Entores Ltd v Miles Far East Corporation

JurisdictionEngland & Wales
CourtCourt of Appeal
Judgment Date17 May 1955
Judgment citation (vLex)[1955] EWCA Civ J0517-1

[1955] EWCA Civ J0517-1

In The Supreme Court of Judicature

Court of Appeal


Lord Justice Denning,

Lord Justice Birkett and

Lord Justice Parker

Entores Limited
Miles Far East Corporation

MR GERALD GARDINER, Q.C. and MR S.B.R. COOKE (instructed by Messrs Allen & Overy) appeared on behalf of the Appellants (Defendants).

MR MAURICE LYELL, Q.C. and MR. DENNIS LLOYD (instructed by Messrs Smiles & Co.) appeard on behalf of the Respondents (Plaintiffs).


This is an application for leave to serve notice of a writ out of the jurisdiction. The grounds are that the action is brought to recover damages for breach of a contract made with in the jurisdiction or by implication to be governed by English law.


The Plaintiffs are an English company. The Defendants are an American corporation with agents all over the worldincluding a Dutch company in Amsterdam. The Plaintiffs say that the contract was made by Telex between the Dutch company in Amsterdam and the English company in London. Communications by Telex are comparatively new. Each company has a teleprinter machine in its office; and each has a Telex number like a telephone number. When one company wishes to send a message to the other, it gets the Post Office to connect up the machines. Then a clerk at one end taps the message on to his machine just as if it were a typewriter and it is instantaneously passed to the machine at the other end which automatically types the message on to paper at that end.


The relevant Telex messages in this case were as follows: 8th September, 1954: Dutch company: "Offer for account our associates Miles Far East Corporation Tokyo up to 100 tons Japanese cathodes sterling 240 longton c.i.f shipment Mitsui Line September 28th or October 10th payment by letter of credit. Your reply Telex Amsterdam 12174 or phone 31490 before 4 p.m.invited". English company: "Accept 100 longtons cathodes Japanese shipment latest October 10th sterling 239. 10. 0. longton c.i.f. London Rotterdam payment letter of credit stop please confirm latest tomorrow". Dutch company: "We received O.K. Thank you". 9th September, 1954: English company: "Regarding our telephone conversation a few minutes ago we note that there is a query on the acceptance of our bid for 100 tons payment in sterling and you are as certaining that your Tokyo office will confirm the price to be longton we therefore await to hear from you further". 10th September, 1954: English company: "Is the price for the sterling cathodes understood to be for longton by Japan as you were going to find this out yesterday?". Dutch company: "Yes, price 239.10.0. for longton"


At that step there was a completed contract by which the Defendants agreed to supply 100 tons of cathodes at a price of £ 239. 10s. 0d. a ton. The offer was sent by Telex from Englandoffering to pay £239. 10s. 0d. for 100 tons and accepted by Telex from Holland. The question for 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 the acceptance is complete as soon as the letter is put into the post box, and that is the place where the contract is made. But there is no clear rule about contracts made by telephone or by Telex. Communications by these neans are virtually instantaneous and stand on a different footing.


The problem can only be solved by going in stages. Let me first consider a case where 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. If 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. Not until I have his answer am I bound. I do not agree with the observations of Mr Justice Hill in ( Newcomb v. De Roos 1859) 2, Ellis & Ellis at page 275.


Now take a case where two people make a contract by telephone. Suppose, for instance, that I make an offer to a man by telephone and, in the middle of his reply, the line goes "dead" so that I do not hear his words of acceptance. There is no contract at that moment. The other man may not 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 of the conversation. If he wishes to make a contract, he must therefore get through again so as to make sure that I heard. Suppose next that the line does not go dead, but it is nevertheless so indistinct that I do not catch what he says and I ask him to repeat it. He then repeats it and I hear his acceptance. The contract is made, not on the firsttime when I do not hear, but only the second time when I do hear. If he does not repeat it, there is no contract. The contract is only complete 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 which is immediately recorded on a teleprinter in a Manchester office, and a clerk at that end taps out an acceptance. If the line goes dead in the middle of the sentence of acceptance, the teleprinter motor will stop. There is then obviously no contract. The clerk at Manchester must get through again and send his complete sentence. But it may happen that the line does not go dead, yet the message does not get through to London. Thus the clerk at Manchester may tap out his message of acceptance and it will not be recorded in London because the ink at the London end fails or something of that kind. In that case the Manchester clerk will not know of the failure but the London 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 a contract. If he case not repeat i t, there is no contract. It is not until his message is received that the contract is complete.


In all the instances I have taken so far, the man who sens the message of acceptance knows that it has not been receive or he has reason to know it. So he must reapeat it. But suppose tht he does not know that his message did not get home. He thinks it has. This may happen if the listenor on the telephone does not catch the words of acceptance, but nevetheless does not trouble to ask for them to be reported: or the ink on the teleprinter fails at the receiving end, but the clerk does not aks for the message to be repeated: so that the man who sends an acceptance reasonably believes that his message has been received. The offerer in such circumstances is clearly bound, because he will be estopped from saying that he did not receive the message of accepteance. It is his own fault that he did not get it. But ifthere should be a case where the offeror without any fault on his part does not receive the message of acceptance - yet the sender of it reasonably believe the message of acceptance - yet the sender of it reasonably believes it has got home when it has not -then I think there is no contract.


My conclusion is that the rule about instantaneous communication between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offeror: and the contract is made at the place where the acceptance is received.


In a matter of this kind, however, it is very important that the countries of the world should have the same rule. I find that most of the European countries have substantially the same rule as that I have stated. Indeed they apply it to contracts by post as well as instantaneous communications. But in the United States of America it appears as if instantaneous communications are treated in the same way as postal communications. In view of this driver case, I think we must consider the matter on principle, and so considered, I have come to the view I have stated, and I am glad to see that Professor Winfield in this country (55 Law Quarterly Review, 514) and Professor Williston in the United States of America (Contracts I S. 82, 239) take the same view.


Applying the principles which I have stated, I think that the contract in this case was made in London where the acceptance was received. It was therefore proper case for service out of the jurisdiction.


Apart from the contract by Telex, the Plaintiffs put the case in another way....

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