Electronic Transactions (Contract Formation) Amendment Bill - Application of the Postal Acceptance Rule

What is the Postal Acceptance Rule?

At common law, a contract is formed and is legally enforceable only at the time acceptance of an offer is communicated to an offeror.

However, the Postal Acceptance Rule exists as an exception to this general rule. Under the Rule, an offer is deemed to be accepted when acceptance is posted. This Rule was established to address the issue of time delay between posting and receipt of a letter. The courts have extended this Rule to apply to telegrams but not to the cases where acceptances are made via telephone, telex or fax because of their “near instantaneous” nature.

The reality is that many contracts these days are made by electronic means. This raises the issue of whether the Postal Acceptance Rule should apply in this context. It is an issue that has not yet been considered by our courts.


What does the Electronic Transactions (Contract Formation) Amendment Bill do?

It is debateable whether an electronic message may be considered “instantaneous” or whether, like the postal system, it is sent through an uncontrollable system.

The Bill, if passed, will settle this debate. The Bill will establish that when acceptance is sent by electronic communication, a contract is formed only at the time of the offeror’s receipt of acceptance. That is, the Postal Acceptance Rule will not extend to acceptances made by electronic communications.

As a result, if you were to respond to an offer via email stating “I accept your offer”, this would be considered acceptance which is legally enforceable only at the point your email is received by the offeror (i.e. not necessarily at the point you press “send”). This is considered the most reasonable approach as it is normally the sender who will know first if an electronic communication “bounces back” or the network fails.

 

Status of the Bill

The Bill was introduced on 8 November 2012 and passed its first reading on 15 May. It was then referred to the Commerce Committee and submissions closed on 27 June. The Commerce Committee’s report is due on 15 November 2013.

 

(From our Winter Newsletter 2013)

 

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