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BLO 5540 Business And Company Law Assignment

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  • Course Code: BLO 5540
  • University: Victoria University
  • Country: Australia

Question:

The postal rule of acceptance of an offer became entrenched in the common law of contract in the English courts and therefore in the Australian courts during the nineteenth century.  The postal rule continues to apply today.  This is so despite the fact that many more efficient methods of communication have since emerged.
 
A)Explain the postal rule, the reasons for its creation and continued application.
B)Given that legislation overrides the common law, what impact (if any) do the Electronic Transactions Act 1999 (Cth) and the Electronic Transactions Act 2000 (Vic) have on the postal rule of acceptance.
C)Should the postal rule apply to email and other forms of modern communication?
 
 

Answer:

Answer to A

Explain the postal rule:

In the contract law, there are certain rules mentioned for making a valid offer and acceptance. When an offer has been made and the same has accepted, it will form a contract between the two parties. However, the acceptance must be communicated. In Felthouse v Bindley, it has been held that silence cannot be treated as a valid acceptance. The general rule regarding the acceptance is that it should be communicated with the offer maker directly. Postal rule is an exception to this general rule. However, this rule is one of the most controversial parts of contract law and as it covers long distance communication, certain questions are being raised regarding the same. The method of postal rule applies to solve the problem regarding the communication and provides an opportunity to the party who is unable to do fact to fact connection. It is treated as an alternative process of acceptance. In Adams v Lindsell, the court was pleased to decide that when an acceptance has been made as against an offer, it will be deemed that a valid contract has been formed. The time of receive the post by the offer maker is not important. There are certain rules present in case of postal methods such as:

  • Until the offree has accepted the offer through post, the rule should not be effective;
  • The effectiveness of acceptance will begin at the time it is posted;
  • If the offer maker wants to revoke the offer, he must have to inform the other party before the other party accepts the offer.

It has been held in Tallerman & Co. Pty Ltd v Nathan’s Merchandise that an acceptance can be made by posting a letter if the offer maker intends to allow the same process. However, certain loopholes are observed as the rule covers long distance. The acceptance made by the party could reach to the addressee after the specific date due to transactional error. In that case, the decision of Felthouse’s case will be applied.

 

Reason for its creation:

The method regarding postal rule has been introduced through the case of Adam v Lindsell [1818]. It has been decided by the court that a contract can be made through electronic transmission system by way of posting it. Further, certain problems relating to the rule have been resolved by the decision. The court finds that when the other party accepts the offer through post, the contract will be made at that point of time. If the offer maker wants to terminate the contract, he has to inform about the termination to the other party and the information should be served before the other party has accepted the offer.  

The offer maker, at the time of making the offer through post, should have to bear the related risks of postal rule. The post of acceptance can be received by him after certain period. Therefore, before selling the products to others, he has to inform the previous party.  However, a drastic change has been observed in the case of communication technology after the formulation of postal rule. A development has been observed regarding the postal rule in Henthorn v Fraser.

However, in Bressan v Squires, it has been observed that if the offer maker makes certain terms like the acceptance post should be received by the offer maker within certain specific date, the postal rule can be excluded. In Holwell Securities Ltd v Hughes, it has been decided that the operation of the postal rule will stop working if the application of the same is absurd in nature.  The persuasiveness of the rules should have to be analysed.

Answer to question B

Impacts of The Electronic Transaction Act 1999 (Cth) on postal rule:

The Electronic Transaction Act 1999 (Cth) was implemented to consider the vital role of informatics economy and facilitate the process of electronic transaction. One of the primary objectives of the Act is to promote the business swiftly by applying modern technology. A report had been published in the year 1998 by the E-commerce expert group where the experts were revealed their wills in favour of the postal rule. All the modern transmitted systems such as e-mail, telephone etc. is included under the instantaneous communication system. The government has made an approach by The Electronic Transaction Act 1999 (Cth) and The Electronic Transaction Act 2000 (Cth) to regulate the application of postal rule in case of online commerce. The process of postal rules is very effective in case of modern business as the problems regarding the long distance can be removed or solved by this process. Therefore, the parties could be benefitted by the process. The Act has substantial impacts on the electronic writing process. In case of postal rule and negotiable contract, the Act has limited impacts. It helps to reduce the risk in case of electronic contract or negotiation process. All the jurisdictional issues that have been cropped up in case of electronic transaction are also come under the parlance of this Act. The Electronic Transaction Act 1999 (Cth) has clarify the truth that contract can be formed by way of electronic means.

 

Answer to question C

Should postal rule apply to e-mail?

Electronic messaging systems are generated by the e-mail. According to the processes of e-mail, it can be stated that the methods used in e-mail is quite similar to the methods applicable to the conventional postal system. Under this system, an offer has been made by one party and sends the same to other party for earning their acceptance. If the other party has accepted the offer and reply it to back to the offeror by posting his consent, the contract will be come into existence. However, there are certain differences existed in between website contract and email contract. There is no legal rules relating to the acceptance and revocation of contract has been stated in case of email. Certain risks are generated in case of email. When the offer maker will get online and send the offer by pressing the correct button, the offer will successfully send to the other party. However, if any transactional dispute cropped up, the whole process will be disturbed and may cancel the whole thing. Based on this fact, many people do not regard the email transaction as instantaneous communication. In case of website acceptance, rules regarding offer and acceptance have been prescribed. On the other hand, adverse situation observed in case of email transaction. If postal rule applies to the email transaction that should be developed in nature and both the contracting parties should be benefitted by the transaction.    

It is important to analyze the question whether email is an instantaneous or non-instantaneous system. Considering the problems faced by the users regarding the delay by way of non-transfer of mails, incorrect email address and illegible subject matter make the process of email sloth. Therefore, it cannot be treated as instantaneous process; rather the process can be treated as virtually instantaneous method. If postal rule be applied to the email, the offeree will not be held responsible for the disputes happen after the transmission of the message. Like the postal rule, in case of email, the offeror has to take certain risks regarding the transmission-based dispute. However, the offeree will get a chance to hold a control over acceptance until the same is noticed by the offeror and that define the continuation of postal rule.

 


However, it can be observed in case of modern business sector that two persons can easily make a deal over telephone and that process is quite secure in nature. In this process, there is no need to have any transactional dispute and it can be observed that the volume of the commercial transactional process can be get more reliable and swift in case of telephone process. Further, the government are not intending to enlarge the process of postal rule to the modern method of communication. In Nunin Holdings v Tullamarine Estates, the Supreme Court of Victoria has stated that the doctrine of postal rules should be confined within the real sphere. In case of email, it can be possible that a party has accepted the offer but due to certain transactional error, the message has not been sent to the offeror. In that case, the transaction process will be regarded as cancel.

Therefore, the general rule regarding the email is that the acceptance will not be effective if a direct communication has not been occurred in between the parties. However, the point of communication has not been considered by the Australian government in case of email. In case of telephonic communication, contract has been formed at the time of making the communication. However, this rule cannot be applied in case of email. The common error in case of email is that the offeree has accepted the offer but his reply could not come into the knowledge of the offer maker due to certain disputes. In this case, it cannot be stated that the contract has been made properly. Lord Denning had attempted to define the point of communication in case of email. According to him, if the transactional dispute occurs by the offeror, it can be treated as the point of communication as the offeror will restrict to deny the effectiveness of communication. However, where the acceptance has not been sent properly, the offeree can easily recognised the fault and he can accept the offer again. In such cases, the point of communication shall be taken place when the message has been received by the operating system of offeror. However, it can be stated that application of rules regarding the postal application is a controversial topic and the area is very much in its infancy. The effectiveness of email transaction is uncertain and it can be avoided by way of careful drafting.

 

Application of postal rule on modern communication:

There are certain electronic stuffs that are playing important role in case of e-commerce such as telephone, telegram, telexes, and facsimiles.

In Entores v Miles Far East Corporation, it has been observed that when one Party has conveyed his acceptance by telephone to the other party, effective communication could not be possible until a communication has been made with the offer maker.  It has been observed in Cowan v O’Connor, the court has considered telegram as an effective medium for offer and acceptance. According to the Court, when the offeree send his consent regarding the offer through telegram and when the said telegram will be given to the post office for dispatch, the contract will be taken place.

In case of postal rule, it can be observed that the contract is made at the time of posting the answer. The time when the receiver is getting the answer is not reasonable in nature. However, this rule does not being followed in case of telex system. The communicative method that has been followed in case of Telex is virtually instantaneous in nature. Therefore, until the message sent by the party is not reached to the addressee, the contract will not be formed. This rule has been generated in Entores’s case. However, the postal rule is not applicable in case of telex system. The same rule has been maintained in case of the Facsimiles system.

 

Reference:

(2018) <https://www.austlii.edu.au/au/journals/JlLawInfoSci/2001/4.html> accessed 20 January 2018

 (Lr.law.qut.edu.au, 2018) <https://lr.law.qut.edu.au/article/download/58/57/> accessed 20 January 2018.

Adams v Lindsell [1818] 1 B & Ald 681

Belás, Jaroslav, et al. "Electronic banking security and customer satisfaction in commercial banks." Journal of security and sustainability issues (2016).

Bressan v Squires [1974] 2 NSWLR 460

Cowan v O’Connor [1888] 20 QBD 640

Entores v Miles Far East Corporation [1955] 2 QB 327

Farisa Tasneem, F. "Enforceability of electronic contracts in Australia." (2015).

Felthouse v Bindley [1862] EWHC J35

Geva, Benjamin. The law of electronic funds transfers. LexisNexis, 2017.

Gordon, Bruce. "Acceptance by conduct in ecommerce transactions in Australia." Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia 28.2 (2014): 3.

Henthorn v Fraser [1892] 2 ch 27

Hitzeroth, Marion, Mathias Jehling, and Martin Brueckner. "Apples and oranges? A multi-level approach explaining social acceptance of renewable energy in Germany and Australia." International Journal of Global Energy Issues 40.3-4 (2017): 141-165.

Holwell Securities Ltd v Hughes [1974] 1 All ER 161

Kasemsap, Kijpokin. "The role of electronic commerce in the global business environments." Handbook of research on interactive information quality in expanding social network communications (2015): 304-324.

Swain, Warren. "Contract Codification in Australia: Is It Necessary, Desirable and Possible." Sydney L. Rev. 36 (2014): 131.

Tallerman & Co. Pty Ltd v Nathan’s Merchandise (1957) 98 CLR 93

Turban, Efraim, et al. Electronic commerce: A managerial and social networks perspective. Springer, 2015.

Virtue, J. G., et al. "Facilitating feral camel removal in Australia through commercial use." The Rangeland Journal 38.2 (2016): 143-151.

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