ELECTRONIC CONTRACT FORMATION by Ritika Mongia@LEXCLIQ

In the traditional notion of contract formation, negotiating parties must come to a “meeting of the minds” on the terms of an agreement. In the course of negotiation, there may be invitations to make offers (e.g., price lists are generally not offers, but invitations) and counter-offers, but the general rule is that formation requires an offer and acceptance to be communicated between the parties.

Communication of Acceptance

Issue

Generally, a contract is formed when acceptance is communicated to the offeree. In face-to-face negotiation, this rule provided few problems. However, the development of methods of communicating over distances, and the associated reliability problems, the case often arises when the offeree has dispatched an acceptance which either is never received by the offeror or arrives after the expiry of the offer. The issue to be resolved in each case is whether the acceptance is communicated to the offeree when it was sent or when it arrives. Case law tends to distinguish between delayed forms of communication, such as mail and telegrams, and virtually instantaneous forms of communication, such as the telephone, telex and fax machine. The courts have yet to consider the electronic message.

Early case law saw the development of the “mailbox rule” for ordinary mail, wherein acceptance is deemed to be communicated to the offeree when it enters the postal system. This rule has been extended to telegrams and even couriers. The offeror, however, is free to put conditions on the communication of the acceptance (e.g., offer must be received; must be by telephone). In contrast to the “mailbox rule”, acceptances communicated using instantaneous or virtually instantaneous means, such as the telephone , telex , and fax, are formed when the offeror receives the acceptance. These means are analogous to face-to-face communications; presumably both parties will be aware of any break in the connection and be able to take corrective action.

There is little case law on acceptance by electronic message. On the one hand, some cases suggest the general rule is that the acceptance must be received by the offeror and that the mailbox rule is only a narrow exception. On the other hand, receipt of electronic messages may not be instantaneous and since the mailbox rule has been extended to telegrams, it could be argued that it should be extended to electronic mail. Although some electronic message systems, such as private EDI networks, provide almost immediate transmission, anecdotal evidence suggests that Internet e-mail is inconsistent and could take minutes, hours or even days to reach its destination.

Another justification for a mailbox-like rule for electronic mail is the offeror’s role in delivery. While telexes and faxes are received at the recipient’s location almost immediately after they are sent, some electronic mail systems use mail servers operated by third parties that are not located at the recipient’s location. Even after receipt by the mail server, the recipient has to take steps to connect to their `mailbox’ on the mail server before the communication is complete. Since the offeror is partially responsible for ensuring delivery, it may not be appropriate to allocate the entire risk in the delivery of electronic mail to the offeree.
It is also quite possible that no simple rule will govern electronic messages. In a recent case involving telex communication, England’s House of Lords seemed to be backing away from the application of a general rule:
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 on 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.

Ritika mongia

Hello everyone! I Ritika Mongia, pursuing B.A.LLB. from Invertis University, Bareilly.

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