Contract | Formation
Acceptance: Electronic
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Introduction
The postal rule was developed to overcome difficulties and uncertainty in contractual timing when parties began communicating at distance by post. However, today it is much more likely that offers are accepted by electronic methods such as email or fax. The issue when acceptance is effective arises in this context too, although authority is less well established.
Communication
Instantaneous electronic acceptance must be communicated to be effective.
Entores v Miles Far East Corp. [1955] 2 QB 327
Facts:
The plaintiff, based in London, sent an offer by telex (an instant, electronic method) to purchase copper cathodes from the defendant, based in Amsterdam. The defendant accepted by telex.
Issue:
A jurisdictional issue arose and it had to be established where the acceptance had occurred.
Held:
The postal rule does not apply to electronic forms of communication which are instantaneous or virtually instantaneous. Therefore, acceptance must be communicated. It provides no direct authority on the issue of when a telexed 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...
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The sender must ensure that his message is communicated. However, if the recipient (offeror) has a problem receiving the message due to a faulty machine then he will still be bound.
Timing
Instantaneous electronic acceptance may become effective at a time when it is reasonable to expect the recipient to have read the message.
The Brimnes [1975] QB 929
Facts:
The defendants hired a ship from the plaintiff.
The plaintiff sent a message by Telex, withdrawing the ship from service, during normal office hours, on 2 April. The defendants did not read the telex until 3 April.
Issue:
When did the withdrawal occur?
Held:
As the notice of withdrawal had been sent during ordinary business hours it could be regarded as being communicated. Therefore, an effective revocation had occurred.
Megaw LJ: I think the principle which is relevant is this: 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...
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Over the internet, there are various forms of communication (keystrokes, selecting and clicking) these are likely to be regarded as instantaneous and analogous to telex or fax. However, some forms of electronic communication are not so instantaneous, for example email sent to an inbox (which may remain unopened or even not received) or a message left on a voicemail (and not listened to). The question arises in these situations when acceptance is actually communicated. Arguably, it could be either when the recipient reads/ listens to the message or when the sender would reasonably expect the acceptance to be communicated.
Brinkibon Ltd v Stahag Stahl GmbH [1983] 2 AC 34
Facts:
The defendant, in Vienna, telexed an offer to purchase steel from the plaintiff, in London. The plaintiff telexed acceptance by return.
Issue:
A jurisdictional issue arose and the court had to establish where the contract was formed.
Held:
The contract was formed in Vienna, as that was where the communication of acceptance was received.
Wilberforce LJ: The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or upon the assumption, that they will be read at a later time. There may be some error or default at the recipient's end which prevents receipt at the time contemplated and believed in by the sender. The message may have been sent and/or received through machines operated by third persons. And many other variations may occur. 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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