptance is received by the offeror”.An agreement made in one country and amended in another should not be regarded as having been made in the second country.

The acceptance was deemed to have been made in London, when the telex was read

In instantaneous communication (unlike in the mail), the contract is complete the moment the acceptance is RECEIVED and at the place where the acceptance is received.