ENTORES V MILES FAR EAST CORPORATION

 

CASE COMMENT

ON THE CASE

ENTORES V MILES FAR EAST CORPORATION[1955] 2 QB 327

BY KHUSHI JAIN

 

CITATION: [1955] 2 QB 327; [1955] 3 WLR 48; [1955] 2 All ER 493; [1955] 1 Lloyd’s Rep 511; (1955) 99 SJ 384; [1955] CLY 441.

BENCH: DENNING LJ, BIRKETT LJ, PARKER LJ

PETITIONER………………………………………………………………...ENTORES

Versus

RESPONDENT………………………...………………MILES FAR EAST CORPORATION

DATE OF JUDGEMENT: 17^th May, 1955

JURISDICTION: England & Wales

COURT: Court of Appeal

 

INTRODUCTION

According to Indian Contract Law, a proposal is said to be accepted when the offeree give his assent to the offer thereto made to him by the offeror. The communication of acceptance is said to be complete when the assent of acceptor came into the knowledge of the proposer and proposer receives it.

There are contracts made between two parties in which parties are not present with each other at the time of contract made. These types of contracts are called Contract inter - absentees. These types of contracts are made with various kinds of communication between the parties. The parties use different type of methods of communication such as telephone, fax, telex, postage, e-mail etc. But there are many questions arise due to this kind communication as how do parties determine where the contract is formed? Or when does the acceptance of the offer between the offeree and offeror is complete?

With the advancement of technology, the concept of communication changes drastically from the customary position under Entores Ltd. V. Miles Far East Corporation. The principle of Entores case has been taken as a reference by the Supreme Court in Bhagwandas Goverdhandas Kedia v Girdharilal Parshottamdas & Co. case.

FACTS OF THE CASE

Entores Ltd. V. Miles Far East Corporation [1955] APP.LR 05/17 is a landmark case in English court of appeal in contract law where decision is made about where acceptance of offer takes place when communication of offer happens via telex.

Here, plaintiff Entores was a London based trading company in England. They made an offer to a party of Holland via telex. The defendant was an American Corporation with agents all over the world including a Dutch company in Amsterdam. Specifically;

According to plaintiff, contract made by Telex between Dutch in Amsterdam and English Company in London.

Offer made by plaintiff was to buy 100-ton copper cathode by defendant a price of £239 10s a ton and after receiving the offer defendant sent its acceptance to offeror by means of Telex.

Lawyer appeared on the behalf of the plaintiff is Mr. Maurice Lyell, Q.C. and Mr. Dennis Lloyd and Lawyer appeared on the behalf of defendant are Mr. Gerald Gardinn, Q.C. and Mr. S.B.R. Cooke.

Case was decided on 17^th May, 1955.

Judges sitting in the court are Denning LJ, Birkett LJ and Parker LJ.

A series of messages by the means of Telex were exchanged between both the parties regarding the offer and the acceptance.

ISSUE

Contract was not fulfilled by the defendant that’s why Entores sue owner of Dutch company for the damages caused by the breach of contract.

Here, the issue arises was that whether the contract was made in Holland or London (England). As if the company can bring action in U.K. if they can prove that contract is made in London rather than Holland to avail English law.

In order to decide whether Dutch law is applicable or English law, the court needs to decide the moment of acceptance of the contract. If the contract is form when the acceptance is sent, then the breach of contract would be dealt under Dutch law but if the contract is form when acceptance is received then the breach of contract would be dealt under English law.

RULE

The communication takes place by the means of Telephone, Telex or Fax is known as Instantaneous communication. These means of communication are called Instantaneous communication as both the contracting parties are absent during the acceptance of the contract and the offer and acceptance reaches to the party in few seconds.

In this case, Telex is a means of an Instantaneous communication. Rules of Instantaneous communication are ;

Contract is only complete when acceptance is received by the offeror.

Formation of contract takes place where the acceptance of the acceptor is received by the offeror.

Rules of Instantaneous communication are different from postal communication.

DECISION OF THE COURT

 

·       Lord Justice Denning

 

Ø  In this case, the leading judgement is delivered by Denning LJ. Court of appeal creates a large distinction between Instantaneous and Non-Instantaneous communication. According to Denning LJ, postal rule cannot be applied to Instantaneous communications, such as Telex or Telephone and give reasons through example:

Ø  Man shouts an offer to a man standing across a river but do not hear a reply because of the voice of the Aircraft flying overhead. There is no contract form as acceptance can’t be heard by the offeror. If the acceptor wishes to make a contract, then he must wait till the Aircraft is gone and shout back his acceptance.

Ø  Another example is of an offer made on telephone by a man but the reply is not heard by the offeror as line gone dead in between. So, here no contract is form. May be the acceptor didn’t know the moment when the line breaks but the offeror know. So, if he wishes to make a contract than offeror needs to confirm the answer of other party.

Ø  Lord Justice concluded that rule about the instantaneous communications between the parties is different from the rules of postal communications. So, in the type for instantaneous communication, the contract is only complete when the acceptance is received by the offer and the contract is made up at the place where the acceptance is received. It should be made in the two countries of the world where there applies the same rule.

So, the appeal was dismissed by Lord Justice.

 

·       Lord Justice Brikett

 

Ø  In his opinion case of Telex communication there cannot be any binding contract takes place unless and until the offeror receives the notice of the acceptance from the offeree. Further, he said that the cases of forming of contract by letters by post have no application to the formation of contracts by Telex communication.

 

·       Lord Justice Parker

 

Ø  He stated that according to general rule, a binding contract is made at the place where theofferor receives the notification of the acceptance that is where offeror is.

Ø  He cited many cases in his judgement such as

·       In Carlill V. Carbolic Smoke Ball Co. (1893), Lord Juistice Lindley states that “unquestionably, as a general proposition, when an offer is made, it is necessary in order to make a binding contract, not only that  it should be accepted, but that the acceptance should be notified”.

·       In Adams V. Lindsell (1818), the court pointed out that unless this were so “no contract could ever be completed by the post. For if the defendants were not bound by their offer when accepted by the plaintiffs till the answer was received, then the plaintiffs ought not to be bound till after they had received notification that the defendants had received their answer and assented to it. And so, it might go on”.

·       In Dunlop V. Higgins (1848), the Lord Chancellor, Lord Cottenham, pointed out “Common sense tells us that transactions cannot go without such a rule.”

·       In Household Fire Insurance Co. V. Grant (1879), Lord Justice Thesiger points out that “where parties are at a distance the balance of convenience dictates that the contract shall be deemed complete when the acceptance is handed to the post office.”

·       Lord Justice Parker was not satisfied with the observations of Mr. Justice Hill in Newcomb V. De Roos (1889).

 

CONCLUSION

So, the contract is complete only when the acceptance is received by the offeror. The acceptance was made in London when the Telex was read.

In Instantaneous communication the contract is complete the moment the acceptance is received and at the place where the acceptance is received.

Court held that the contract and damages were to be decided by the English law. It was stated that the postal rule will not be applied to the Instantaneous mode of communication. Acceptance via these forms of communication to be clear before any contract is created.

Acceptance is needed to be communicated between the parties before the contract is formed and become effective.  “An Agreement made in one country and amended in another should not be treated as a second country agreement”.

There are many Supreme Court cases where Entores Ltd. V. Miles Far East Corporation case is cited. One of the leading cases was Bhagwandas Goverdhandas Kedia V. Girdharilal Parshottamdas and Co., And Others. It is the evidence that Entores case has a very large impact on other cases and provided a great help to analyze other cases similar to it.  The decision focuses on both the parties to arbitrate and for the formation of a concluded contract. It is proved to be a case of great assistance.  In light of this decision both the parties must be very careful with the words and clear about the facts of acceptance to complete the proposal without any complications and conclude a contract.