Entores Ltd v Miles Far East Corp [1955] 2 QB 327 (CA)

Facts

• Entores Ltd, a London-based company, sent an offer to Miles Far East Corp, situated in Amsterdam, via telex.
• The defendants transmitted their acceptance back to Entores’ telex machine in London.
• The dispute centered on where the contract was formed, as this determined the jurisdiction for enforcement proceedings.
• The case examined the rules applicable to contract formation using instantaneous communication technologies such as telex.

Issues

1. Whether, in instantaneous forms of communication like telex, a contract is formed at the place and time acceptance is sent or when it is received by the offeror.
2. Whether the "postal rule," under which acceptance is effective upon dispatch, applies to instantaneous communications.
3. What determines jurisdiction and effective date in contracts formed by such methods.

Decision

• The Court of Appeal held that in the case of instantaneous communications, a contract is formed where and when the acceptance is received by the offeror.
• The "postal rule" does not apply to instantaneous communication; instead, acceptance must be effectively communicated to and received by the offeror.
• The contract in this case was formed in London, where the plaintiff’s telex machine received the acceptance, establishing jurisdiction there.
• The location of the transmitting machine (Amsterdam) was irrelevant; receipt by the offeror in London was the decisive factor.

Legal Principles

• For instantaneous communication methods (e.g., telex, telephone), acceptance is not effective until received by the offeror.
• The "postal rule," which treats acceptance as effective on posting, applies only to non-instantaneous communication and not to instant methods.
• The "receipt rule" ensures that offerors are aware of acceptance, providing certainty in contract formation and jurisdiction.
• Exceptions exist, such as when acceptance is sent outside normal business hours; in such cases, it may be deemed received at the start of the next working day.
• The parties can contract out of the general receipt rule by specifying terms governing receipt and effectiveness of acceptance.
• Subsequent case law, including Brinkibon v Stahag Stahl and The Brimnes, affirmed and clarified the application and nuances of the receipt rule.

Conclusion

The decision in Entores Ltd v Miles Far East Corp established that contract formation via instantaneous communication requires acceptance to be received by the offeror before it is effective, distinguishing such methods from the postal rule and shaping modern contract law regarding electronic communications.