• In the case of Brinkibon Ltd v Stahag Steel [1983] 2 AC 34, contract formation was explored in the context of instantaneous communication and the presiding jurisdiction where the sellers were based in a different country.

Facts of Brinkibon Ltd v Stahag Steel [1983] 2 AC 34

  • The C buyers, Brinkibon Ltd, were a company based in London, England
  • The D sellers, Stahag Steel, were based in Vienna, Austria
  • The Cs had sent their acceptance to the Ds offer by telex communication
  • Later, the Cs wanted to sue the Ds for breach of contract
  • The High Court were unsure on the scope of their jurisdiction regarding a party residing outside of the country and the Court of Appeal believed it be outside the scope of English law, so the case was taken to the House of Lords

Issues in Brinkibon Ltd v Stahag Steel [1983] 2 AC 34

  • A contract was made between the parties, but was this formed in England and so English law could deal with the alleged breach, or would Austrian law have to deal with it?
  • Having accepted using telex, when was the contract formed?

Held by the House of Lords

  • Appeal dismissed. The contract was formed in Austria where the acceptance was received – therefore the presiding law was Austrian law, and the High Court had no jurisdiction

Lord Wilberforce

For contracts, Lord Wilberforce stated the general rule

  • “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 have already commented) it appears logical that this should be at the place where acceptance is communicated to the offeror.” [41]

Telex: instantaneous or non-instantaneous communication?

  • Citing Entores v Miles Far East Corp [1955], Lord Wilberforce stated that the Court of Appeal held telex to be “classified … with instantaneous communications” [42]

Citing Entores again, Lord Wilberforce stated that if the acceptance formed the contract this would be under Austrian jurisdiction

  • “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.” [42]

Lord Wilberforce denied jurisdiction would be under English law after considering the possibility that the contract was formed upon the offer made from Vienna and acceptance by conduct in England:

  • “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 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.” [42]