The Postal Acceptance Rule
The rule of postal acceptance was established in the case titled Adams v Lindsell (1818) in which the Court was required to make a decision regarding the exact moment when a contract is formed through post. It was discovered that parties were not sure regarding the exact time of the acceptance of the communication when it is sent through the post. As there is a delay in postal communication, the parties are not simultaneously aware of acceptance. This created several problems and the need for the formulation of the postal acceptance rule was felt (Yamaguchi 2004). The rule is accepted in the legal system of common law and provides that where it can be presumed that according to ordinary usage, it has to be within the deliberation of parties to the contract that postal services can be used for communicating the acceptance to an offer, it is deemed to be complete the moment it is posted (Henthorn v Fraser, 1892).
This kind of uncertainty is not present in the face to face environment or while other instantaneous modes of communication are used in the formation of a contract. In these cases the parties to the contract are aware of the contract conclusion and there is no issue of delay or failure of transmission of acceptance which could arise in case of non instantaneous communications (Fascianp, 1996-97). The postal rule provides an effective solution to determine the time at which the parties arrive at consensus ad item and it was believed that the chances were greater of meeting the minds of the parties when the letter was being posted as compared to the time when the acceptance is delivered (Evans, 1966). Another reason given in favor of the postal acceptance rule is that the offeror needs to be considered as making the offer for the whole period till the offer remains in post. Thus agreement should be deemed to be complete the moment the letter is posted. This notion relies on the supposition that offer produces a power which binds both the parties to the contract and acceptance is the use of this power. As a result the offeror enjoys full power during the commencement to decide the acts which comprise acceptance but after such determination has been made by offeror, the legal effects do not remain in his control as the offer has become effectual by them and the advantage in the process of contract formation is now enjoyed by the offeree. The offeree may need extra time to decide regarding the acceptance of the offer and in this time may spend effort and money to reach a conclusion (Payton, 2003). Some experts go even further and consider the post office as an agent of the offeror. This argument is not widely established in literature because it is clear that the telegram company and the post office are not agents to whom acceptance may be communicated especially when we are aware of the fact that post office is government agency which has its own rules and could by no means act as an agent in this field (Evans, 1966). Further more the letters are previously sealed when they reach the post office therefore it cannot be presumed that the contents of a sealed letter have been communicated to the post office. At the most the post office could be treated as an agent authorized to transmit the letter of acceptance but is not authorized to receive it.
We can say that the postal rule is effective and aware of the fair allocation of risk and also the expediency of the offeree as this rule established are a definite date to the formation of the contract and also helps in avoiding circular communication (Watnick, 2004). The delay that takes place between conveying and receiving the post could create a risk for the parties to the contract due to the ambiguity as to the precise moment when the message could be deemed to have reached the other party. This justification is treated as the basis for the application of this rule. Depending on the creation of contract during posting or the dispatch of post establishes an exact point of time for confirmation between the parties if they have asked for it and there is no need for any further communication. This can be understood in the words of Taylor (2005) who states that the Courts while applying the rule of postal communication try to introduce the rational of necessity and envisage if the contract could have come into force on sending the acceptance of the offer. For example if it has been asked by the offeror that a notification would be required, in such case the offeree needs to send the notification of the receipt. Carrying this notion to its logical end, the risk is placed in the hands of the offeror as he owns the offer and in a position to specify the specific actions which exposes him to the possible risk.
These traditional justifications in favor of the postal acceptance rule are needed to be given in respect of contracts formed through post as there is a gap of time due to the delay that takes place between sending a letter and receiving it. In such cases the parties could not control the transmission of letters sent by post therefore an argument can be given that contracts by e-mail are also similar to the contracts formed through post therefore the postal rule of acceptance should also be applied to acceptance through e-mail (Wolfson, 2005).
Application of Postal Acceptance Rule to e-mail Acceptances
Although complicated issues can also arise while forming the contracts through electronic means; there is no legal impediment which may restrict the parties from using electronic communication for the formation of contractual relationships. The general principle of law does not require the use of any particular method of communication to establish a binding contract between the parties (Geiger, 1999). Therefore most contracts can be formed using various methods of communication which include the post, e-mail, facsimile, telex, and the communication can even be communicated orally. The main principles of contract apply in all these cases regardless of the technology use for the formation of contract. In Ford v La Forrest (2001) it was upheld by the Court that the contract created by using the electronic means is a valid contract. E-mails were found to be capable of the formation of a binding contract between the parties by the Electronic Transaction (Queensland) Act, 2001 (QLD). No definite judicial statement regarding the applicability of the rule of postal acceptance to e-mails has been delivered as yet but it has been established that the postal acceptance rule is not applicable to communications send by telephone, facsimile of telex. The Singapore High Court was faced with the issue of applicability of this rule to modern technology communications in Chwee Kin Keong v Digilandmall.com Pte Ltd. (2004). The statements made by the Court in that case suggest that it might be in appropriate to apply the postal acceptance rule to e-mails. It was argued that in case of transactions conducted of the internet, these are almost instantaneous and interactive therefore the logical default rule that acceptance will only be effective when it is received should apply in such cases.
The ongoing debate regarding the application of postal acceptance rule to e-mails has produced several arguments related with this issue.
There are high chances that e-mails will be categorized as an instantaneous form of communication by the Courts. Therefore the rule of postal acceptance should not be applied in these cases. Acceptance should be treated as effective only when it is communicated to the offeror (Hill, 2001 ; Nikolich, 2003).
In another argument given by Christensen (2001) believes that the classification of e-mails as instantaneous or non-instantaneous forms of communication could be inappropriate. Depending on a large number of factors like the technology used, intention of the contracting parties business practices and the legislation designed for facilitating e-commerce, the general principle of acceptance that it would be effective when it is communicated to the other party should be applied. A different time of acceptance should be adopted only in case the parties to the contract have provided otherwise (De Zilva, 2003).
Another argument believes that e-mail is not an instantaneous form of communication. E-mails messages can also be delayed or e-mail lost forever in cases of power outages, network congestion or system crashes. Therefore there is possibility that the sender may never know if the message has been received by the other party. Therefore it may be argued that acceptances sent through e-mails should also receive the benefit provided by the rule of postal acceptance (Lim, 2002). At the same time the fact that e-mails can get lost or corrupted has been used by other commentators to argue that the rule of postal acceptance can not be reasonably applied to communications sent through e-mail (Argy and Martin, 2001).
As sending communication through e-mail is some what similar to sending it through post, the postal acceptance rule should also apply to acceptances sent through e-mails and it should be effective at the time the offeree has sent the e-mails containing the acceptance (Pitiyasak, 2003). In contrast where the contracts are formed through the website, the postal acceptance rule should not be applied in such cases as the parties communicate instantaneously.
The decision to apply the postal acceptance rule could be influenced by the functionality of technology which is used for communicated the acceptance as it may influence the evaluation of which a party has to put up with the risk of the non receipt of communication carrying acceptance. Therefore the difference in technology could mean that the rule of postal acceptance will remain relevant at least in some forms of technology (Hogan-Doran, 2003).
The above arguments show that the applicability of the rule of postal acceptance is uncertain when it comes to electronic communication. It is particularly so because of the presence of a wide range of communication technologies which can be used for electronic contracting and it can be argued that no single rule fits all cases.
Even if we assume that the rule of postal acceptance is not applicable to electronic communication and acceptance will be come effective only when it is communicated to the offeror, a debate is still going on as to the time when communication actually occurs. For example when the acceptance is send by e-mail, it could be considered to be communicated when the message is read by the recipient ; the time when the message is downloaded on the computer of the recipient or the time when it is received by the ISP of the recipient (Davidson, 2004). Therefore we see that a number of uncertainties still exist when it come to the determination of the point when an electronic contract is formed according to the contractual principles of the law. Unfortunately these uncertainties have not been effectively clarified by the Electronic Transaction (Queensland), Act 2001 (QLD). Section 23 & 24 of the Electronic Transaction (Queensland), Act 2001 (QLD) try to clarify when the electronic communication is dispatched and when it is treated as being receipt. The problem with these provisions of ETQA is that while they clarify when the electronic communication is dispatched and received, they do not state in a contractual framework whether it is the sending of the communication or the receipt of it by the other party that results in the formation of a contract (Thomson, 2003). Therefore these provisions of the ETQA could not be refer to by the Courts as either supporting the application of the general rule that acceptance is treated as effective only when it is communicated to the offeror an leave the question regarding the effectiveness of acceptance to the general principle of contract law (Christonson 2001). Therefore we see that the provisions of ETQA do not provide an answer to the question if the postal acceptance rule could be applied to electronic communications. Even if we assume that the acceptance is effective on its communication to the offeror, Section 24 of the Act fails to definitively settle the issues related with timing.
From the above study it becomes clear that there are several uncertainties associated with the electronic form of contracting and in such a case the practical implication of these uncertainties could be serious for the parties to the contract. While on the general level, these uncertainties can contribute in reducing the willingness of the businesses to take advantage of the modern technologies for communication. The increased cost which may be incurred in dealing with the new legal uncertainties can offset any reduction that has been achieved in the cost by using new technologies and as a result it can needlessly slow down the rate at which the businesses might be willing to adopt new technologies (Boss and Kaufman, 1997).
References:
Argy, P. & Martin, N., 2001, ‘The Effective Formation of Contracts By Electronic Means’,
Computers & Law, vol.46, p. 20, available at http://www.nswscl.org.au/journal/46/Argy.html (accessed on 5 May, 2012).
Boss, A.H. & Kaufman Winn, J., 1997, ‘The Emerging Law of Electronic Commerce’, The Business Lawyer, vol.52, p. 1469
Christensen, S., 2001, ‘Formation of Contracts by Email – Is it Just the Same as the Post’,Queensland University of Technology Law & Justice Journal, vol.1, no. 1, p. 22
Davidson, A., 2004, ‘Signatures on Electronic Documents’, Proctor, vol.24, no.7, p. 29
De Zilva, A., 2003, ‘Electronic Transactions Legislation: An Australian Perspective’, The International Lawyer, vol.37, no.4, p.1009
Evans, David Marshal, (1966) ‘The Anglo-American Mailing Rule : Some problems of offers and acceptance in contracts by correspondence’ 15 International and comparative Law Quarterly 553
Fasciano, Paul, (1996-1997) ‘Internet Electronic Mail : A Last Bastion for the Mailbox Rule’ 25 Hofstra Law Review, 1542
Geiger, D.R., 1999, ‘Failure to Preserve Email and Discovery’, Internet Law Bulletin, vol.2, no.6, p. 81
Hill, S.W.B., 2001, ‘Email Contracts – When is the Contract Formed?’, Journal of Law and Information Science, vol.12, no.1, p. 46.
Hogan-Doran, J., 2003, ‘Jurisdiction in Cyberspace: The When and Where of On-line Contracts’, Australian Law Journal, vol.77, no.6, p. 377.
Lim, Y.F., 2002, Cyberspace Law: Commentaries and Materials, Oxford University Press, Melbourne.
Nikolich, M., 2003, ‘The Legality of E-mail Messages’, Australian Construction Law Newsletter, vol.91, p. 27.
Payton, David (2003)’ Electronic Contracts’ (DPhil thesis Aberystwyth University) 185
Pitiyasak, S., 2003, ‘Electronic Contracts: Contract Law of Thailand, England and UNCITRAL Compared’, Computer and Telecommunications Law Review, vol.9, p. 16.
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