Entores Ltd v Miles Far East Corporation - [

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All England Law Reports/1955/Volume 2 /Entores Ltd v Miles Far East Corporation - [1955] 2 AllER 493

[1955] 2 All ER 493

Entores Ltd v Miles Far East Corporation

COURT OF APPEAL

DENNING, BIRKETT AND PARKER LJJ

2, 3, 17 MAY 1955

Contract - Service of writ - Service out of jurisdiction - Contract - Whether made in jurisdiction -Acceptance by Telex in London.

Practice - Service - Service out of jurisdiction - Contract - Whether made in jurisdiction -Acceptance by Telex in London - Message from Amsterdam to London.

An English company in London was in communication with a Dutch company in Amsterdam(acting as agent for an American principal) by Telex, each company having in its office ateleprinter machine by means of which, on the two machines being connected by the Post Office,a message typed by one company's clerk was simultaneously and automatically typed out onpaper by the other's machine. The English company received an offer of goods from the Dutchcompany by Telex and made a counter-offer which the Dutch company accepted by Telex. The

English company applied under RSC, Ord 11, r 1, for leave to serve notice of the writ in an actionfor damages for breach of the contract on the American principal out of the jurisdiction.

Held - the contract was made at the place where the English company received the acceptance,which in this case was London, and therefore the contract was made within the jurisdiction andleave for service out of the jurisdiction could be properly given under RSC, Ord 11, r 1.

Observations of Hill J in Newcomb v De Roos (1859) (2 E & E at p 275) disapproved.

Appeal dismissed.

Notes

An offer is accepted by the communication of the acceptance to the offeror; see 8 Halsbury'sLaws (3rd Edn) 73, para 126; and for cases on the subject, see 12 Digest(Repl) 72, 397-406.The rule is modified where contracts are made through the post, for an offer made by letter maybe accepted by letter and the Post Office is in effect the agent of the offeror for the purpose ofcommunicating the acceptance; see 8 Halsbury's Laws (3rd Edn) 78, 79. In the present case theCourt of Appeal do not extend this exception from the general rule to the case of contracts madeby the Post Office Telex services.


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Cases referred to in judgments

Newcomb v De Roos (1859), 2 E & E 271, 29 LJQB 4, 1 LT 6, 121 ER 103, 12 Digest(Repl)62, 339.

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, 62 LJQB 257, 67 LT 837, 57 JP 325, 12Digest(Repl) 59, 323.

Adams v Lindsell(1818), 1 B & Ald 681, 106 ER 250, 12 Digest(Repl) 86, 477.

Dunlop v Higgins (1848), 1 HL Cas 381, 9 ER 805, 12 Digest(Repl) 86, 470.

Re Imperial Land Co of Marseilles, Harris' Case (1872), 7 Ch App 587, 41 LJCh 621, 26 LT

781, 12 Digest(Repl) 85, 465.

Household Fire & Carriage Accident Insurance Co v Grant(1879), 4 ExD 216, 48 LJQB 577,41 LT 298, 44 JP 152, 12 Digest(Repl) 72, 398.

Appeal

The defendants appealed against an order of Donovan J dated 3 March 1955,dismissing an appeal from an order of Master Lawrence, dated 17 February 1955,dismissing an application by the defendants for the discharge of an order dated 17December 1954, giving liberty to the plaintiffs to serve notice of a writ in an action for

damages for breach of contract on the defendants out of the jurisdiction (in New York).The defendants contended that the contract, which was made[1955] 2 All ER 493 at 494

by Telex, the messages being conveyed between two teleprinter machines owned bythe two companies and connected up by the Post Office, was made out of the

jurisdiction and, therefore, could not be made the subject of leave for service out of thejurisdiction under RSC, Ord 11, r 1.

Gerald Gardiner QC and S B R Cooke for the defendants.

Maurice Lyell QC and D Lloyd for the plaintiffs.

Cur adv vult

17 May 1955. The following judgments were delivered.

DENNING LJ.


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This is an application for leave to serve notice of a writ out of the jurisdiction. The grounds arethat the action is brought to recover damages for breach of a contract made within the jurisdictionor by implication to be governed by English law.

The plaintiffs are an English company. The defendants are an American corporation with agentsall over the world, including a Dutch company in Amsterdam. The plaintiffs say that the contractwas made by Telex between the Dutch company in Amsterdam and the plaintiffs in London.Communications by Telex are comparatively new. Each company has a teleprinter machine in itsoffice, and each has a Telex number like a telephone number. When one company wishes tosend a message to the other, it gets the Post Office to connect up the machines. Then a clerk atone end taps the message on to his machine just as if it were a typewriter, and it isinstantaneously passed to the machine at the other end, which automatically types the messageon to paper at that end.

The relevant Telex messages in this case were as follows: 8 September 1954: Dutch company:

"Offer subject cable confirmation for account our associates Miles Far East Corporation Tokyo up to400 tons Japanese cathodes sterling 240 longton c.i.f. shipment Mitsui Line Sept. 28 or Oct. 10 paymentby Lc. ... Your reply Telex Amsterdam 12174 or phone 31490 before 4 p.m. invited."

Plaintiffs:

"Accept 100 longtons cathodes Japanese astm specification shipment latest Oct. 10 sterling 1 333sterling 239.10.0 longton c.i.f. London/Rotterdam optional bladings payment letter credit stop Pleaseconfirm latest tomorrow."

Dutch company:

"We received O.K. Thank you."

9 September 1954: Plaintiffs:

"Regarding our telephone conversation a few minutes ago we are pleased to note that our bid for 100tons Japanese cathodes for payment in French francs has been accepted stop Further we note thatthere is a query on the acceptance of our bid for 100 tons payment in sterling and you are ascertainingthat your Tokyo office will confirm the price to be longtons we therefore await to hear from you further."

10 September 1954: Plaintiffs:

"Is the price for the sterling cathodes understood to be per longton by Japan as you were going to findthis out yesterday?"

Dutch company:

"Yes, price 239.10. per longton."


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At that step there was a completed contract by which the defendants agreed to supply one

hundred tons of cathodes at a price of 239 10s a ton. The offer was sent by Telex from Englandoffering to pay 239 10s for one hundred tons and accepted by Telex from Holland. The questionfor our determination is: Where was the contract made?

When a contract is made by post it is clear law throughout the common law countries that theacceptance is complete as soon as the letter of acceptance is

[1955] 2 All ER 493 at 495

put into the post box, and that is the place where the contract is made. But there is no clear ruleabout contracts made by telephone or by Telex. Communications by these means are virtuallyinstantaneous and stand on a different footing.

The problem can only be solved by going in stages. Let me first consider a case where twopeople 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 isdrowned by an aircraft flying overhead. There is no contract at that moment. If he wishes to makea contract, he must wait till the aircraft is gone and then shout back his acceptance so that I canhear what he says. Not until I have his answer am I bound. I do not agree with the observations ofHill J in Newcomb v De Roos (2 E & E at p 275).

Now take a case where two people make a contract by telephone. Suppose, for instance, that Imake an offer to a man by telephone and, in the middle of his reply, the line goes "dead" so that Ido not hear his words of acceptance. There is no contract at that moment. The other man maynot know the precise moment when the line failed. But he will know that the telephone

conversation was abruptly broken off, because people usually say something to signify the end ofthe conversation. If he wishes to make a contract, he must therefore get through again so as tomake sure that I heard. Suppose next that the line does not go dead, but it is nevertheless soindistinct that I do not catch what he says and I ask him to repeat it. He then repeats it and I hearhis acceptance. The contract is made, not on the first time when I do not hear, but only thesecond time when I do hear. If he does not repeat it, there is no contract. The contract is onlycomplete when I have his answer accepting the offer.

Lastly take the Telex. Suppose a clerk in a London office taps out on the teleprinter an offer whichis immediately recorded on a teleprinter in a Manchester office, and a clerk at that end taps outan acceptance. If the line goes dead in the middle of the sentence of acceptance, the teleprintermotor will stop. There is then obviously no contract. The clerk at Manchester must get throughagain and send his complete sentence. But it may happen that the line does not go dead, yet themessage does not get through to London. Thus the clerk at Manchester may tap out his messageof acceptance and it will not be recorded in London because the ink at the London end fails orsomething of that kind. In that case the Manchester clerk will not know of the failure but theLondon clerk will know of it and will immediately send back a message "not receiving". Then,when the fault is rectified, the Manchester clerk will repeat his message. Only then is there acontract. If he does not repeat it, there is no contract. It is not until his message is received thatthe contract is complete.


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made at the place where first completed, not at the place where the variations are agreed. Butwhether this be so or not, I think the variations were accepted by conduct in London and weretherefore made in England. Both the original contract and ensuing variations were made inEngland and leave can properly be given for service out of the jurisdiction.

I am inclined to think also that the contract is by implication to be governed by English law,because England is the place with which it has the closest connection. I think the decisions of themaster and the judge were right and I would dismiss the appeal.

BIRKETT LJ.

I can state very briefly my agreement with the judgment just delivered by my Lord. The plaintiffswished to bring an action against Miles Far East Corporation for damages for breach ofcontract. The plaintiffs are a company registered and resident in England, the registered officebeing in the city of London. The defendants are a corporation with headquarters at 150,Broadway, New York, in the State of New York. In September, 1954, a series of communicationspassed between the plaintiffs and the defendants by means of an equipment called Telex service,consisting of a teleprinter and signalling unit and certain necessary subsidiary apparatuspossessed by both parties. The communications are virtually instantaneous, for the moment oneparty types out the message the other party ought to be receiving it in the ordinary course ofthings.

[1955] 2 All ER 493 at 497

The plaintiffs claim they entered into a contract with the defendants for the purchase of coppercathodes and they seek to issue a writ claiming damages for the breach of the contract by thedefendants. They were given leave to serve notice of a writ on the defendants in New York out of

the jurisdiction. This appeal is against a decision of Donovan J dismissing the appeal against theorder giving leave.

The plaintiffs contend that the contract was made in England and therefore comes within RSC,Ord 11, r 1, whereby the court or a judge may allow service of a writ outside the jurisdiction,where the action is one brought against a defendant for damages for breach of a contract madewithin the jurisdiction. The defendants say the contract was not made in England but was made inHolland. There were several Telex communications but the important ones for this appeal are thecounter-offer of 8 September 1954, made by the plaintiffs in London, and the acceptance from thedefendants received in London also, on 10 September 1954.

I am of opinion that in the case of Telex communications (which do not differ in principle from the

cases where the parties negotiating a contract are actually in the presence of each other) therecan be no binding contract until the offeror receives notice of the acceptance from the offeree.Counsel for the defendants submitted that the proper principle to be applied to a case like thepresent could be thus stated: "If A makes an offer to B, there is a concluded contract when B hasdone all that he can do to communicate his acceptance by approved methods." He furthersubmitted that great difficulties would arise if Telex communications were treated differently fromacceptances by post or telegram.

In my opinion the cases governing the making of contracts by letters passing through the post


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have no application to the making of contracts by Telex communications. The ordinary rule of law,to which the special considerations governing contracts by post are exceptions, is that theacceptance of an offer must be communicated to the offeror and the place where the contract ismade is the place where the offeror receives the notification of the acceptance by the offeree. If a

Telex instrument in Amsterdam is used to send to London the notification of the acceptance of anoffer, the contract is complete when the Telex instrument in London receives the notification of theacceptance (usually at the same moment that the message is being printed in Amsterdam) andthe acceptance is then notified to the offeror, and the contract is made in London. Such were thefacts in this appeal, and I agree with the judgment of Donovan J and this appeal should bedismissed.

PARKER LJ.

I have come to the same conclusion, and would only add a few words on the basis that the

contract sued on is that created by the Telex messages. As was said by Lindley LJ in Carlill vCarbolic Smoke Ball Co ([1893] 1 QB at p 262):

"Unquestionably, as a general proposition, when an offer is made, it is necessary in order to make abinding contract, not only that it should be accepted, but that the acceptance should be notified."

Bowen LJ said (ibid, at p 269):

"One cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified tothe person who makes the offer, in order that the two minds may come together. Unless this is done thetwo minds may be apart, and there is not that consensus which is necessary according to the Englishlaw--I say nothing about the laws of other countries--to make a contract."

Accordingly, as a general rule, a binding contract is made at the place where the offeror receivesnotification of the acceptance, that is where the offeror is.

[1955] 2 All ER 493 at 498

Since, however, the requirement as to actual notification of the acceptance is for the benefit of theofferor, he may waive it and agree to the substitution for that requirement of some other conductby the acceptor. He may do so expressly, as in the advertisement cases, by intimating that he iscontent with the performance of a condition. Again he may do so impliedly by indicating acontemplated method of acceptance, eg, by post or telegram. In such a case he does notexpressly dispense with actual notification, but he is held to have done so impliedly on grounds of

expediency. Thus inAdams v Lindsellthe court pointed out that, unless this were so (1 B & Ald atp 683):

"... no contract could ever be completed by the post. For if the defendants were not bound by their offerwhen accepted by the plaintiffs till the answer was received, then the plaintiffs ought not to be bound tillafter they had received the notification that the defendants had received their answer and assented to it.

And so it might go on ad infinitum."

Again in Dunlop v Higgins Lord Cottenham LC pointed out that (1 HL Cas at p 400):


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"Common sense tells us that transactions cannot go on without such a rule ... "

and in Re Imperial Land Co of Marseilles, Harris' Case, Mellish LJ (7 Ch App at p 594) referred tothe mischievous consequences which would follow in commerce if no such rule was adopted. Tothe same effect is the judgment of Thesiger LJ in Household Fire & Carriage Accident InsuranceCo v Grant, in which he points out (4 Ex D at pp 223, 224) that, where the parties are at adistance, the balance of convenience dictates that the contract shall be deemed complete whenthe acceptance is handed to the Post Office.

Where, however, the parties are in each other's presence or, though separated in space,communication between them is in effect instaneous, there is no need for any such rule ofconvenience. To hold otherwise would leave no room for the operation of the general rule thatnotification of the acceptance must be received. An acceptor could say: "I spoke the words ofacceptance in your presence, albeit softly, and it matters not that you did not hear me"; or: "Itelephoned to you and accepted and it matters not that the telephone went dead and you did not

get my message". Though in both these cases the acceptor was using the contemplated, orindeed the expressly indicated, mode of communication, there is no room for any implication thatthe offeror waived actual notification of the acceptance. It follows that I cannot agree with theobservations of Hill J in Newcomb v De Roos (2 E & E at p 275).

So far as Telex messages are concerned, though the dispatch and receipt of a message is notcompletely 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 thegeneral rule that there is no binding contract until notice of the acceptance is received by theofferor. That being so and, since the offer--a counter-offer--was made by the plaintiffs in Londonand notification of the acceptance was received by them in London, the contract resultingtherefrom was made in London. I would accordingly dismiss the appeal.

Appeal dismissed. Leave to appeal to the House of Lords refused.

Solicitors: Allen & Overy (for the defendants); Smiles & Co (for the plaintiffs).

F A Amies Esq Barrister.


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Entores Ltd v Miles Far East Corporation - [