KULIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES

COMMERCIAL LAW(LAW 3512)

SEM 1 16/17

GROUP 5

ENTORES LTD v MILES FAR EAST

PREPARED FOR:
DR. SITI SALWANI RAZALI

GROUP MEMBERS:
NO. NAME MATRIC NO

1. NUR AZIEMAH BT JAPERI 1520084

2. SITI NURZIANI BINTI SABRI 1527864

3. NURIN AMIRAH BT ZAIDI 1522462

4. NOOR IZZATUL SYAHIRAH BT JASNI 1525550

5. NURFATIN NAJIHAH BINTI ABD RAHIM 1527654

TABLE OF CONTENT
 NO. ITEM PAGE

1.0 Facts of the case 2-3

2.0 Issue of the case 4-6

3.0 Principle of the case 7

4.0 Decision of the case 8

5.0 Commentary 9-10

6.0 Islamic perspectives 11-13

7.0 References 14

ENTORES LTD v MILES FAR EAST

THE CITATION OF THE CASE

Entores Ltd v Miles Far East Corporation [1955] EWCA Civ 3, 2 QB 327

1
 FACT OF THE CASE
The plaintiffs, Entores Ld., were an English Company with a registered office in London,

and the defendants, Miles Far East Corporation, were an American corporation, were an

American corporation with headquarters in New York, and with agents all over the world,

including a Dutch company in Amsterdam. Both the plaintiffs and the defendants’ agents in

Amsterdam had in their office an equipment known as Telex Service, by which messages could

be dispatched by a teleprinter operated like a typewriter in one country, and almost

instantaneously received and typed in another. The plaintiffs desired to make a contract with the

defendants’ agents in Amsterdam for the purchase of copper cathodes from the defendant

corporation.

In September, 1954, a series of communication by Telex passed between the plaintiffs

and the Dutch company, the material one for the present purposes being a counter-offer made by

the plaintiff on September 8, 1954, and an acceptance of that offer by the Dutch agents on behalf

of the defendants received by the plaintiffs in London by Telex on September 10, 1954.

The plaintiffs later alleged that there had been a breach by the defendants of the contract.

They accordingly applied for leave to serve notice of a writ on the defendants in New York on

the ground that the contract was made in England and, therefore fell within the terms of R.S.C.,

Ord. 11, r. 1 (e). It was contended for the defendants that the contract was made in Holland.

The plaintiffs’ application was granted by a master, and on appeal his decision was

affirmed by Donovan J. The defendants appealed.

2
 ISSUES OF THE CASE

ISSUE

The main issue of the case is to decide when and where the acceptance of the contract took

place if it was sent by a telex machine in one country and received on a telex machine in another

country. The answer to this would determine whose law’s applied whether English or Dutch law.

3
If it was when the contract of acceptance was sent, damages would be dealt under Dutch law. If

the acceptance was when it was received, then it would be under English law.

ANSWER

1. When:

The leading judgement in the court of appeal was given by Lord Denning. To answer the

question, he started using a very simple form of communication, which is a case where people

make a contract face to face. If, for instance, the offeror offer a contract and the offeree’s reply is

drowned by an aircraft flying overhead, there is no contract made. Instead, he must wait till the

aircraft is gone and shout back the acceptance so that the offeror can hear what he says. The

offeror is bound only when he hears the acceptance from the offeree.

There is also a case when an offer is made over the telephone. The contract is only

complete when the offeror hears the acceptance. If the line goes dead, he must call again and

repeat his acceptance until the offeror hears it.

For the case of when an offer is made by Telex, the offeror must receive the acceptance.

The line may go dead on either side, or the offeror’s machine may run out of ink. The offeror

must send notice to the acceptor of ‘not receiving’. The contract only becomes valid when the

message is received. If the offeror does not send notice of not receiving, or does not replace the

ink, or does not ask the message to be repeated, and the acceptor believes his message to have

been received, the offeror is bound. If it is not the offeror’s fault that he did not receive the

message, and he does not believe there is an acceptance, even if the acceptor accepted, there is

no contract.

4
 According to the Denning’s rule, instantaneous communication is only complete when

the acceptance received by the offeror and contract made at the place where acceptance is

received.

2. Where:

In US law, the telex contract is like a post contract. It becomes law and is subject to the

rules of the country where the acceptance was made. In European law, the telex contract becomes

law where the acceptance was received, like Denning’s Rule above.

To determine where the contract was made, Justice Denning uses same principles as he

decides when it was made. Thus, the contract is made in London and it is under English

jurisdiction.

The variation (ports of delivery, provision of import license, etc) to contract made by

letter posted from Holland and accepted in England. Acceptance done by the conduct of the

English Company (they opened letter of credit, etc).

Acceptance complete as soon as acts were done in England. Denning thinks it may be

that a contract is made at the place where it was first completed, not at the place where variations

are agreed. But luckily here, both the original contract and the variations where made in England.

Also, this contract is by implication governed by English law because England is the

place with which it has the closest connection.

5
 PRINCIPLE OF THE CASE

Acceptance

Based on the case of Entores Ltd v Miles Far East Corporation, the principal of the case

is acceptance. Since acceptance is one of the elements of contract, the contract will be void if the

expression of acceptance is absent. It is stated in the Contract Act 1950, “All agreements are

contract if they are made by the free consent of parties competent to contract, for lawful

consideration and with lawful object, and are not hereby expressly declared void”. The

acceptance can be expressed either by oral, writing, conduct or sign.

The case of Entores Ltd v Miles Far East Corporation is to determine when and where the

acceptance had occur to know if the postal rule is applied or not in the communication by Telex.

The acceptance is considered done when the offeree put the letter in the mailbox if based on the

6
postal rule. English law stated that the telex communication is included in the postal rule while

the European rules do not consider telex in postal rule because it is an instantaneous

communication like offer and acceptance by phone call. Thus, the acceptance of instantaneous

communication requires the offerer to listen or get the acceptance of the offer made immediately.

The agreement considered valid only if this happens and the offeree must make sure that the

offeror hear his/her acceptance or rejection of the offer.

DECISION OF THE CASE

Denning LJ, the sitting judge at the Court of Appeal of England and Wales make a

leading judgment that the telex communication is an instantaneous communication which is not

included in the postal rule. The contract is also binding when the offeror received the acceptance

by the offeree and where the acceptance is received not where it is being delivered. Thus, the

contract is made at London which governs by the English law.

The Lord of Justice Denning also mentions that it is not fair to consider the contract is

binding when there is an interruption at the time of acceptance. For example, the phone line

when dead or an airplane passes by when the offeree said the acceptance that will block the

offeror from hearing it and both parties just end the session without any confirmation. The

offeree need to confirm the acceptance has been received by the offeror and the offeror need to

ensure that the offeree accept or reject the offer in order to bind the contract.

7
 Next, The Lord Denning think that it is important for all the countries in the world to

have the same rules. Since the English law and the European law are different whether the telex

communication is included in postal rule or not, The Lord Denning had consider the matter on

principle. Thus, it is decided that the English law will be applied to the case since the contract is

done at London in which where and when the acceptance by Telex communication is received

not where and when it is delivered.

COMMENTARY

Entores Ltd v Miles Far East Corporation [1955] is a landmark English Court of Appeal

decision in contract law on the moment of acceptance of a contract over telex. The court held

that the posting rule did not apply to an acceptance by telex as the court regarded it as an

instantaneous form of communication. Denning LJ found that the regular postal rule did not

apply for instantaneous means of communications such as a telex. Instead, acceptance occurs

where the message of acceptance is read.

We agree with the decision made by the judge. Communication of acceptance of

proposals is deemed to be made by any act of the party accepting by which he intends to

communicate the acceptance. This provision highlighted the importance of the acceptance to be

communicated. This is clearly stated under Section 3 of the Contracts Act 1950. In that case

there was no acceptance and therefore no contract. As suggested in the Entores Case(plaintif) it

was said that this principle could apply where an offer is accepted by telephone and the offeror

8
did not catch the words of acceptance but did not ask for the words to be repeated and in the

BRIMNES case (1975) where acceptance is sent by Telex during business hours, but is simply

not read by anyone in the Offeror’s office.

The instantaneous nature of telex meant that regular rules of acceptance by post did not

apply. When a contract is made by post it is clear law throughout the common law countries that

the acceptance is complete as soon as the letter is put into the post box, and that is the place

where the contract is made. But there is no clear rule about contracts made by telephone or by

Telex. There might a technical hitch at the receiving end, the message might not be received

because the teleprinter had run out of ink, or the line was defective. Communications by these

means are virtually instantaneous and stand on a different footing. The general principle that

acceptance takes place when communicated applies to all instantaneous forms of

communication. Contract created when acceptance received. An acceptance which is sent by an

instantaneous method of communication must be received to be effective. This is an exception

to the postal rule. Consequently, it is questionable as to whether there is a valid conclusion of

contract.

In this specific case, the next issue was about the place of acceptance, the court need to

establish that the contract had been formed in London rather than Amsterdam. In a matter of this

kind, however, it is very important that the countries of the world should have the same rule. We

find that most of the European countries have substantially the same rule as that we have stated.

Indeed, they apply it to contracts by post as well as instantaneous communications. But in the

United States of America it appears as if instantaneous communications are treated in the same

way as postal communications.

9
 The conclusion is, that 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.

ISLAMIC PERSPECTIVES

As a general rule, a contract is formed when there is an exchange of offer and acceptance

between the parties. However, in instantaneous communication the contracting parties are not in

face-to-face meeting and thus the exchange of offer and acceptance involves the possibility that

such correspondence may not reach its intended recipient because of technical errors or other

technological complexities. Thus, it is disputable in such cases to determine the moment during

which a contract is deemed to be binding.

According to the majority of the Fiqh Schools, pillars of contract are three:

1- Expression (sighah), which includes offer and acceptance.

Conditions of Offer and Acceptance:

1- Clarity: The words used in offer and acceptance should clearly indicate and express the

consent of the parties with certainty.

2- Conformity of Offer with Acceptance:

For example, when a seller offers to sell two computers for RM 3000 the buyer should accept the

offer and buy both computers for RM 3000. He cannot buy one of the computers for RM 1500.

10
 3- Continuity Between Offer and Acceptance:

Which means acceptance should reach the offer within particular time or in the same

session of contract (Majlis al’aqd).

The session of contract refers to “a period of time in which an offer is made negotiated and

accepted while both parties remain at the same place”. This means that acceptance should be

made before both or one of the parties separate and leave the place. However, this does not

necessarily mean that the contracting parties should always be in the same place. It is possible

that the two parties could be at two different places while negotiating and offer (through

telephone). The session continues until acceptance is made, or the parties change or terminate

their discussion.

If acceptance is not taken within particular time, offer may not survive. The party who has made

the offer has the right to withdraw or change the offer. The wisdom behind this rule is to allow

the offerer to withdraw or change his offer.The offerer has the right to take into his account the

changing conditions of the market and make new offer.It would be unfair to stop the offerer from

changing his offer after the session of contract is over. It is therefore necessary that the

acceptance should not come after the lapse of time but should immediately follow the offer.

2- The contracting parties (al ‘aqidan).

3- The subject matter (mahal al ‘aqd) or the property on which a contract is concluded.

11
 Mutual consent of parties is the basis for formation of a contract. However, consent is an

intangible mental fact. Therefore, this intention must be manifested in sufficient form of

words/conduct that indicates a definite intention to contract. Based on the case, Entores LTD

assumes that Miles Far East had accepted his offer which was cannot be defined as a legal

contract.

REFERENCE

1. https://en.wikipedia.org/wiki/Entores_Ltd_v_Miles_Far_East_Corp
2. https://webstroke.co.uk/law/cases/entores-v-miles-far-east-corporation-1955
3.

12