Facts of the Case
The plaintiffs, a company based in London, made an offer by telex to the defendants, who were based in Amsterdam. The defendants subsequently sent their acceptance of this offer back to the plaintiffs via telex. The legal dispute centered on whether the English courts had jurisdiction to serve a writ on the defendants, which depended entirely on where the contract was made.
Legal Principle and Ruling
The Court of Appeal held that the contract was formed when the communication of the acceptance was received by the plaintiffs in London. This established the definitive rule that for instantaneous communications (such as telex, telephone, or face-to-face conversation), an acceptance is only effective when it is communicated to the offeror, rather than when it is sent. Consequently, the contract was made in London, and the English courts had jurisdiction.
Judicial Reasoning (Denning LJ)
Denning LJ reasoned that the rule for instantaneous communications must differ from the postal rule (where acceptance is effective upon posting). He provided several analogies to illustrate this:
- Oral Communication: If one person shouts an offer across a river but the reply is drowned out by an aircraft, there is no contract until the acceptance is shouted back and heard.
- Telephone: If a line goes “dead” mid-acceptance, the parties are not bound until the caller gets through again to ensure the words were heard.
- Fault and Estoppel: If the recipient is at fault for the lack of communication—for example, if their telex ink fails and they do not ask for the message to be repeated—they may be estopped from denying they received the acceptance. However, if no one is at fault and the message is not received, there is no contract.
Discussion and Commentary
- Exception to the Postal Rule: The case confirms that the postal rule (Adams v Lindsell) is an exception based on commercial expediency for non-instantaneous communication; telex, being virtually instantaneous, follows the general rule of receipt.
- Approval by the House of Lords: The principles in Entores were later approved by the House of Lords in Brinkibon Ltd v Stahag Stahl, which affirmed that the contract is made where and when the telex of acceptance is received.
- Modern Application: While telex is now largely obsolete, the “receipt rule” from Entores is generally applied to modern technologies like faxes, emails, and WhatsApp. Academic consensus suggests that for these methods, acceptance should be considered communicated when it reaches the recipient’s system, provided it arrives during normal business hours.
Related Cases
- Adams v Lindsell (1818): The foundational authority for the postal rule, which Entores identifies as an exception to the general rule of communication.
- Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879): Confirmed that under the postal rule, a contract is formed even if the acceptance is lost and never reaches the offeror.
- Brinkibon Ltd v Stahag Stahl (1983): Approved Entores and applied the receipt rule to international telex communications.
- The Brimnes : Applied similar logic to find that a withdrawal notice sent during office hours was effective upon receipt on the machine, even if not read immediately.
- Thomas v BPE Solicitors (2010): A more recent case indicating that emails are treated as instantaneous communications and thus governed by the Entores receipt rule.
- Chwee Kin Keong v Digilandmall.com Pte Ltd (2004): A Singaporean case discussing whether the postal or receipt rule should apply to internet and email transactions.