The starting point for the law in this area is the case of Entores v Miles Far East Corp.124
This was concerned with communications by telex machine. The primary issue before the court was the question of where the acceptance took effect, if it was sent from a telex
123 Arts 1.303(3) and 2.205(1).
machine in one country, and received on a telex machine in another country. The answer to this would affect the position as to which country’s law governed the contract.
The leading judgment in the Court of Appeal was given by Lord Denning. His approach was to take as his starting point a very simple form of communication over a distance (albeit a rather unlikely one in factual terms), that is, two people making a contract by shouting across a river. In this situation, he argued, there would be no contract unless and until the acceptance was heard by the offeror. If, for example, an aeroplane flew overhead just as the acceptor was shouting his or her agreement, so that the offeror could not hear what was being said, there would be no contract. The acceptor would be expected to repeat the acceptance once the noise from the aeroplane had diminished. Taking this as his starting point, he argued by analogy, that the same approach should apply to all contracts made by means of communication which are instantaneous or virtually instantaneous (as opposed to post or telegram, where there is a delay). On this basis, regarding telex as falling into the ‘instantaneous’ category, he held that the acceptance by telex took place where it was received, rather than where it was sent.
The same answer is generally presumed to apply to all other forms of more sophisticated electronic communication which can be said to be more or less instantaneous in their effect. They will all take effect at the place where they are received. It is at least questionable, however, whether Lord Denning’s analogy with a face to face conversation does really hold up when applied to telexes, faxes and emails. The only true instantaneous types of communication are face to face, by telephone, or, possibly, by the kind of electronic message service where both participants are online at the same time. A telex and a fax can sit unread in somebody’s in-tray for some time, and an email may not be opened as soon as it arrives. In that respect, they are more analogous to posted communications, which may not be read until some time after they have been delivered to the addressee. This becomes even more important when the time that the acceptance takes effect is the crucial issue.125The fact that an extension of the postal rule was rejected
in Entores is thus more easily explained on the basis of an unwillingness to allow that anomalous approach to be applied more widely, rather than a logical necessity, based on an analysis of the types of communication involved.
There is perhaps a slightly stronger analogy, at least as regards telex or fax, when the question of what happens when there are problems with the communication is considered. As we have seen, Lord Denning took the view that in instantaneous communications it is generally up to the person sending the communication to ensure that his message gets through. The sender will in most cases (as with the aeroplane flying overhead) be aware if there is a problem. If, however, the reason for failure to communicate is clearly the responsibility of the recipient, then the position will be different. Thus:126
... if the listener on the telephone does not catch the words of acceptance, but nevertheless does not trouble to ask for them to be repeated: or the ink on the teleprinter fails at the receiving end, but the clerk does not ask for the message to be repeated: so that the man who sends an acceptance reasonably believes that his message has been received. The offeror in such circumstances is clearly bound, because he will be estopped from saying that he did not receive the message of acceptance.
125 As discussed in the next section, 2.11.11.
On the other hand:127
... if there should be a case where an offeror without any fault on his part does not receive the message of acceptance – yet the sender of it reasonably concludes that it has got home when it has not – then I think there is no contract.
The expectation is that, as with a personal or telephone conversation, both sender and recipient will know quickly if the communication has failed. That is most likely to be the case with a telex or fax, where the reply may well be received in an office where those working near to the relevant machine will notice if there has been a failed attempt to send a message. They will then, presumably, try to communicate with the sender. This is not the case with email, however, where the intended recipient may have no immediate indication of a failed attempt to communicate, and the sender may well only receive a message saying that the email has not been delivered at some time later. Even as regards telex and fax there will be no instant response where the messages is sent out of office hours, or where the recipients do not notice that an attempt to communicate has been made, or where the relevant machine is not located in an area where a malfunction will be noticed quickly. Even in this respect, therefore, the categorisation of these types of communication as closely analogous to a personal conversation tends to break down. They are ‘instantaneous’ in the sense that the message is received at the recipient’s premises almost immediately, but otherwise are more akin to postal communications than personal or telephone conversations. Once again, the conclusions in Entores as to the consequences of telex communication can be seen to be based more on what it is reasonable to expect in a business context than on the analogy with other types of communication which Lord Denning used as the overt basis of his analysis.