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B When and Where is the Acceptance Effective?
A contract is formed by the method of “offer ” and “acceptance”. An offer is a promise given by the offeror who intends to create legal relations with the offeree. If the offeree accepts the received offer from the offeror, the contract is concluded and therefore legally binding, provided that other requirements including consideration, intention and certainty are satisfied. The process of creating a contract is still applicable to electronic contracts. UNCITRAL Model Law on Electronic Commerce says that in the context of formation, “an offer and the acceptance may be expressed by means of data messages”.
According to the principle of the law of contract, there are two rules determining when and where the acceptance is effective: the postal rule and the receipt rule. The postal rule means the contract is created at the moment when the acceptance is posted by the offeree rather than received by the offeror. The receipt rule means the contract is created at the moment when the acceptance is received by the offeror rather than posted by the offeree. The postal rule is best seen as an exception to the receipt rule. Basically the application of different rules depends on whether the communication is instantaneous or not. If the communication between parties is instantaneous, the receipt rule will be applied otherwise the postal rule is applied.
Because the application of different rules is determined by different methods of communications, it is necessary to analyse email electronic contracts and click-wrap contracts separately.
1 Email---the postal rule, a controversial issue.
Traditionally, email was treated as a communication method like telephone and telex. Therefore some commentators insisted that the receipt rule, rather than the postal rule apply to contracting by email on the grounds that the method of communication is instantaneous. However, other commentators contend that email is not instantaneous way of communications and thus the postal rule shall apply. In the course of contracting by email the communications are not in real-time and the offeree is not sure that the offeror has successfully received its acceptance. In this regard, email is just like a normal letter. The outbox of the sender is equivalent to the post-box. The ISPs of both the sender and the recipient are like the post offices. The Inbox of the recipient is like the mailbox.
The legal consequence of application of the postal rule is that the contract is formed and therefore legally binding at the moment when the offeree sends its acceptance via email.
Initially the Law Commission held in its Electronic Commerce Part One that the post rule applies to email communications due to the above reason. It also pointed out if there is a circumstance that the sender can directly access to the recipient to whom the email is sent, the receipt rule applies on the grounds that the communication is instantaneous. However, the Law Commission changed its mind in the Electronic Commerce Part Two on the grounds that the post rule will make the law uncertain and that it is not consistent with the Model Law Art 13, 14 and 15. It implied that the postal rule would not apply to electronic transactions.
In my view, apart from the similar characteristic between email and ordinary mail, the principle of placement of risk is in favor of the postal rule when dealing with when and where a contract is formed by email. The post rule is intended to distribute risk to those most able to control it. The offeror selects the method for contracting which is not likely to rule out non-delivery and delayed delivery. When the offeree sends the acceptance by email it loses the control over the risk of non-delivery. It is unfair for the referee to assume the risk which ought to be distributed to the offeror.
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