This is a Common law case on the rule of instantaneous communications in Contracts.
Facts of the Case
The plaintiffs, Entores Ltd are a company registered and resident in England. The defendants are a corporation with headquarters at 150, Broadway, New York, in the State of New York with agents all across the world. On 8 September, one of defendant’s agent, a Dutch company made an offer to the plaintiff for supplying copper cathodes. The plaintiff then made a counter offer and the Dutch company accepts the counter offer. The communications were done through Telex. Telex service consist of a teleprinter and signalling unit and certain necessary subsidiary apparatus possessed by both parties. The communications are virtually instantaneous, for the moment one party types out the message the other party ought to be receiving it in the ordinary course of things.
The plaintiffs claim they entered into a contract with the defendants for the purchase of copper cathodes and they seek to issue a writ claiming damages for the breach of the contract by the defendants. They were given leave to serve notice of a writ on the defendants in New York out of the jurisdiction.
Defendant appealed against the decision of the court giving leave but was dismissed by the court. The Defendant appeal again to the current court.
Issue of the Case
Whether the contract was made within jurisdiction of the Court (in England)?
Judgments of the Court
Plaintiffs contend that the contract was made in England and therefore comes within RSC, Ord 11, r 1, whereby the court or a judge may allow service of a writ outside the jurisdiction, where the action is one brought against a defendant for damages for breach of a contract made within the jurisdiction. The defendants say the contract was not made in England but was made in Holland.
Court held that where a contract is made by post, the acceptance is complete as soon as the letter of acceptance is put into the post box and that is the place where the contract is made. However, there are no clear rule on contracts made by Telex or telephone. The rules on instantaneous communications is different.
Contract is completed only when the acceptance is successfully communicated to the offeror (the person making the offer). If the offeree (the person accepting the offer) had reasonable believe that his message is not received, he needs to repeat his message. If he does not repeat it, there is no contract.
If the offeror does not catch the words of acceptance or his instrument failed but does not bother to ask the sender to repeat the message and lead the offeree to believe that his acceptance was received, he is bound to the contract.
If the offeror does not receive the message of acceptance but there is no fault on his part but the sender reasonably believes that his message had been received, then there is no contract.
In conclusion, the rule about instantaneous communications 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.
Applying the principles to the facts in this case, the contract was made when the plaintiff received the acceptance from the defendant. Thus, contract was made in England.
Defendant also argued that the contract by Telex was varied by letter posted in Holland and accepted by conduct in England, which amounted to a new contract made.
The court found that the variations consisted in the ports of delivery, provisions of import licence and etc. The plaintiff had accepted the variations by conduct in London. Thus, variations agreement was made in England and the contract is made at the place where it first completed, not the place where the variations are agreed. The appeal was dismissed.
Principle of the Case
The rule about instantaneous communications between the parties is that 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.
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