Brinkibon Ltd. v. Stahag Stahl

1
Brinkibon Ltd. v. Stahag Stahl 1983 2 A.C. 34,
1982 1 All E.R. 293 (House of Lords) Lord
Wilberforce 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 at the place where
acceptance is communicated to the offeror A
telex is to be assimilated to other methods of
instantaneous communication (referring to Entores
Ltd. v. Miles Far East Corp. 1955 2 All E.R.
493. 1955 2 Q.B. 327). Where the condition of
simultaneity is met, and where it appears to be
within the mutual intention of the parties that
contractual exchanges should take place in this
way, I think it is a sound rule, but not
necessarily a universal rule In the case (very
common) of communication at a distance the
so-called postal rule has developed (referring
to Adams v. Lindsell (1818) 1 B. Ald. 681, 106
E.R. 250) and Household Fire and Carriage
Accident Insurance Co. Ltd. v. Grant (1879) 4 Ex.
D. 216 in these cases too It seems logical
to 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 The message may not reach, or be intended
to reach, the designated recipient immediately
message may be sent out of office hours, or at
night, with the intention, or on the assumption,
that they will be read at a later time. There may
be some error or default at the recipients 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 personsNo universal rule can
cover all such cases they must be resolved by
reference to the intentions of the parties, by
sound business practice and in some cases by
judgment as to where the risk should lie.
2
Brinkibon Ltd. v. Stahag Stahl 1983 2 A.C. 34,
1982 1 All E.R. 293 (House of Lords) Lord
Fraser The posting rule is based on
considerations of practical convenience, arising
from the delay that is inevitable in delivering a
letter It has been extended to apply to
telegrams sent through the Post Office An
acceptance sent by telex directly from the
acceptors office to the offerors 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 Ltd. v. Miles
Far East Corp. seems to have worked without
leading to serious difficulty or complaint from
the business community. Secondly, once the
message has been received on the offerors telex
machine, it is not unreasonable to treat it as
delivered to the principal offeror, because it is
his responsibility to arrange for prompt handling
of messages within his own office. Thirdly, a
party who tries to send a message by telex can
generally tell if his message has not been
received on the other partys machine, whereas
the offeror will not know if an unsuccessful
attempt has been made to send an acceptance to
him. It is therefore convenient that the
acceptor, being in better position, should have
the responsibility of ensuring that his message
is received. Lord Brandon The cases on
acceptance by letter and telegram constitute an
exception to the general principle of the law of
contract that the acceptance of the offer by the
offeree must be notified to the offeror before a
contract can be regarded as concluded (referring
to Carlill v. Carbolic Smoke Ball Co. 1893 1
Q.B. 256)
3
Household Fire Carriage Accident Insurance Co.
v. Grant (1879) 4 Ex. D. 216 (C.A.) Thesiger
L.J. A contract formed by correspondence
through the post is complete as soon as the
letter accepting an offer is put into the post,
and is not put an end to in the event of the
letter never being delivered (referring to
Dunlop v. Higgins (1848) 9 E.R. 805) The
acceptance of the offer at all events binds both
parties from the time of acceptance being posted
(Harris Case (1872) L.R. 7 Ch. App. 587) As to
how the minds of the parties were brought
together if the letter was not received If the
post office be the common agent of both parties,
it seems to me to follow that, as soon as the
letter of acceptance is delivered to the post
office, the contract is made as complete and
final and absolutely binding as if the acceptor
had put his letter into the hands of a messenger
sent by the offeror himself as his agent to
deliver the offer and receive the acceptance
4
Holwell Securities v. Hughes 1974 1 W.L.R. 155,
1974 1 All E.R. 161 (C.A.) Lawton L. J. The
general postal rule (that is, that the acceptance
is complete as soon as it is posted) does not
apply in all cases where the parties choose the
post to be used as a means of accepting an
offer. First, it does not apply when the express
terms of the offer specify that the acceptance
must reach the offeror Secondly, it probably does
not operate if its application would produce
manifest inconvenience and absurdity (referring
to the opinion of Bramwell in British American
telegraph Co. v. Colson (1871) LR 6 Exch 108) In
my judgment, the factor of inconvenience and
absurdity are but illustrations of a wider
principle, namely, that the rule does not apply
if, having regard to all the circumstances,
including the nature of the subject-matter under
consideration, the negotiating parties cannot
have intended that there should be a binding
agreement until the party accepting an offer or
exercising an option had in fact communicated the
acceptance or exercise to the other.