34

[1983]

[HOUSE O F L O R D S ]

BRINKIBONLTD APPELLANTS
AND
STAHAG STAHL UND STAHLWARENHANDELS-
G E S E L L S C H A F T m.b.H RESPONDENTS fi

1981 Nov. 18, 19; Lord Wilberforce, Lord Fraser of Tullybelton,

1982 Jan. 21 Lord Russell of Killowen, Lord Bridge of
Harwich and Lord Brandon of Oakbrook

Contract—Formation—Offer and acceptance—Telex communica­

tion from London to Vienna—Alleged breach of contract— p
Where contract made—Service of writ out of jurisdiction—
R.S.C., Ord. 11, r. 1 (1) (/) (g)
B., an English company, sought leave under R.S.C., Ord. 11,
r. 1 (1) to issue a writ against S., an Austrian company, and
serve notice of it on them in Austria. The proposed action
was for breach of a contract which was made (if at all) either
by a telex communication from B. in London to S. in Vienna,
accepting a counter-offer made by S., or else by acceptance D
of the counter-offer by conduct in instructions given by B. to
their bankers in the United Kingdom to open a letter of credit
in Switzerland in favour of S. Further, it was alleged that
there had been repudiation and breach of contract by S.
within the jurisdiction.
Mocatta J. held that the contract had been " made within
the jurisdiction " within R.S.C., Ord. 11, r. 1 (1) (/) and gave
leave thereunder but refused leave under paragraph (g) on E
the ground that the breach and repudiation occurred in
Austria. The Court of Appeal, holding that the contract was
made in Austria, reversed his decision to grant leave.
On appeal by B.: —
Held, dismissing the appeal, that the acceptance by telex
from London to Vienna caused the contract to be made in
Vienna since, according to the general rule, instantaneous
communication between principals involved that the contract F
(if any) was made when and where the acceptance was
received (post, pp. 4 1 B - E , H—42A, 4 3 E - F , 4 8 F - H ) .
Entores Ltd. v. Miles Far East Corporation [1955] 2
Q.B. 327, C.A. applied.
Per curiam. In telex communications the senders and
recipients may not be the principals to the contemplated
contract. They may be servants or agents with limited
authority. The message may not reach, or be intended to G
reach, the designated recipient immediately; it may be sent
out of office hours or at night on the assumption that it will
be read at a later time. Error or default at the recipient's
end may prevent receipt at the time contemplated and believed
in by the sender. The message may be sent and/or received
through machines operated by third persons. No universal
rule can cover all such cases, which must be resolved by
reference to the intentions of the parties, sound business H
practice and in some cases by a judgment where the risks
should lie (post, pp. 4 2 B - D , 4 3 H — 4 4 B , 5 0 C - D ) .
Held, further, that the steps taken by B. to set up a letter
of credit did not amount to acceptance of the counter-offer
 35
2 A.C. Brinkibon Ltd. v. Staling Stahl C.m.b.H. (HX.(E.))
within the jurisdiction (post, pp. 42G-H, 47H—48A); and that the
A alleged breach relied on occurred outside the jurisdiction (post,
pp. 43A, 50A).
Decision of the Court of Appeal [1980] 2 Lloyd's Rep.
556 affirmed.
The following cases are referred to in their Lordships;' opinions:
Adams v. Lindsell (1818) 1 B. & Aid. 681.
B Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, C.A.
Entores Ltd. v. Miles Far East Corporation [1955] 2 Q.B. 327; [1955]
3 W.L.R. 48; [1955] 2 All E.R. 493, C.A.
Henthorn v. Fraser [1892] 2 Ch. 27, C.A.
Household Fire and Carriage Accident Insurance Co. Ltd. v. Grant (1879)
4 Ex.D. 216, C.A.
Imperial Land Co. of Marseilles, In re (Harris' Case) (1872) L.R. 7
Q Ch.App. 587.

The following additional cases were cited in argumenit:

Bennett v. Cosgriff (1878) 38 L.T. 177.
Brimnes, The [1973] 1 W.L.R. 386; [1973] 1 All E.R. 769; [1975] Q.B.
929; [1974] 3 W.L.R. 613; [1974] 3 All E.R. 88, C.A.
Cowan v. O'Connor (1888) 20 Q.B.D. 640, D.C.
D Dunlop v. Higgins (1848) 1 H.L.Cas. 381, H.L.(Sc).
Evans v. Nicholson (No. 2) (1875) 32 L.T. 778.
Inland Revenue Commissioners v. Mutter & Co.'s Margarine Ltd. [1901]
A.C. 217, H.L.(E.).
Joseph v. Krull Wholesale Drug Co. (1956) 147 F.Supp. 250.
Martin v. Stout [1925] A.C. 359, P.C.
Newcomb v. De Roos (1859) 2 El. & El. 271.
E Tel Peda Investigation Bureau (Ply.) Ltd. v. Van Zyl, 1965 (4) S.A. 475.
United States v. Bushwick Mills Inc. (1947) 165 F. 2d 198.

APPEAL from the Court of Appeal.

This was an appeal by the appellants, Brinkibon Ltd., by leave of
the House of Lords from an order of the Court of Appeal (Stephenson
p and Templeman L.JJ.) dated June 12, 1980, reversing a decision of
Mocatta J. dated March 11, 1980, discharging an order of Robert Goff J.
dated November 30, 1979, whereby leave had been granted to the appel­
lants, to serve notice of a writ on the respondents, Stahag Stahl und
Stahlwarenhandelsgesellschaft m.b.H., in Austria under l:he provisions of
R.S.C., Ord. 11, r. 1 (1) (/) and (g) on the grounds that a contract between
the parties had been made in England and further that a breach of the
G contract had occurred in England.
The appellants contended that, by sending telexes from Austria to
England the respondents had so acted as to confer jurisdiction on the
English court under R.S.C., Ord. 11, r. 1 (1). In the first place they
contended that the respondents concluded a contract in England by a telex
of acceptance sent from Austria thereby confirming jurisdiction pursuant to
JJ rule 1 (1) (/). In the second place they contended that the respondents
broke the contract in England by a telex of renunciation sent from Austria,
thereby confirming jurisdiction pursuant to rule 1 (1) (g). This appeal
raised the question of the circumstances in which the English court can
36
Brinkibon Ltd. v. Stabag Stahl G.m.b.H. (HX.(E.)) [1983]
properly assume jurisdiction over a foreign defendant in an action based on ^
a contract made or renounced by telex. This involved consideration both
of the letter and of the spirit of the relevant provisions of rule 1 (1).
The facts are stated in the opinions of Lord Wilberforce and Lord
Brandon of Oakbrook.

Anthony Thompson Q.C. and Alastair MacGregor for the appellants.

The accepted practice is that in the making of a contract it comes into B
existence when one party communicates to the other acceptance of an offer.
If an offer is accepted by letter or by telegram, the place where the letter is
posted or the telegram handed in is the place of the making of the contract.
This rule is sometimes unsatisfactory. If the acceptance is oral or by
telex the contract is made at the place where the words are heard or the
telex is received. As to the breaking of a contract different rules apply. „
There is no authority as to repudiation by telephone. Telex at present
would seem to follow the oral inter praesentes rule so far as the making of
a contract is concerned. The English, Scottish, Canadian, Australian and
American decisions are at variance. The old rules as to the making of a
contract came into force before telephones.
There should be one basic rule, simple, certain and admitting no excep­
tions, i.e. that, when the parties are apart, the contract should be made in D
both places where they are. Alternatively, if the courts will not go that far,
the contract should be taken to be made where the acceptor is, irrespec­
tive of the means of communication employed. In the further alternative
the House of Lords should reverse Entores Ltd. V. Miles Far East Cor­
poration [1955] 2 Q.B. 327 and bring telex into line with letters and
cables. That case is based on false premises as to the realities of telex _
communications and the law as to contracts inter praesentes.
Contracts were originally made by persons in one place or by their
authorised agents. The postal rule developed to meet the case of com­
munications at a distance: Adams v. Lindsell (1818) 1 B. & Aid. 681, a
decision as to point of time. It is artificial to distinguish point of time from
the place of making the contract. In the case of posting the law is well
established that the contract is made when the letter of acceptance is F
posted. But where the reality of the situation is that the contract was
made in two places it should be so held, e.g. in the case of a telephone
conversation. The decision in Dunlop v. Higgins (1848) 1 H.L.Cas. 381
is not challenged though it creates some difficulties, sometimes leaving the
offeror in doubt as to whether there has been an acceptance. In Cowan v.
O'Connor (1888) 20 Q.B.D. 640, 641, 642, the postal rule was extended to
telegrams, the time of making the contract being equated with the place.
The appellants do not challenge that decision as regards time but they do
challenge it as regards place. In the Entores case [1955] 2 Q.B. 327, 331—
332, 335, a distinction was drawn between instantaneous and non-
instantaneous modes of communication, and communications by telephone
and telex were treated as instantaneous so that a contract made thereby
was inter praesentes, but that is a misapplication of the inter praesentes H
rule. Communications by telex are not analogous to inter praesentes.
When two businesses are dealing by telex the people contracting would not
be the people tapping out the communications. Instructions are given by
 37
2 A.C. Brinkibon Ltd. v. Stahag Stahl G.m.b.H. (HX.(E.))
secretaries to the telex operators. In the case of a telex communication
"■ between London and Hong Kong the office at Hong Kong might well be
shut when the message arrived, so that the situation is much closer to
communication by letter, a very fast letter. Telex communications are
quite different from word of mouth communications. Though a telex
message goes instantly to the machine, the person with authority to contract
will not be standing beside it to receive the communication. It is pure
B fiction to treat a telex communication as though the parties were in each
other's presence. Even if it be so treated, the law in 1955 was not as stated
in the Entores case [1955] 2 Q.B. 327 in relation to inter praesenter contracts.
The telephone comes far closer to the parties being in each other's presence,
but it is not really so. For example, there are answering devices for record­
ing messages. The common law rule is that where the parties are apart
acceptance is at the place where the acceptor stood. At p. 332 Denning L.J.
c
refused to follow Newcomb v. De Roos (1859) 2 El. & El. 271, 274.
In the United States the view has been expressed that there is no
" resemblance between communication by mail and by telephone or tele-
tape " : Williston on Contracts, 3rd ed. (1957), para. 82A, pp. 270-273.
See also Corpus Juris Secundum, vol. 17A (1963), ss. 355-356; United
States v. Bushwick Mills Inc. (1947) 165 F. 2d 198, 202 and Joseph v. Krull
D Wholesale Drug Co. (1956) 147 F.Supp. 250,253-254.
In South Africa see Tel Veda Investigation Bureau (Pty.) Ltd. v. Van
Zyl, 1965 (4) S.A. 475 in which the Entores case [1955] 2 Q.B. 327 was
followed.
A contract may be made in two places at once: Evans v. Nicholson
(No. 2) (1875) 32 L.T. 778, 779-780 and Bennett v. Cosgriff (1878) 38 L.T.
177
E -
Reliance is placed on Inland Revenue Commissioners V. Muller & Co.'s
Margarine Ltd. [1901] A.C. 217, 222-223 as to where the contract was
made. If it is too great a leap to say that this contract was made in both
places, then the place is where the acceptor was when he uttered his accept­
ance. The situation does not change according to whether it is accepted
by telex, letter or telephone. The acceptor's situation should not change
F according to the means of communication which he chooses. Acceptance
by telephone should follow the rule with regard to letters. When an accept­
ance is spoken, it operates from the place where'it is spoken.
The opening of the letter of credit operated as an acceptance. In cases
of delivery of goods as soon as they were put in line for delivery that was
enough to constitute acceptance.
Q Nicholas Phillips Q.C. and Martin White for the respondents. A con­
tract is made in the place where it is concluded, i.e. where that occurs
which converts negotiations into a binding agreement. On that point the
appellants failed to discharge the burden of proof. They relied on two
telexes as constituting offer and acceptance. Neither the tirial judge nor the
Court of Appeal accepted this.
The only way the appellants can establish that a contract was concluded
as they suggest without a change in the law is to contend that the res­
pondent's telex of May 3, 1979, was an offer that could be accepted by
conduct without the need of communication by the acceptor. There can
38
Brinkibon Ltd. v. Stahag Stahl G.m.b.H. (H.L.(E.)) [1983]
be such a unilateral contract as in Carlill v. Carbolic Smoke Ball Co.
A
[1893] 1Q.B. 256.
The Court of Appeal held that the telex of May 3, 1979, did not con­
stitute such an offer as was contended. If it is to be read as a counter offer
acceptance of which did not need to be communicated, acceptance would be
the opening of the letter of credit. For that one would have to obtain a
binding obligation on the part of the bank to the beneficiary. But that
would not operate till the bank issuing it advised the beneficiary or his B
agent. It is the act of so advising that binds the bank to perform its part.
Till then the beneficiary has nothing; all that has happened so far is pre­
liminary. Events may happen which delay or prevent the beneficiary from
receiving the letter of credit. Giving instructions to the bank is not accept­
ance; it is only evidence of our intention to accept.
The decision in the Entores case [1955] 2 Q.B. 327 that in the case of
a telex communication acceptance was when and where it was received
has been generally accepted, e.g. in South Africa. It is the only English
decision on this point and has not been considered vulnerable in principle
or objectionable in practice. It is in accordance with business efficiency.
The basic principle is that a binding contract does not come into existence
till an offer is accepted. Acceptance requires communication. That
makes obvious common sense. The parties should not reasonably be D
bound until they are both aware that they are ad idem. Special features
arise in the case of communication by post and telegram, but it is hard
to find the principle underlying the postal exception to the general rule,
which emerged pragmatically: see Treitel, The Law of Contract, 5th ed.
(1979), pp. 18-19; Chitty on Contracts, 24th ed. (1977). paras. 62-64,
pp. 32-34, and Henthorn v. Fraser [1892] 2 Ch. 27, 31-33. E
In the Entores case [1955] 2 Q.B. 327, 329-330 the submission of
counsel for the defendant must not be taken to have been upheld as a
general principle. In general a contract is made when and where
acceptance of an offer is communicated to the offeror. When the
acceptance is by post or telegram the contract is concluded when and
where the letter is posted or the telegram handed to the post office:
Adams v. Lindsell, 1 B. & Aid. 681, 683. See also Dunlop v. Higgins, F
1 H.L.Cas. 381, 384, 397, where the issue was whether there had been
undue delay in acceptance. But the decision in Entores [1955] 2 Q.B.
327 should be upheld in that it is no departure from the relevant common
law rule that acceptance in order to be accepted must be communicated.
The postal rule developed by accident pragmatically and is an exception
to the common law rule. It should not be applied to telex. See also Q
In re Imperial Land Co. of Marseilles {Hams' Case) (1872) L.R. 7 Ch.
App. 587, 594; Household Fire and Carriage Accident Insurance Co. Ltd.
v. Grant (1879) 4 Ex.D. 216, 227-228, and Henthorn v. Fraser [1892]
2 Ch. 27. The postal rule came into being because the courts had to
grapple with problems of offer and acceptance by post which must take
some time in transmission. It prevents commercial men from blowing
hot and cold. The telex is a mechanical agent on its own. It is like
putting a clerk beside the telephone to take any messages; communications
to him are communications to his employer. So communication by telex
 39
2 A.C. BrinkibonLtd. v. StahagStahl G.m.b.H. (HX.(E))
. is notification to the offeror, because the telex is an instantaneous method
of communication. Reliance is placed on The Brimnes [1973] 1 W.L.R.
386, 404-405; [1975] Q.B. 929, 945, 966, 967, 969-970. Difficult questions
may arise when a telex is left on to take messages outside working hours.
Such cases would have to be dealt with on their own particular facts.
The Entores case [1955] 2 Q.B. 327 was rightly decided and it should not
be upset now.
B Thompson Q.C. in reply. The decision in the Entores case [1955]
2 Q.B. 327 was based on the false premise that to constitute a contract the
acceptance must be received by the offeror, whereas it is only necessary
that it should be dispatched by the acceptor. If he takes appropriate steps
to communicate his acceptance to the offeror, then, unless the offeror has
specified that acceptance must be brought to his attention, taking those
c appropriate steps is sufficient.
In Adams v. Lindsell, 1 B. & Aid. 681, 682-683, the court was merely
establishing the time of acceptance and did not suggest that the postal
rule was a derogation from the general rule. This decision was followed
and approved in Dunlop v. Higgins, 1 H.L.Cas. 381, again with no sugges­
tion that it was an exception to the general rule. Nothing in In re Imperial
Land Co. of Marseilles, L.R. 7 Ch.App. 587, suggests that the postal rule
D is an exception. If an offer to buy goods in London was sent from
Hong Kong to an English company which sent a telex acceptance to a
branch office of the offerors, it could not be said that the contract was
not complete until the acceptance was received in Hong Kong. If in the
case of a telex message the onus was on the acceptor to show that
the offeror had received the acceptance, the same difficulties would apply
g as in the case of acceptance by letter and there would be a duty to accept
by registered letter or recorded delivery. There is no duty to accept
by any means other than those contemplated by the parties. Reliance
is placed on the Household Fire case, 4 Ex.D. 216, 220-221, 223-224, and
Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, 262.
The giving of the notice is the binding acceptance. The time of the
contract is the time when the notice is given. The place where the
F notice is given is the place where the contract is completed. The
contract becomes binding on the transmitting of the acceptance. A
postal contract is complete when the letter is posted. It was wrong to
say in the Entores case [1955] 2 Q.B. 327 that the contract is made
where the words of acceptance are heard.
As to repudiation of the contract the relevant words in R.S.C., Ord. 11,
G r. 1 (1) (g), are " breach committed within the jurisdiction... " Repudiation
is an intention not to perform the contract. The proper test is: When
does the repudiation take effect? If the rule in Entores [1955] 2 Q.B.
327 is upheld this repudiation took effect when notice of it was received
in England. The repudiation is without effect until communicated to the
innocent party. Martin v. Stout [1925] A.C. 359 should not be followed.
Ti A repudiation may be looked at either as a wrongful act or as an offer
open to acceptance. In either case it should be regarded as taking place
where it is communicated.
With regard to this acceptance, if the telex of May 3, 1979, was a
40
Brinkibon Ltd. v. Stahag Stahl G.m.b.H. (HX.(E.)) [1983]
counter-offer to the appellants and was accepted by the opening of the
letter of credit a question arises as to the place of that contract. The A
procedure followed takes account of the fact that the vendor wants to
be sure that he will be paid and the purchaser causes letters of credit
to be opened, applying to his bank who communicate with the corre­
sponding bank by whom the vendor will be paid. The buyer instructs
the issuing bank to open a credit in favour of the seller while the bank
approached advises the seller that the credit has been issued. Here there g
was an opening of credit by the issuing bank on the instructions of the
purchaser. An irrevocable step was taken by the purchaser when he gave
his instructions in London. In the case, say, of a sale of wine the moment
when the contract is complete is when the wine merchant despatches it.
Similarly in the present case when instructions were given to the bank to
issue the letters of credit, that was acceptance of the offer. A further telex
saying that the letters of credit had been issued was irrelevant: see the C
Entores case [1955] 2 Q.B. 327, 334.

The respondents were not called on to reply to this last point.

Their Lordships took time for consideration.

January 21, 1982. LORD WILBERFORCE. My Lords, the appellants

desire to sue in this country the respondents, an Austrian company, for
breach of an alleged contract for the supply of steel. In order to do
so, they must obtain leave to serve notice of their writ upon the respon­
dents under one or other of the provisions of R.S.C., Ord. 11, r. 1 (1).
Those relied upon are paragraphs (/) and (g). To satisfy (/), the appel­
lants must show that the contract was " made within the jurisdiction "; E
to come within (g) they must establish that the action is in respect of a
breach committed within the jurisdiction. The Court of Appeal has
decided against the appellants under both paragraphs.
The question whether a contract was made within the jurisdiction will
often admit of a simple answer: if both parties are in England at the
time of making it, or if it is contained in a single document signed by p
both parties in England, there is no difficulty. But in the case of con­
tracts involving negotiations, where one party is abroad, the answer may
be difficult to find. Sophisticated analysis may be required to decide
when the last counter-offer was made into a contract by acceptance, or
at what point a clear consensus was reached and by virtue of what words
spoken or of what conduct. In the case of successive telephone conver­
sations it may indeed be most artificial to ask where the contract was G
made: if one asked the parties, they might say they did not know—or
care. The place of making a contract is usually irrelevant as regards
validity, or interpretation, or enforcement. Unfortunately it remains in
Order 11 as a test for purposes of jurisdiction, and courts have to do their
best with it.
In the present case it seems that if there was a contract (a question „
which can only be decided at the trial), it was preceded by and possibly
formed by a number of telephone conversations and telexes between
London and Vienna, and there are a number of possible combinations
 41
2 A.C. Brinkibon Ltd. v. Stahag Stahl G.m.b.H. (HX.(E.)) Lord Wilberforce
upon which reliance can be placed. At this stage we must take the
A alternatives which provide reasonable evidence of a contract in order to
see if the test is satisfied. There are two: (i) A telex dated May 3, 1979,
from the respondents in Vienna, said to amount to a counter-offer,
followed by a telex from the appellants in London to the respondents
in Vienna dated May 4, 1979, said to amount to an acceptance, (ii) The
above telex dated May 3, 1979, from the respondents followed by action,
g by way of opening a letter of credit, said to have amounted to an
acceptance by conduct.
The first of these alternatives neatly raises the question whether an
acceptance by telex sent from London but received in Vienna causes a
contract to be made in London, or in Vienna. If the acceptance had
been sent by post, or by telegram, then, on existing authorities, it would
have been complete when put into the hands of the post office—in
C London. If on the other hand it had been telephoned, it would have
been complete when heard by the offeror—in Vienna. So in which
category is a telex communication to be placed? Existing authority of
the Court of Appeal decides in favour of the latter category, i.e. a telex
is to be assimilated to other methods of instantaneous communication:
see Entores Ltd. v. Miles Far East Corporation [1955] 2 Q.B. 327. The
jy appellants ask that this case, which has stood for 30 years, should now
be reviewed.
Now such review as is necessary must be made against the back­
ground of the law as to the making of contracts. The general rule, it is
hardly necessary to state, is that a contract is formed when acceptance
of an offer is communicated by the offeree to the offeror. And if
it is necessary to determine where a contract is formed (as to which I
E have already commented) it appears logical that this should be at the
place where acceptance is communicated to the offeror. In the common
case of contracts, whether oral or in writing inter praesentes, there is no
difficulty; and again logic demands that even where there is not mutual
presence at the same place and at the same time, if communication is
instantaneous, for example by telephone or radio communication, the
P same result should follow.
Then there is the case—very common—of communication at a dis­
tance, to meet which the so called " postal rule " has developed. I need
not trace its history: it has firmly been in the law at least since Adams
v. Lindsell (1818) 1 B. & Aid. 681. The rationale for it, if left somewhat
obscure by Lord Ellenborough C.J., has since been well explained.
Mellish L.J. in In re Imperial Land Co. of Marseilles (Harris' Case)
G (1872) L.R. 7 Ch.App. 587, 594 ascribed it to the extraordinary and mis­
chievous consequences which would follow if it were held that an offer
might be revoked at any time until the letter accepting it had been
actually received: and its foundation in convenience was restated by
Thesiger L.J. in Household Fire and Carriage Accident Insurance Co. Ltd.
v. Grant (1879) 4 Ex.D. 216, 223. In these cases too it seems logical to
TT say that the place, as well as the time, of acceptance should be where
(as when) the acceptance is put into the charge of the post office.
In this situation, with a general rule covering instantaneous communi­
cation inter praesentes, or at a distance, with an exception applying to
42
Lord Wilberforce Brinkibon Ltd. v. Stahag Stahl G.m.b.H. (HX.(E.)) [1983]
non-instantaneous communication at a distance, how should communi- »
cations by telex be categorised? In Entores Ltd. v. Miles Far East
Corporation [1955] 2 Q.B. 327 the Court of Appeal classified them with
instantaneous communications. Their ruling, which has passed into the
textbooks, including Williston on Contracts, 3rd ed. (1957), appears not to
have caused either adverse comment, or any difficulty to business men. I
would accept it as a general rule. Where the condition of simultaneity
is met, and where it appears to be within the mutual intention of the B
parties that contractual exchanges should take place in this way, I think
it a sound rule, but not necessarily a universal rule.
Since 1955 the use of telex communication has been greatly expanded,
and there are many variants on it. The senders and recipients may not
be the principals to the contemplated contract. They may be servants
or agents with limited authority. The message may not reach, or be „
intended to reach, the designated recipient immediately: messages may
be sent out of office hours, or at night, with the intention, or upon the
assumption, that they will be read at a later time. There may be some
error or default at the recipient's end which prevents receipt at the time
contemplated and believed in by the sender. The message may have
been sent and/or received through machines operated by third persons.
And many other variations may occur. No universal rule can cover all D
such cases: they must be resolved by reference to the intentions of the
parties, by sound business practice and in some cases by a judgment
where the risks should lie: see Household Fire and Carriage Accident
Insurance Co. Ltd. v. Grant, 4 Ex.D. 216, 227 per Baggallay L.J. and
Henthorn v. Fraser [1892] 2 Ch. 27 per Lord Herschell.
The present case is, as Entores Ltd. v. Miles Far East Corporation
[1955] 2 Q.B. 327 itself, the simple case of instantaneous communication
between principals, and, in accordance with the general rule, involves
that the contract (if any) was made when and where the acceptance
was received. This was on May 4, 1979, in Vienna.
The alternative argument under this head was that the contract was
made by an offer made from Vienna (as above, on May 3, 1979) and an
acceptance by conduct in the United Kingdom. The conduct relied upon F
was the giving of instructions by the appellants to set up a letter of
credit, as requested in the respondents' telex of May 3, 1979. The
appellants' telex of May 4, 1979, opened with the words " confirm having
opened our irrevocable letter of credit No. 0761/79 on account of Mide-
strade Est., Chiasso, Switzerland . . ." Midestrade Est. is, it appears, the
company behind the appellants—a fact which raises the question whether _
a letter of credit on their account satisfied the terms of the respondents'
request. I need not come to a conclusion on this point because I am
satisfied that the letter of credit was not opened in the United Kingdom.
Instructions were indeed given by the appellants to their bank in the
United Kingdom to open it, and that bank gave instructions on May 4,
1979, to their correspondent in Vienna, but these steps were between
the appellants and their agents only. They could not amount, in my H
opinion, to an acceptance of the offer of May 3, 1979. This took place,
if at all, when the correspondent bank in Vienna notified the respondents:
this they did in Vienna. On neither ground, therefore, can it be said
 43
2 A.C. Brinklbon Ltd. v. Stahag Stahl G.m.b.H. (H.L.(E.) ) Lord Wilberforce
that the contract was made within the jurisdiction and the case under
A subparagraph if) must fail.
That under subparagraph (g) can be more shortly dealt with. The
breach pleaded is that the defendants (respondents) " have not opened
a performance bond and have delivered no steel" (points of claim para­
graph 7). Each of these acts should have been performed outside the
jurisdiction and failure to do them must be similarly located.
B On both points, therefore, I find myself in agreement with the Court
of Appeal, and the appeal must be dismissed.
LORD FRASER OF TULLYBELTON. My Lords, I am in full agreement
with the reasoning of my noble and learned friends, Lord Wilberforce
and Lord Brandon of Oakbrook. I wish only to add a comment on the
subject of where a contract is made, when it is made by an offer accepted
C by telex between parties in different countries. The question is whether
acceptance by telex falls within the general rule that it requires to be
notified to the offeror in order to be binding, or within the exception of
the postal rule whereby it becomes binding when (and where) it is handed
over to the post office. The posting rule is based on considerations of
practical convenience, arising from the delay that is inevitable in deliver-
D ing a letter. But it has been extended to apply to telegrams sent through
the post office, and in strict logic there is much to be said for applying
it also to telex messages sent by one business firm directly to another.
There is very little, if any, difference in the mechanics of transmission
between a private telex from one business office to another, and a tele­
gram sent through the post office—especially one sent from one large
city to another. Even the element of delay will not be greatly different
E in the typical case where the operator of the recipient's telex is a clerk
with no authority to conclude contracts, who has to hand it to his prin­
cipal. In such a case a telex message is not in fact received instan­
taneously by the responsible principal. I assume that the present case
is a case of that sort.
Nevertheless I have reached the opinion that, on balance, an acceptance
F sent by telex directly from the acceptor's office to the offeror's office
should be treated as if it were an instantaneous communication between
principals, like a telephone conversation. One reason is; that the decision
to that effect in Entores v. Miles Far East Corporation [1955] 2 Q.B. 327
seems to have worked without leading to serious difficulty or complaint from
the business community. Secondly, once the message has been received on
the offeror's telex machine, it is not unreasonable to treat it as delivered
G to the principal offeror, because it is his responsibility to a rrange for prompt
handling of messages within his own office. Thirdly, a party (the acceptor)
who tries to send a message by telex can generally tell if his message has not
been received on the other party's (the offeror's) machine, whereas the
offeror, of course, will not know if an unsuccessful attempt has been
made to send an acceptance to him. It is therefore convenient that the
JJ acceptor, being in the better position, should have the responsibility of
ensuring that his message is received. For these reasons I think it is
right that in the ordinary simple case, such as I take this to be, the general
rule and not the postal rule should apply. But I agree with both my
44
of0TunJbe«on Brinkibon Ltd. v. Stahag Stahl G.m.b.H. (H.L.(E.)) [1983]
noble and learned friends that the general rule will not cover all the .
many variations that may occur with telex messages.

LORD RUSSELL OF KILLOWEN. My Lords, I have had the advantage

of reading in draft the speeches prepared by my noble and learned
friends, Lord Wilberforce and Lord Brandon of Oakbrook. I agree with
them and accordingly I too would dismiss this appeal.
B
LORD BRIDGE OF HARWICH. My Lords, I have had the advantage
of reading in draft the speeches of my noble and learned friends, Lord
Wilberforce and Lord Brandon of Oakbrook. I agree with them that,
for the reasons they give, this appeal should be dismissed.
LORD BRANDON OF OAKBROOK. My Lords, both the appellants (whom „
I shall call " the buyers ") and the respondents (whom I shall call " the
sellers") are traders in steel. The buyers are an English company. The
sellers are an Austrian company, having no place of business in England
or Wales.
It is common ground between the buyers and the sellers that early
in May 1979, following negotiations which began in April 1979, an
executory contract was made between them for the sale by the sellers D
to the buyers of a quantity of mild steel bars. It is further common
ground that, in circumstances which I shall explain later, that executory
contract (which I shall call " the contract") was never performed.
On November 30, 1979, a considerable time after performance of the
contract should, according to its terms, have been completed, the buyers
applied ex parte to Robert Goff J. in the Commercial Court for leave
to issue a writ against the sellers claiming damages for breach of the
contract, and to serve notice of such writ on the sellers out of the juris­
diction in Austria. The application was supported by an affidavit of Mr.
Jackson, a partner in the firm of solicitors acting for the buyers, and
the learned judge made the order which he was asked to make. Pursuant
to that order, the buyers issued a writ against the sellers indorsed on
the back with points of claim, and served notice of such writ on the F
sellers in Austria.
On March 11, 1980, Mocatta J. in the Commercial Court dismissed
an application by the sellers, who had meanwhile entered a conditional
appearance in the action, to set aside the service on them of notice of
the writ in Austria.
The sellers appealed against the decision of Mocatta J. and by order
of June 12, 1980, the Court of Appeal (Stephenson and Templeman L.JJ.)
allowed the appeal and set aside both the order of Robert Goff J. of
November 30, 1979, and that of Mocatta J. of March 11, 1980. The
Court of Appeal refused an application by the buyers to present a petition
of appeal to your Lordships' House, but leave for them to do so was later
given by the Appeal Committee.
There are two grounds on which the buyers relied in the courts below, H
and continued to rely in your Lordships' House, for their contention that
this was a proper case for service out of the jurisdiction in Austria under
R.S.C., Ord. 11, r. 1 (1). The first ground was that the case came within
 45
L rd
2 A.C. Brinkibon Ltd. v. Stahag Stahl G.m.b.H. (H.L.(E.) ) 2f 05ji™jjk
A paragraph (/) of rule 1 (1) because the action begun by the writ was brought
against the sellers to recover damages in respect of a contract which was
made in England. The second ground was that the case came within
paragraph (g) of rule 1 (1) because the action begun by the writ was brought
against the sellers in respect of a breach of contract committed in England.
Robert Goff J. appears to have accepted both grounds. Mocatta J.
accepted the first ground but rejected the second. The Court of Appeal
B rejected both grounds.
My Lords, the negotiations between the parties which led up to the
making of the contract were conducted, in the main at any rate, by telex.
I say " in the main " because there is some evidence:, contained in the
affidavit of Mr. Jackson, to which I referred earlier, that there were also
some telephone conversations between representatives of the parties relating
c to the matter. There was, however, no evidence to show what was said
in the course of any such telephone conversations and no significance can
therefore be attached to them.
There were six telexes leading up to making of the contract: four from
the buyers to the sellers, sent on April 20, April 23, April 26 and May 4,
1979; and two from the sellers to the buyers sent on April 25, and May 3,
1979. In the course of these telexes the principal terms of the contract were
D agreed as follows. First, the goods to be sold were to be 20,000 metric tons
of mild steel bars of four different sizes. Secondly, the goods were to be
delivered c. & f. Alexandria on liner terms. Thirdly, the price was to be
U.S.S353 per metric ton. Fourthly, the goods were to be sliipped infivesepa­
rate instalments, each of 4,000 metric tons, in June, July, August, September
and October 1979. Fifthly, payment of the price of each of the five instal-
ments, namely, U.S.$1,412,000, was to be made by means of a letter of
k credit, revolving four times, which was to be operative at a named bank
in Vienna. Sixthly, the following documents were to be presented against
the letter of credit: a commercial invoice; a full set of clean bills of lading;
a certificate of origin legalised by the Egyptian embassy or consulate; a
blacklist certificate of the shipping company; a works certificate indicating
the mechanical properties of the steel and that the bars were manufactured
F according to British Standard Specification 4449/1969. Seventhly, the
sellers were to provide a performance bond based on a percentage of the
total price of U.S.$7,060,000. With regard to this the buyers first proposed
that the percentage should be 5 per cent., but the sellers; made a counter­
proposal of 3 per cent, which, since the buyers made no objection to it,
appears to have been impliedly accepted by them. Eighthly, if the freight
rates were to increase for the shipments in September and October, the
G buyers would repay such increase to the sellers. With regard to this too,
the proposal came first from the sellers and, since the buyers made no
objection to it, appears again to have been impliedly accepted by them.
In their telex of May 3, 1979, the sellers named the Zentralsparkasse
der Gemeinde bank in Vienna as the bank at which the buyers' letter of
credit was to be operative. Following receipt of that telex the buyers, on
H May 4, 1979, gave instructions to their London bank, as a result of which
the latter sent to Osterreichische Landerbank, their correspondent bank in
Vienna, a long telex which amounted either to a letter of credit, or at any
rate to notice of a letter of credit, opened by a Swissfirm,.Midestrade Est.,
46
Lord Brandon Brinkibon Ltd. v. Stahag Stahl G.m.b.H. (H.L.(E.) ) [1983]
of Oakbrook
of Chiasso, in favour of the sellers in respect of the prices payable for the
five instalments of steel bars the subject matter of the contract. A
In the last paragraph but one of that telex the buyers' London bank
said:
" This telex advice should be considered as a negotiable instrument.
Please advise the above credit through Zentralsparkasse der Gemeinde,
Wien, Vienna. Please also advise the beneficiaries about the arrival
of credit on telephone." B
After giving those instructions to their London bank, the buyers on the
same day, May 4, 1979, sent to the sellers a telex in these terms:
"Confirm having opened our irrevocable letter of credit No. 0761/79
on account of Midestrade Est., Chiasso, Switzerland, favouring your­
selves for U.S. dlrs. 1,142,000 covering shipment of 4,000 m, tons
rebars stop the credit is to revolve four times covering total shipment
of 20,000 m. tons stop this credit has been advised through
Osterreichische Landerbank (Wien)."
Midestrade Est. of Chiasso in Switzerland were in fact principals on
whose behalf the buyers, throughout their negotiations with the sellers,
were acting as agents. The mention, however, of that Swiss firm's name in ~
the telexed letter of credit sent by the buyers' London bank to their corres­
pondent bank in Vienna, and in the telex from the buyers to the sellers set
out above, constituted the first intimation to the sellers that a third party
was involved in the contract on the buyers' side.
On May 9, 1979, the sellers sent a telex to the buyers complaining that
the letter of credit was unworkable and that it had been opened in the name
not of the buyers but of a Swiss firm of whom the sellers knew nothing. E
On May 21, 1979, the sellers sent a further telex to the buyers in which they
said, in effect, that they were withdrawing from the contract on the ground
that they had not had opened in their favour a proper letter of credit under
it. Further telexes were exchanged in which the buyers sought to persuade
the sellers to change their minds and go on with the contract, but these
efforts all failed. The result accordingly was that the contract was never _
performed.
My Lords, I shall consider first the buyers' contention that the case
comes within paragraph (/) of R.S.C., Ord. 11, r. 1 (1), because the action
begun by the writ was brought against the sellers to recover damages in
respect of a contract which was made in England. In order to examine
that contention it is necessary to consider the question when and where the
negotiations between the buyer and the seller resulted in what both parties G
agree they did result in, namely, a concluded contract of sale.
In Mr. Jackson's affidavit of November 21, 1979, in support of the
buyers' ex parte application to Robert Goff J. he stated in paragraph 4
that the contract came into being as the result of an offer by the buyers,
contained in a telex sent by them to the sellers on April 26, 1979, being
accepted by a telex sent by the sellers to the buyers on May 3, 1979. The H
manner in which the contract was made was pleaded in the same way in
paragraph 4 of the buyers' points of claim indorsed on the back of the writ.
Examination of the two telexes concerned does not support the buyers'
 47
2 A.C. Brinkibon Ltd. v. Stahag Stahl G.m.b.H. (H.L.(E.)) Lord Brandon
° of Oakbrook
original case on how the contract was concluded. The buyers' telex of April
26, 1979, is capable of being interpreted as an offer, but the sellers' telex of
May 3, 1979, cannot be interpreted as an acceptance of such offer, because
it introduced terms which differed materially from those contained in
the latter. In particular, the buyers in their telex of April 26, 1979, proposed
a performance bond of 5 per cent, on the total purchase price, whereas
the sellers in their telex of May 3, 1979, specified a performance bond of
B 3 per cent. The sellers further introduced an entirely new term, under
which the buyers were to pay to the sellers any increase in freight charges
in respect of the September and October shipments. In these circumstances
the sellers' telex of May 3 must, in accordance with well-established
principles of the law of contract, be interpreted not as an acceptance of
the buyers' offer but as a counter-offer.
_, In your Lordships' House, Mr. Thompson Q.C. for the buyers accepted,
as I understood him, that the way in which the contract was said to have
been made, first, in paragraph 4 of Mr. Jackson's affidavit and, secondly, in
paragraph 4 of the buyers' points of claim, could not be supported. He
recognised that the sellers' telex of May 3 had to be interpreted as a
counter-offer, and he put forward two alternative cases as to the manner
in which that counter-offer was accepted by the buyers, either of which
D would, he said, produce the same result, namely, that acceptance took place,
and the contract was therefore made, in England.
Mr. Thompson's first contention was that the sellers' counter-offer
contained in their telex of May 3, 1979, was accepted by the buyers by
their conduct on May 4, 1979, in instructing their London bank to open
the required letter of credit operative in Vienna. His second and alternative
contention was that the counter-offer was accepted by the buyers sending
to the sellers their telex of May 4, 1979, which I quoted in full above.
In support of the first contention Mr. Thompson argued that the conduct
of the buyers in giving the instructions concerned to their London bank
took place in England, and that, since that conduct had the effect of
concluding the contract, the contract was one made in England for the
purposes of paragraph (/) of R.S.C., Ord. 11, r. 1 (1).
F In support of his second and alternative contention, Mr, Thompson
argued that, since the buyers' telex of May 4, which resulted in the con­
cluding of the contract, was sent by a representative of the buyers in
London, once again the contract was one made in England for the purposes
of paragraph (/) above,
My Lords, I do not consider that Mr. Thompson's first contention, that
Q the contract was concluded by the conduct of the buyers on May 4, 1979,
in giving instructions to their London bank can possibly be right. It may
be that when, as a result of those instructions, a letter of credit was opened
operative at a bank in Vienna, and the sellers were then notified of that
fact by that bank, such notification had the effect of bringing into being
a concluded contract on the terms of the sellers' telex of May 3, 1979.
But the proposition that the mere giving by the buyers to their London bank
of the instructions concerned, without any notification to the sellers of the
fact that such instructions had been given, or of their nature and effect,
could result in bringing into being a concluded contract: appears to me to
48
Lord Brandon Brinkibon Ltd. T. Stahag Stahl G.m.b.H. (H.L.(E.) ) [1983]
of Ualtbrook
be quite untenable. On the other hand, if the contract was concluded as
a result of a letter of credit operative at a bank in Vienna being opened,
and the bank concerned then notifying the sellers of such opening, the
contract so concluded would be one made in Austria and not in England.
Mr. Thompson's second and alternative case, that the contract was
concluded by the buyers transmitting to the sellers their telex of May 4,
1979, seems to me to be the correct analysis of the transaction, On this
analysis, however, the buyers are up against the difficulty that it was B
decided by the Court of Appeal in Entores Ltd. v. Miles Far East Corpora­
tion [1955] 2 Q.B. 327 that, when an offer is accepted by telex, the contract
thereby made is to be regarded as having been so made at the place where
such telex was received (in this case Vienna) and not in the place from
which such telex was sent (in this case London).
Mr. Thompson invited your Lordships to hold that the Entores case was ^
wrongly decided and should therefore be overruled. In this connection he
said that it was well-established law that, when acceptance of an offer was
notified to an offeror by post or telegram, the concluding of the contract
took place when and where the letter of acceptance was posted or the
telegram of acceptance was despatched. He then argued that the same
rule should apply to cases where the acceptance of an offer was com­
municated by telex, with the consequence that the contract so made should D
be regarded as having been made at the place from which the telex was
sent and not the place where it was received.
My Lords, I am not persuaded that the Entores case [1955] 2 Q.B. 327,
was wrongly decided and should therefore be overruled. On the contrary,
I think that it was rightly decided and should be approved. The general
principle of law applicable to the formation of a contract by offer and p
acceptance is that the acceptance of the offer by the offeree must be notified
to the offeror before a contract can be regarded as concluded, Carlill v.
Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, 262, per Lindley LJ, The
cases on acceptance by letter and telegram constitute an exception to the
general principle of the law of contract stated above. The reason for the
exception is commercial expediency: see, for example, Imperial Land Co.
of Marseilles, In re {Harris' Case) (1872) L.R. 7 Ch.App. 587, 692 per F
Mellish L.J. That reason of commercial expediency applies to cases where
there is bound to be a substantial interval between the time when the
acceptance is sent and the time when it is received. In such cases the
exception to the general rule is more convenient, and makes on the whole
for greater fairness, than the general rule itself would do, In my opinion,
however, that reason of commercial expediency does not have any appli- c
cation when the means of communication employed between the offeror
and the offeree is instantaneous in nature, as is the case when either the
telephone or telex is used. In such cases the general principle relating to
the formation of contracts remains applicable, with the result that the
contract is made where and when the telex of acceptance is received by
the offeror.
H
It follows from what I have said that, in my opinion, Mr. Thompson's
contention that the present case falls within paragraph (/) of R.S.C., Ord.
11, r, 1 (1), fails and must be rejected.
 49
2 A.C. Brinklbon Ltd. v. Stahag Stahl G.m.b.H. (H.L.(E.)) Lord Brandon
° of Oakbrook
I turn to examine Mr. Thompson's other contention that the present
A case falls within paragraph (g) of R.S.C., Ord. 11, r. 1 (1). In order to do
this it is necessary to consider first what is the breach of the contract in
respect of which the buyers' action against the sellers was brought, and
then to see whether such breach, assuming that it was committed, took
place within or outside the jurisdiction.
This part of the case appears to have been conducted by both sides at
B every stage in the courts below as if the breach of the contract in respect of
which the buyers' action was brought consisted of an anticipatory breach
in the form of a repudiation of the contract contained in the sellers' telexes
of May 9 and 21, 1979. As a result the question considered in the courts
below was whether such repudiation took place in the country from which
the telexes concerned were sent, namely, Austria, or in the country in
which they were received, namely, England. Both Mocatta J. and the
C Court of Appeal took the view that the repudiation, £ind therefore the
relevant breach of the contract, took place in Austria, the country from
which the telexes concerned were sent.
In my view both sides, in conducting this part of the case on the basis
described above, were acting under a complete misapprehension as to what
was the breach of the contract in respect of which the buyers' action was
D brought. That this is so becomes immediately apparent from the terms of
paragraphs 6, 7 and 8 of the points of claim indorsed on the back of the
writ.
Assuming, in favour of the buyers, that the sellers, by sending their
telexes of May 9 and 21, repudiated the contract, a situation then arose in
which the buyers were entitled to elect between two courses. They could
F either accept the repudiation and treat the contract as at an end; or they
could decline to accept the repudiation and treat the contract as still
subsisting. It is clear that, in that situation, the buyers elected to follow
the second course and not the first.
I say that that is clear for four reasons. First, there iis nowhere to be
found in the documents put in evidence any telex or letter from the buyers
to the sellers indicating that the former accepted the repudiation of the
F contract by the latter. Secondly, though reference is made in paragraph 6
of the buyers' points of claim to the sellers' two telexes of May 9 and
21, 1979, it is nowhere pleaded either that the sending of those telexes
constituted a repudiation of the contract by the sellers, or that the
buyers elected to accept such repudiation and treat the contract as at
an end. Thirdly, the breach of the contract in fact pleaded in para-
Q graph 7 of the points of claim is simply a failure by the sellers to perform
the contract by opening a performance bond and delivering the steel.
Fourthly, the damage alleged to have been suffered by the buyers in
paragraph 8 of the points of claim is damage calculated by reference to
the difference between the market and the contract prices of the steel
at the time when the five instalments should, on the footing that the
contract remained in force, have been delivered to the buyers.
"■ Having regard to these matters the question to be considered in relation
to paragraph (g) of R.S.C., Ord. 11, r. 1 (1) is not in what country did
any alleged anticipatory repudiation of the contract by the sellers take
50
Lord Brandon Brinkibon Ltd. v. Stahag Stahl G.m.b.H. (H.L.(E.)) [1983]
of Oakbrook
place. The question is rather whether the sellers, on the assumption
that they failed to perform any part of their obligations under the
contract, thereby committed any breach of the contract in England.
There is no difficulty in giving a negative answer to that question, for it
has never been suggested that any part of the contract to be performed
by the sellers was to be performed anywhere except outside the
jurisdiction.
It follows from what I have said that, in my opinion, Mr. Thompson's B
contention that the present case falls within paragraph (g) of R.S.C.,
Ord. 11, r. 1 (1) also fails and must be rejected.
My Lords, for the reasons which I have given, I would affirm the
decision of the Court of Appeal, though on different grounds in relation
to paragraph (g), and dismiss the appeal.
Since preparing this speech I have had the advantage of reading in Q
draft that of my noble and learned friend, Lord Wilberforce. In it he
points out that, while the present case, like the Entores case [1955] 2
Q.B. 327, is concerned only with instantaneous communication by telex
between the principals on either side, there may in other cases be a
number of variations on that simple theme. He further expresses the
view that there can be no general rule capable of covering all such
variations, and that, when they occur, the problems posed by them must D
be resolved by reference to the intention of the parties, sound business
practice and in some cases a judgment where the risk shall lie. I agree
entirely with these observations.
Appeal dismissed.

Solicitors: Heald Nickinson; Linklaters & Paines. E

F. C.