Evaluate the law of formation of contract in the context of modern methods of communication

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The law of contract is imperative for the function of commercial activity as it seeks to protect businesses and individuals engaging in transactions. The formation of contract; the beginning stage of when a contract is being formed is governed by strict rules and terms to distinguish the different elements. The statutes regarding offers and invitations to treat are dominated by the 18-20th century where communication was distant and took a considerable amount of time. However, with the turn of the millennium; we have entered a ‘digital age’ where the use of technology is widespread and interactivity is encouraged which has affected the way we communicate. Thus the purpose of this article is to evaluate whether or not the law regarding the formation of contract must be reformed to accommodate modern methods of communication.

  The previous commonly used methods of communication were letters which does have problems in the formation of contract. This is because a contract can be terminated if; a reasonable time has passed   or if there is a specified time and it has passed. In modern times, the major shift in communication is the fact that it has become instantaneous. For example, a telephone conversation has the same speed as a face to face conversation. Other modern types of communication include text messaging, social networking such as Facebook and Twitter or even Skype and email. These modern types of communication have ensured that responses can be as soon as the respondent has read the message as messages are sent immediately. In addition, most modern methods of communication now alert the sender when the message has been read.

A reasonable time in  contracts usually apply to contracts with no time limit, a reasonable time is decided by the court based on the circumstances as demonstrated in Ramsgate Victoria Hotel v Montefiore (1866) where an offer to buy shares had lapsed when the company responded 5 months later. In modern times this would not be an issue due to the instantaneous nature of communication where a party could potentially respond immediately and the reasonable time for an offer to purchase shares would be only a few hours due to the fluctuations in share prices and the speed of communication.  

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A major discussion point regarding whether or not the law on the formation of contract needs to be reformed due to modern communication is the postal rule. The postal rule declares that postal acceptance takes effect when the letter of acceptance is posted (in the control of the Post Office or its employees and as shown in Adams v Lindsell (1818); acceptance takes effect at the time of arrival. Also, Holwell Securities v Hughes (1974) shows that if the postal rules apply, acceptance takes place when the letter is posted regardless whether or not it arrives.

However, there is some confusion ...

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