In early March 1961, R., the proprietor of the defendant firm, went to the plaintiff's place of business with M., the engineer who managed the defendant's branch at D. There they had negotiations with H., the plaintiff's partner and general agent, concerning the purchase of a tractor and trailer from the plaintiff. On 28 March M and H inspected the trailer and then went to H's home where H drafted a contract of sale on one of the plaintiff's invoices, which both H and M signed. The document was addressed to 'The Firm of R., pipe construction, via the factory at D', and ran as follows: 'Purchased, after agreement and inspection, one caterpillar tractor with Deutz 175-PS motor, and one trailer, as is, at a lump sum price of 20,000 DM. Collection against payment in cash to be made between 25 and 30 April 1961 . . . '

R was away at a spa at the time, and when he returned at the end of April 1961 he took delivery of the tractor but not the trailer, and paid the plaintiff 7,200 DM.

The plaintiff sued for 13,000 DM with interest against delivery of the trailer, claiming that at the time of the original negotiations between the parties in early March 1961 R had empowered M to continue negotiations with the plaintiff after verifying certain details about the trailer and to enter an agreement for the purchase of both vehicles. The defendant contended that M's signature to the document of 28 March was subject to R's approval.

Both lower courts rejected the claim; on the plaintiff's further appeal their judgment is vacated and the case remanded.

Reasons

The appellant maintained that his claim may be based on a matter which the court of appeal did not consider, namely the acceptance without protest of a commercial letter of confirmation. He was right. Since it emerges from several of the documents submitted by the plaintiff that the defendant did not protest the sale contract of 28 March until 30 August, this should have been considered, notwithstanding that the plaintiff did not expressly invoke the rules of law on commercial letters of confirmation.

1. A commercial letter of confirmation is a document addressed by one contractor to the other in which he communicates his version of the conclusion and content of a contract which has been formed orally, telephonically or telegraphically. It is the normal method used by businessmen to establish evidence of the content of a transaction so formed [reference omitted]. In order to serve as a letter of confirmation the document must be designed ex facie to reflect the dealings or at least their gist (BGH, 5 Dec. 1960, BB 61, 271).

Since the document of 28 March satisfies these basic requirements, it is a commercial letter of confirmation. Not only was it obviously apt to establish the terms agreed between M and H on 28 March, but it was also clearly designed to put the defendant in the picture as to the terms to which its representative had agreed, with resulting obligations for the defendant. That this was the plaintiff's purpose is evident from the fact that the document was addressed to the defendant. Furthermore, its content satisfies the requirements of a commercial letter of confirmation, notwithstanding that it does not contain the expression 'confirmation' or 'confirm'; for usual though it may be for the draughtsman of such a document to 'confirm' the formation of the contract in so many words, this is not an essential feature of a confirmatory letter. Nor does the fact that the document is signed by M as the representative of the defendant addressee count against its being given the effect of a letter of confirmation. Indeed, M's signature gives the document a higher evidentiary value than a document signed by the sender alone, as is usual. There are therefore no objections to regarding this letter in law as a letter of confirmation.

2. The recipient of a letter of confirmation is required by good faith (Treu und Glauben) and commercial practice to make an immediate protest if he does not wish to be bound by its contents. If he makes no protest, the contract is treated as formed with the content as confirmed. The Reichsgericht and the Bundesgerichtshof have constantly held that this is the result in law even if no firm contract ensued from the transactions preceding the letter of confirmation. It is therefore irrelevant whether the negotiator, here the employee M, had the power to conclude a contract or not (see RGZ 103, 401, 405; RG JW 38, 1902; BGHZ 7, 187, 189; BGH NJW 64, 1951). What produces the contract in such a case is not the conduct of the representative, which may be unauthorised, but the silence following upon the confirmatory letter (BGH NJW 64, 1951).

3. But the addressee's duty to protest arises only when he learns of the letter of confirmation or at the earliest when it 'reaches' him in the sense of para. 130 BGB. This is for the person who sends the letter of confirmation to prove. The document is taken to have arrived as soon as 'normal procedures bring the letter within the area of factual control of the addressee himself or of a person who represents him for the receipt of letters, and he is consequently in a position to acquaint himself with it' (RGZ 50, 191, 194).

The plaintiff has not yet asserted in terms that the document of sale dated 28th March came to the attention of R immediately or after his return from the spa. Indeed, M gave evidence that he left the document which the plaintiff handed him in the D branch office which he managed for the defendant and that he later destroyed it when he thought the matter was closed. We must therefore see whether M had power to accept the document of sale so as to affect the defendant.

It is possible that M was qualified to receive the document qua manager of the D branch of the defendant's business. The decisive question here is whether businessmen would regard the branch office as a proper place to which to deliver written communications directed to the defendant's head office. The question cannot be conclusively answered on the facts as found by the Court of Appeal. One must start from the fact that a branch of a business is not ipso facto to be regarded as a 'proper place of acceptance' for written communications directed to the head office. The important thing is what impression the branch office gives to the outside world. If a branch has a fair degree of independence, especially in matters of commerce, it may be right to treat it as empowered to accept documents, and it may be relevant whether the communication relates to matters with which that branch regularly deals. If it emerges that the D branch was in general occupied only with construction work or other technical matters, this would militate against its being a proper place for the acceptance of documents addressed to the defendant.

Quite apart from this, one must see whether M had power under the special agency granted to him by the defendant in connection with the purchase of both vehicles to accept the document of 28 March so that it must be treated as having reached the defendant. Here one must consider not only whether M was granted a power of receipt in the sense of para. 164 para. 3 BGB, but also whether the defendant told him to act as a messenger. In either case the document would have 'reached' the defendant. If M had a power of receipt, the document 'arrived' as soon as it was handed to him (para. 164 para. 3 BGB). If he was simply a messenger the document arrived at the moment at which in the normal course of events it could be expected to reached the defendant's head office or come to R's attention. The answer to these questions depends largely on the content and scope of the mandate pursuant to which M negotiated with the plaintiff on 28 March. Here also more findings of fact are required. It is true that the Court of Appeal has found that the mandate was only 'to clear up a few preliminary questions relating to the machines being purchased', but in view of the plaintiff's assertion that M was empowered to conclude the contract, all this may mean is that while it was common ground that the mandate went that far, it was not proved that it went any further. However, the Court of Appeal was reading the conflicting evidence only in the light of the question whether M was empowered to conclude the contract; if it had examined the scope of the mandate from the point of view of M's power to accept documents, it might well have reached a different conclusion, especially as in his evidence M did not accept that it was beyond his powers to conclude the contract subject to R's approval. Nor has the defendant expressly stated that M acted beyond his mandate in negotiating with the plaintiff for the purchase of both vehicles in the name of the defendant, in concluding the contract in the name of the defendant subject to its approval, and in co-operating in the written confirmation of the agreed terms. On the other hand, it may be necessary, by way of construction, if need be, to examine whether the mandate to negotiate was wide enough to entail a power to accept a document of confirmation regarding the conclusion of a contract on behalf of the defendant.

4. The rules on acceptance of a commercial letter of confirmation without protest are designed to protect proper commercial conduct (RGZ 129, 347, 349). They therefore do not apply unless the person uttering the document is in good faith. In a case where the contract has been concluded through an intermediary and the draughtsman knew that the intermediary had no authority to represent the principal, he can draw no comfort from the recipient's failure to protest the letter of confirmation (compare BGH NJW 64, 1951). This must be taken into consideration when the case is finally decided.

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