Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellscha...

Facts

• Brinkibon Ltd, based in London, sought to purchase steel from Stahag Stahl, an Austrian company.
• Acceptance of the offer was communicated via telex transmitted from London to Vienna.
• A dispute arose regarding the contract’s performance, prompting Brinkibon to initiate legal action for breach of contract.
• The central issue was over jurisdiction: whether the contract was formed in England (giving English courts jurisdiction) or in Austria.
• The initial court held the contract was made in Austria, where the telex was received; Brinkibon appealed this decision.

Issues

1. Whether the contract was formed at the place where the telex was sent (London) or where it was received (Vienna).
2. Whether the postal rule applied to telex communications, making acceptance effective upon sending.
3. Whether, in cases of instantaneous communication, acceptance should only be effective upon receipt by the offeror.

Decision

• The House of Lords dismissed the appeal, holding the contract was formed in Vienna, Austria, where the telex acceptance was received.
• The court ruled that the postal rule does not apply to instantaneous communication methods such as telex.
• Acceptance by telex is only effective when it is received by the offeror.
• Each case involving instantaneous communication should be decided according to the intentions of the parties and sound business practice.

Legal Principles

• The postal rule, developed in cases like Adams v Lindsell, applies only to non-instantaneous communications.
• For forms of instantaneous communication (e.g., telex, telephone), acceptance is effective only upon receipt by the offeror.
• There is no universal rule covering all forms of instantaneous communication; the outcome depends on the facts, intentions of the parties, and business practice.
• The decision aligns with the principle in Entores v Miles Far East Corp, which established receipt as the moment of acceptance for telex messages.
• Jurisdiction is determined by the place of contract formation, which is the location where acceptance is received in instantaneous communications.

Conclusion

Brinkibon Ltd v Stahag Stahl clarified that the postal rule does not apply to instantaneous communications, such as telex; instead, acceptance is only effective upon receipt by the offeror. This establishes a clear distinction for contract formation in modern communications, providing greater certainty for international commercial dealings.