Contracts (O’Byrne)
Acceptance (Part 5)
Instantaneous Methods of Communication
I.
Per Treitel: The postal rule does not apply to acceptances made by some
instantaneous mode of communication, e.g. by telephone or by telex. Such
acceptances are therefore governed by the general rule that they must have
been communicated to the offeror. The reason why the [postal] rule does not
apply in such cases is that the acceptor will often know at once that his
attempt to communicate was unsuccessful, so that it is up to him to make a
proper communication. But a person who accepts by letter which goes astray
may not know of the loss or delay until it is too late to make another
communication. Fax messages seem to occupy an intermediate position. The
sender will know at once if his message has not been received at all and
where this is the position, the message should not amount to an effective
acceptance. But if the message is received in such a form that it is wholly or
partly illegible, the sender is unlikely to know this at once and it is suggested
that an acceptance sent by fax might be effective in such circumstances. The
same principles should apply to other forms of electronic communication such
as email…here again the effects of unsuccessful attempts to communicate
should depend on whether the sender of the message knows (or has the
means of knowing) at once of any failure in communication [footnotes
omitted].
II.
Brinkibon Ltd v Stahag Stahl
Buyers (Brinkibon)
plaintiffs
in London
Sellers (Stahag)
defendants
in Vienna, Austria
Buyers (London) are suing Sellers (Austrian) for breach of contract to supply
steel. Buyers are seeking an order for service ex juris.
Where is contract formed? (only if contract is formed in England will the
Buyers get their order). To answer the legal question, we need to know
what rule to apply with respect to when acceptance is communicated.
2
Basic facts
May 3:
May 4:
telex counter offer from Sellers in Vienna to buyers in London
telex acceptance from Buyers in London to Sellers in Vienna
if acceptance by postal rule, acceptance is
communicated upon “posting.” This means that the
contract is made in ENGLAND and buyers will get
their order.
if acceptance by instantaneous communication rule,
acceptance occurs when received in Vienna. This
means that the contract is made in VIENNA and the
buyers will NOT get their order.
Per court in Brinkibon:
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 parties. And many other
variations may occur. No 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 a
judgment where the risks should lie….
Buyer’s back-up emergency argument:
May 3:
Offer from VIENNA
Acceptance by conduct of buyers in LONDON when they instructed
their bank to open up an irrevocable letter of credit.
See next page for diagram
3
Buyer
instructs
Bank in England
(London)
Opens an
irrevocable letter
of credit in favour
of seller
Corresponding
Bank in Vienna
Notifies
Seller
(Vienna)