The law of e-commerce

Electronic Contracts

Electronic contracts

How can contracts be created in the real world?

- Verbally

- Conduct

- In writing

Electronic contracts

How are contracts created electronically?

- By email (in writing as per the real world.)

- Via the Internet.

Electronic contracts and email

It is important to remember that when dealing with the creation of a contract all that is really needed is offer, acceptance and intention.

Consideration can and often will move after the contract has been made.

Email and e-commerce

There are numerous methods of creating a contract via email.

For example … …

Examples of contract creation via email

Alphie sends Benny this email:

“I have a computer for sale – you know, the one that you used last week. I want to raise some money to go on holiday so I will sell it to you for £600. Come and get it this evening if you want it”

THIS IS AN OFFER

Examples of contract creation via email

Benny emails Alphie

“That sounds great, I will come over tonight and get

it”

THIS IS AN ACCEPTANCE

A contract will now have been formed

Examples of contract creation via email

This example is possibly the most simple example of an emailed offer and acceptance.

You could have email used to create the contract in other ways.

Examples of contract creation via email

A person could send an email to an account advertised in the classifieds of a newspaper.

Alternatively, an email would probably amount to valid acceptance for any offer that required acceptance to be made in writing.

Electronic contracts and email

Therefore, when looking at electronic contracts and email, it is important to appreciate that the acceptance email is very important.

Communication of acceptance

It is therefore important to ensure that communication of acceptance has occurred.

In Entores Ltd v Miles Far East Corporation [1955] 2 All ER 493, Lord Denning said:

Entores v Miles

“Suppose, for instance, that I shout an offer to a man across a river ... but I do not hear his reply because it is drowned by an aircraft flying overhead. There is no contract at that moment. If he wishes to make a contract, he must wait until the aircraft is gone and then shout back his acceptance so that I can hear what he says” (at page 495)

Communication of Acceptance

Acceptance must therefore be communicated.

The law is the same regardless of the fact that we are dealing with e-commerce

Silence and acceptance

The rule that silence cannot constitute acceptance will still apply.

Felthouse v Bindley

Exceptions to the normal rules of acceptance

Unilateral Contracts

Carlill v Carbolic Smokeball Co.

Communication of acceptance

When examining the creation of a contract via email it is important to look in some detail at the applicability of the postal rule to electronic mail.

The postal rule was created in the case of Adams v Lindsell (1818) 1 B & Ald 680

What is meant by the postal rule?

The postal rule states that where a letter is posted, the acceptance is deemed effective from the moment that the letter is posted and not when the letter has been received.

The Courts have been careful to limit the ambit of this rule wherever possible.

Limitations on the postal rule

In Holwell Securites v Hughes [1974] 1 All ER 161 where the term ‘notice in writing’ is used this meant that notice must occur and the postal rule is not valid.

Limitations on the postal rule

The postal rule is also invalid if the rules and regulations of the Post Office are not followed.

This means that the letter must be properly addressed and that the correct postage must be paid.

Limitations to the postal rule

Letters must also be placed in post boxes if they are available.

The postal rule will not apply to instances where a letter is handed to a postman. (re London and Northern Bank ex parte Jones [1900] 1 Ch 220)

Does the postal rule apply to email?

The position is unclear as there has been no legislation or case law on the matter.

If the matter was to come to court and the legal position tested, what would the courts decide?

Books

L Edwards & Charlotte Waelde, Law & the Internet, 2nd Edition, 2000, Hart Publishing, Oxford, p 22-26.

Paul Todd, E-Commerce Law, Cavendish Publishing, p 179-182.

Articles

E-mail and the postal rule

Kirsten Houghton & Kate Vaughan-Neil, Computers & Law 2001/02, 12(5), 31-35,

The postal rule in electronic commerce: a reconsideration.

Susannah Downing & Justin Harrington, Communications Law, 2000, 5(2), 43-47

Copies of these articles are available on short loan. There are also many other articles around as well – available on Westlaw and Lexis Nexis Professional.

Does the postal rule apply to email?

Q Why was the postal rule created?

A Because at the time it was necessary.

Should the postal rule apply to email?

Is email so similar to posted letters of acceptance that it should?

Similarities

Post

Non instantaneous

Control

Email

Non instantaneous

Control

Why should the Postal Rule not apply to Email

You can now check whether the acceptance has been received

- Delivery and read receipts- Non-delivery notification- Email recall- UNCITRAL’s Model Law of E-Commerce - http://www.uncitral.org/

Does the postal rule apply to emailed acceptances?

There is no legal authority on this point within the UK.

Academics are divided on the issue and therefore it is a grey area.

Does the postal rule apply to emailed acceptances?The Model Law of E-commerce states that the postal rule should not apply to emailed acceptances.

Other Jurisdictions, e.g. America have legislated similarly.