Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelgesellschaft m.b.H.
| Jurisdiction | England & Wales |
| Judge | Lord Wilberforce,Lord Fraser of Tullybelton,Lord Russell of Killowen,Lord Bridge of Harwich,Lord Brandon of Oakbrook |
| Judgment Date | 21 January 1982 |
| Judgment citation (vLex) | [1982] UKHL J0121-1 |
| Date | 21 January 1982 |
| Court | House of Lords |
[1982] UKHL J0121-1
Lord Wilberforce
Lord Fraser of Tullybelton
Lord Russell of Killowen
Lord Bridge of Harwich
Lord Brandon of Oakbrook
House of Lords
My Lords,
The appellants desire to sue in this country the respondents, an Austrian company, for breach of an alleged contract for the supply of steel. In order to do so, they must obtain leave to serve notice of their writ upon the respondents under one or other of the provisions of R.S.C. Order 11 Rule 1(1). Those relied upon are paragraphs ( f) and ( g). To satisfy ( f), the appellants must show that the contract was "made within the jurisdiction"; to come within ( g) they must establish that the action is in respect of a breach committed within the jurisdiction. The Court of Appeal has decided against the appellants under both paragraphs.
The question whether a contract was made within the jurisdiction will often admit of a simple answer: if both parties are in England at the time of making it, or if it is contained in a single document signed by both parties in England, there is no difficulty. But in the case of contracts involving negotiations, where one party is abroad, the answer may be difficult to find. Sophisticated analysis may be required to decide when the last counter offer was made into a contract by acceptance, or at what point a clear consensus was reached and by virtue of what words spoken or of what conduct. In the case of successive telephone conversations it may indeed be most artificial to ask where the contract was made: if one asked the parties, they might say they did not know—or care. The place of making a contract is usually irrelevant as regards validity, or interpretation, or enforcement. Unfortunately it remains in Order 11 as a test for purposes of jurisdiction, and courts have to do their best with it.
In the present case it seems that if there was a contract (a question which can only be decided at the trial), it was preceded by and possibly formed by a number of telephone conversations and telexes between London and Vienna, and there are a number of possible combinations upon which reliance can be placed. At this stage we must take the alternatives which provide reasonable evidence of a contract in order to see if the test is satisfied. There are two:
(i) A telex dated 3rd May 1979 from the respondents in Vienna, said to amount to a counter offer, followed by a telex from the appellants in London to the respondents in Vienna dated 4th May 1979, said to amount to an acceptance.
(ii) The above telex dated 3rd May 1979 from the respondents followed by action, by way of opening a letter of credit, said to have amounted to an acceptance by conduct.
The first of these alternatives neatly raises the question whether an acceptance by telex sent from London but received in Vienna causes a contract to be made in London, or in Vienna. If the acceptance had been sent by post, or by telegram, then, on existing authorities, it would have been complete when put into the hands of the post office—in London. If on the other hand it had been telephoned, it would have been complete when heard by the offeror—in Vienna. So in which category is a telex communication to be placed? Existing authority of the Court of Appeal decides in favour of the latter category, i.e. a telex is to be assimilated to other methods of instantaneous communication—see Entores Ltd. v. Miles Far East Corporation [1955] 2 Q.B. 327 C.A. The appellants ask that this case, which has stood for 30 years, should now be reviewed.
Now such review as is necessary must be made against the background of the law as to the making of contracts. The general rule, it is hardly necessary to state, is that a contract is formed when acceptance of an offer made by an offeror is communicated to the offeree. And if it is necessary to determine where a contract is formed (as to which I have already commented) it appears logical that this should be at the place where acceptance is communicated to the offeree. In the common case of contracts, whether oral or in writing inter praesentes, there is no difficulty; and again logic demands that even where there is not mutual presence at the same place and at the same time, if communication is instantaneous, for example by telephone or radio communication, the same result should follow.
Then there is the case—very common—of communication at a distance, to meet which the so called "postal rule" has developed. I need not trace its history: it has firmly been in the law at least since Adam v. Lindsell (1818) 1 B. & A. 681. The rationale for it, if left somewhat obscure by Lord Ellenborough, has since been well explained. Mellish L.J. in Harris case (1872) L.R. 7 Ch. 587, 594 ascribed it to the extraordinary and mischievous consequences which would follow if it were held that an offer might be revoked at any time until the letter accepting it had been actually received: and its foundation in convenience was restated by Thesiger L.J. in Household Fire Insurance Co. Ltd. v. Grant (1879) 4 Ex.D. 216, 223. In these cases too it seems logical to say that the place, as well as the time, of acceptance should be where (as when) the acceptance is put into the charge of the post office.
In this situation, with a general rule covering instantaneous communication inter praesentes, or at a distance, with an exception applying to non-instantaneous communication at a distance, how should communications by telex be categorised? In Entores the Court of Appeal classified them with instantaneous communications. Their ruling, which has passed into the textbooks, including Williston on Contracts, appears not to have caused either adverse comment, or any difficulty to business men. I would accept it as a general rule. Where the condition of simultaneity is met, and where it appears to be within the mutual intention of the parties that contractual exchanges should take place in this way, I think it a sound rule, but not necessarily a universal rule.
Since 1955 the use of telex communication has been greatly expanded, and there are many variants on it. The senders and recipients may not be the principals to the contemplated contract. They may be servants or agents with limited authority. The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or upon the assumption, that they will be read at a later time. There may be some error or default at the recipient's end which prevents receipt at the time contemplated and believed in by the sender. The message may have been sent and/or received through machines operated by third persons. And many other variations may occur. No universal rule can cover all such cases: they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie (see Household Fire Insurance v. Grant u.s. p.227 per Baggallay L.J. and Henthorn v. Fraser [1892] 2 Ch.27 per Lord Herschell).
The present case is, as Entores itself, the simple case of instantaneous communication between principals, and, in accordance with the general rule, involves that the contract (if any) was made when and where the acceptance was received. This was on 3rd May 1979 in Vienna.
The alternative argument under this head was that the contract was made by an offer made from Vienna (as above, on 3rd May 1979) and an acceptance by conduct in the United Kingdom. The conduct relied upon was the giving of instructions by the appellants to set up a letter of credit, as requested in the respondents' telex of 3rd May 1979. The appellants' telex of 4th May 1979 opened with the words "confirm having opened our irrevocable letter of credit No. 0761/79 on account of Midestrade Est., Chiasso, Switzerland …" Midestrade Est. is, it appears, the company behind the appellants—a fact which raises the question whether a letter of credit on their account satisfied the terms of the respondents' request. I need not come to a conclusion on this point because I am satisfied that the letter of credit was not opened in the United Kingdom. Instructions were indeed given by the appellants to their bank in the United Kingdom to open it, and that bank gave instructions on 4th May 1979 to their correspondent in Vienna, but these steps were between the appellants and their agents only. They could not amount, in my opinion, to an acceptance of the offer of 3rd May 1979. This took place, if at all, when the correspondent bank in Vienna notified the respondents: this they did in Vienna. On neither ground, therefore, can it be said that the contract was made within the jurisdiction and the case under subparagraph ( f) must fail.
That under subparagraph ( g) can be more shortly dealt with. The breach pleaded is that the defendants (respondents) "have not opened a performance bond and have delivered no steel" (Points of Claim paragraph 7). Each of these acts should have been performed outside the jurisdiction and failure to do them must be similarly located.
On both points, therefore, I find myself in agreement with the Court of Appeal, and the appeal must be dismissed.
My Lords,
I am in full agreement with the reasoning of my noble and learned friends, Lord Wilberforce and Lord Brandon of Oakbrook. I wish only to add a comment on the subject of where a contract is made, when it is made by an offer accepted by telex between parties in different countries. The question is whether acceptance by telex falls within the general rule that it requires to be notified to the offeror in order to be binding, or within the exception of the postal rule whereby it becomes binding when (and...
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