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Contract | Formation

Acceptance: Electronic

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  • postal rule: developed to overcome acceptance uncertainty in when parties began communicating at distance by post
  • today more likely offers are accepted by electronic methods, similar issues, although authority less well established


  • instantaneous electronic acceptance must be communicated to be effective


    • plaintiff (P), in London, sent offer by telex (instant, electronic method) to purchase copper cathodes from defendant (D), in Amsterdam, who accepted by by telex


    • where had acceptance occurred?


    • in Amsterdam because postal rule does not apply to instantaneous electronic communication, therefore, acceptance must be communicated
    • provides no direct authority on issue of when acceptance takes effect
    • Denning LJ: .. the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offeror; and the contract is made at the place where the acceptance is received...
    • sender must ensure message is communicated, but if recipient has a problem receiving due to faulty machine he is still bound


  • by analogy, instantaneous electronic acceptance effective when it is reasonable to expect recipient to have read the message
    • D hired ship from P
    • P sent message by telex, withdrawing ship from service, during normal office hours, D did not read until next day
    • when did withdrawal occur?
    • withdrawal sent during ordinary business hours could be regarded as communicated
    • Megaw LJ: .. if a notice arrives at the address of the person to be notified, at such a time and by such a means of communication that it would in the normal course of business come to the attention of that person on its arrival, that person cannot rely on some failure of himself or his servants to act in a normal businesslike manner in respect of taking cognisance of the communication, so as to postpone the effective time of the notice until some later time when it in fact came to his attention...
  • online acceptance (keystrokes, selecting and clicking) likely to be regarded as instantaneous and analogous to telex or fax
  • some forms not so instantaneous: email sent to an inbox (may remain unopened or even not received) or a voicemail message (not listened to)
  • debatable when acceptance is actually communicated: either when the recipient reads/listens or when sender would reasonably expect acceptance to be communicated?


    • D, in Vienna, telexed offer to purchase steel from P, in London, who telexed acceptance by return


    • where was contract formed?


    • formed in Vienna, that was where communication of acceptance was received
    • Wilberforce LJ: No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie ...
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