"The rules on offer and acceptance may have been adequate in the twentieth-century: they are inappropriate for the technologies of the twenty-first". Do you agree? Give your reasons.

The application of postal rule does not apply in instantaneous communications like the telephone, telex, direct communication that we will be examining next.

Telex, Facsimile, and Telephone Acceptances

 The Court of Appeal in Entores Ltd v Miles Far East Corporation examined the effect of the postal rule when communication is made by other means. It was held that the use of telex in contract formation, along with most modern means of communication should be likened to parties negotiating in each other's presence. Telex and Telephone were held to be direct means of communicating and therefore response is instantaneous. In recent times the theory of expedition does not apply to these methods of communication as technological advances have changed the manner in which telex systems work and they therefore, can no longer be referred to as an instantaneous method of communication. The ruling in Entores on the nature of telex communication has become obsolete. With advanced modern technology, a telex system may return an “answer back” even though it has not been received at the other end. The case, which finally distinguished Entores, and therefore is now established as law, is Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH. In this case negotiations using a variety of communication devices were examined and the court applied the general rule that “a contract is formed when acceptance is communicated by the offeree to the offeror. In cases of instantaneous communication, the contract would be made when and where the acceptance was received. In Brinkibon the House of Lords set out a number of guidelines, which can be used to determine whether a postal rule can be applied to any form of communication. It was held that the general rule should apply although there are circumstances of which this may vary. It is important to note also that an acceptance communicated by facsimile will become effective at the time it is communicated.  The court has recognized an ability to create a binding contract by an exchange of signed facsimiles provided that the parties are in agreement and intend to be legally bound immediately. There may be circumstances where the postal acceptance rule can be applied such as where the facsimile machine is operated by third parties; this will be likened to third party agent.

EDI Acceptances

Acceptance can be transmitted through another form of communication called Electronic Data Interchange (EDI). This is the computer-to-computer transmission of business data in a standard format.  Unlike the Internet, EDI is a virtually instantaneous form of communication, which is more secure than the e-mail.  It is mostly used by large organizations and it involves the direct link up of their systems with their trading or business partners. The system can be used for negotiation and performance of a contract and will usually be governed by an overarching agreement between the parties dealing with issues such as the effective time of contract formation and the governing law. An EDI system could be compared to the sending of a facsimile direct from one facsimile machine to another. The rule on contract formation requires that communication of an offer and acceptance is viable for a binding contract to be established. This is one situation that has been considered in the contract formation through EDI. The problem of communication of acceptance has been resolved by EDI Trading Partner Agreement, which states that no contract will become binding until it has been received, this has eliminated the possibility of the ‘postal rule’ being applied. The risk of transmission failure is also minimized with the provision of an encrypted ‘pop up’ requiring recipients to promptly acknowledge the receipt of any messages which they have been sent and notifying the sender of any communication it reasonably deems to be inappropriate. If the postal rule were applied, then acceptance would normally be effective as soon as it is received in the network.  

E-mail Acceptances

E-mail is a digital means of communication by computers joined together in a network. It can be used to make an offer and or to communicate an acceptance. There has been no case law on the acceptance of an offer through email, but to ascertain if  ‘postal rule’ can govern communication by e-mail, we need to examine the process of delivering viz a viz that of postage. Email may be instantaneous, but it does not go directly to its destination, it goes through a host, which is likened to the post office. The problem with communication through e-mail is in asserting what stage a receipt has been acknowledged; if it would be at the point of being received by the Internet Service Provider, or at the point of being delivered at the recipient’s mailbox or at the point that it is being read by the recipient. Delays in transmission of e-mail messages, incorrect addresses, and other identifiable factors, which may impede the receipt of the e-mail communication, can thus be likened to invalid addresses and wrong sorting that can be experienced in postage. In order to promote business certainty, the postal rule will be applied where it is reasonable to expect instantaneous receipt of the e-mail when communicated. It can also be argued that Electronic mail acceptance meets the general rule of contract formation whereby when an offer and an acceptance are to be communicated by electronic mail the acceptance is effective when it is received.

Click Wrap Acceptances

Click-wrap has emerged to provide new means to form contracts over the Internet, particularly over the World Wide Web. In click wrap acceptance, communication between web client and servers is instantaneous. One main distinction is that a click-wrap agreement typically requires a reader to actively indicate consent to the terms and provisions of the agreement before proceeding with further transactions. The network communications between clients and servers have an inbuilt self-checking mechanism called a checksum that allows the receiving computer to check that the correct information has been received. It has been argued that the communication between client and server on the World Wide Web is simultaneous with the quality of a telephonic conversation, albeit between two computers rather than humans this is because it immediately makes you aware where there is a breach in communication. The general rule rather than postal rule will not be applied in this situation, as the acceptance is instantaneous.      

CONCLUSION

The rule on offer and acceptance is a guiding factor, which is overly emphasized in contract formation and has stood the test of time amidst changes and growth in technology as seen in the emergence of e-commerce .The adaptation of the principle in modern day contract formation shows the responsive nature of common law.   As there are no dictated rules of the medium of communication of an offer or an acceptance, any of the means adopted should be appropriate as long as it is acceptable to both parties who are contracting in agreement. According to Lord Wilberforce in Brinkibon                  

        “No universal rule can cover all such sound cases; they must be resolved by reference to the intentions of the parties, by the sound business practice and in some cases a judgment of where the risk should lie.” 

It can be anticipated with certainty that, as technology improves, most of the problems identified with e-commerce contracts will improve. Therefore, it will be inadequate to “jump the gun” and propose new principles for contract formation.  It is a recognized doctrine that the law is to be consistent at all times such that people can ascertain how they should lawfully behave or conduct themselves.

The European Electronic Commerce Directive, published by the European Commission in 1998 is welcome relief; it contains express provisions on when an electronic contract is deemed to come into effect. It states that where a consumer is required to perform a certain act, such as ‘clicking on an icon’, the contract becomes effective when

1. He receives acknowledgement that her acceptance has been received, and
2.  He confirms receipt of the acknowledgement. The proper construction of when a contract is deemed to come into effect in the European Union will probably be when the acceptance is received by the offeror.                                    

This tends to add another meaning to the process of contract formation, but on a clearer meaning, according to Halson, “it is no more revolutionary than the ‘cooling off period’ required by the statute in relation to contracts for provision of credit”.   However, even with this legislative framework there will remain a need to rely on principles of contract law, primarily developed within the 19th century, in order to adjudicate upon a dispute.

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