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How Communication of Acceptance Is Completed by Telephone Fax Telex and Email
How Communication of Acceptance Is Completed by Telephone Fax Telex and Email
ABSTRACT
Generally a contract formed when acceptance is communicated to the offeror. In faceto-face negotiations this rule provides few problems. However, the development of
methods of communicating over distance and the associated reliability problems, the
case often arises when the offeree has dispatched an acceptance which is either never
received by the offeror or arrives after expiry of the offer.
The issue to be resolved in each case is whether the acceptance is communicated to
the offeree when it is sent or when it arrives. Case law tends to distinguish between
delayed forms of communication such as mail, telegram and virtually instantaneous
forms of communication such as telephone, telex, fax machine and email.
The question comes to exactly when does communication of acceptance get
completed, considering the se of telephone, fax, telex and email?
Contract:
An agreement which is a legally binding or enforceable by law is called a Contract. Due
to this, it can be seen that not all agreements are enforceable by law. For an agreement
to be legally binding, several ingredients have to be there. These ingredients are:
Agreement: There should be two parties that have agreed to certain terms, the
offeror and the offeree.
Intention: The two parties to the contract must be willing to perform their duties
under the contract.
Capacity: The parties to he contract must have the legal capacity to perform or
make good on their responsibilities under the contract.
Consideration: There has to be a price for the promise to be performed under the
contract. The consideration can, therefore, be in the form of interest, or a benefit
to the promisor; or a loss, sufferance, detriment, etc. to the promisee; or both in
due course of the contract performance. Consideration needs not be adequate.
Nevertheless, it must be sufficient. In this respect, anything that has got
economic value in the eye of the Law can be seen as to constitute sufficient
consideration for contract purposes.
Free consent: The parties must not be forced to enter into a contract; they must
act out of their own free will and not out of compulsion.
Not declared void by the Law of Contract Act: All terms of the contract must be
legal, and they must therefore abide by the Laws of the Country (in Tanzania, we
are governed by the Law of Contract Act, 2002).
An Offer
An offer can be described as "an expression of willingness to contract on certain terms,
made with the intention that it shall become legally binding as soon as it is accepted by
the person to whom it is addressed", the "offeree".
The "expression" referred to in the definition may take different forms, such as a letter,
newspaper, fax, email and even by conduct, as long as it communicates the basis on
which the offeror is prepared to contract.
Whether two parties have an agreement or a valid offer is an issue which is determined
by the court using the Objective test. Therefore the "intention" referred to in the
definition is objectively judged by the courts. In the English case of Smith v. Hughes
(1871), the court emphasised that the important thing is not a party's real intentions but
how a reasonable person would view the situation. This is due mainly to common sense
as each party would not wish to breach his side of the contract if it would make him or
her culpable to damages, it would especially be contrary to the principle of certainty and
clarity in commercial contract and the topic of mistake and how it affects the contract.
The classical principles are illustrated in the well-known case of Carlill v. Carbolic
Smoke Ball Company (1893).
Case facts:
The defendants, Carbolic Smoke Ball Co. Ltd., inserted ads in various papers offering to
pay 100 to any person who contracted influenza after using the smoke ball (their
invention/product which was supposed to be a cure for influenza) three times a day for
two weeks. In addition, the defendants had deposited 1000 at the Bank for that
purpose. Carlill, a lady, used the ball as advertised, and was attacked by influenza
during the course of treatment. She sued for 100.
Defendants court defences, and the court decisions were:
The company argued that the offer was not specific because no time limit was
stipulated in which the user was to contract influenza. The court decided: that it
must have been the intention that the ball would protect its user during the period
of its use.
Carbolic Smoke Ball Co. claimed that there was no consideration. The court held
that: using this inhalant three times a day for three weeks or more was sufficient
consideration.
The Company argued that the matter was an just an advert puff with no
intention to create legal relations. The court ruled: that the deposit of 1000 at
the bank was a clear evidence of an intention to pay claims.
It was also argued that there was no communication of acceptance: To this the
court held: that looking at reward cases, contracts of this kind, acceptance may
be by conduct.
It was further suggested that this was an attempt to contract the whole world and
this was not possible in English law. To this the court held: that the advertisement
was an offer to the whole world and that, by no analogy with the reward cases, it
was possible to make an offer of this kind.
Acceptance
Under the Law of Contract Act, 2002 s.2(1)(b) Acceptance is defined as an assent to
the proposal by the person to whom it was made. Literary, the section states that when
the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted, and a proposal, when accepted, becomes a promise.
For there to be a valid contract, the offer has to be proved and it must be satisfied that
the offeree has accepted the offer.
The offeree must give a firm and final assent statement that will show his/her
acceptance, willingness and commitment to the terms of the offer as they were
presented to him/her.
Depending on the construction of the contract, the acceptance may not have to come
until the notification of the performance of the conditions in the offer as in Carlill's case,
but nonetheless the acceptance must be communicated. Prior to acceptance, an offer
may be withdrawn.
An offer can only be accepted by the person to whom the offer was made. An offeree is
not bound if another person accepts the offer on his behalf without his authorisation as
per agency law.
This means that the person accepting the offer must have knowledge of the proposal
before accepting it. A person with no knowledge of offer cannot accept it. On top of that,
acceptance must have been induced by the offer. For example, Bob advertises in the
local radio that he has lost his passport and adequately gives the details (such as
passport number, date of issue, place of issue, expiry date, etc.) and specifies that a
person who finds and returns it shall get a reward of TShs. 200,000. Charlie, who did
not know of the reward because he did not hear the advert, found the passport and
returned it to the rightful owner. In this case there is no acceptance and Charlie cannot
rightfully claim the reward.
It may be implied from the construction of the contract that the offeror has dispensed
with the requirement of communication of acceptance. If the offer specifies a method of
acceptance (such as by post or fax), you must accept it using the method specified.
Silence cannot be construed as acceptance.
The "mirror image rule" states that if you are to accept an offer, you must accept an offer
exactly how it is, without modifications; if you change the offer in any way, this is a
counter-offer that kills the original offer. However, a mere request for information is not
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a counter-offer. It may be possible to draft an enquiry such that it adds to the terms of
the contract while keeping the original offer alive.
An offeror may revoke an offer before it has been accepted, but the revocation must be
communicated to the offeree, although not necessarily by the offeror. If the offer was
made to the entire world, such as in Carlill's case, the revocation must take a form that
is similar to the offer. However, an offer may not be revoked if it has been encapsulated
in an option in option contracts.
If the offer is one that leads to a unilateral contract, then unless there was an ancillary
contract entered into that guaranteed that the main contract would not be withdrawn, the
contract may be revoked at any time:
It should be noted that acceptance has to be communicated AND received for there to
be a contract. More discussions on this aspect are to be discussed later in this paper.
The above mentioned sections of the Act are vividly seen as being based on the
mailbox rule, taking post as the main method of written communication. (the mailbox
rule is discussed hereinafter). It can be seen that the Law of Contract Act, 2002, has left
a lacuna as far as the instantaneous modes of communication are concerned.
Instantaneous Communication
With the development of Information and Communication Technology (ICT), here came
new and faster modes of communication, such as telephones (land lines and mobile
phones), fax, telex and email. Such methods have made the globe look like one village,
enabling instant delivery of voice and data (text) communication. Generally,
Instantaneous forms of communication do not fall under the mailbox rule. Acceptance
by these methods is, therefore, only valid when the message is received.
Reasoning with instantaneous communication is that people should consider the
situation as if the parties are in each others presence.
Place of Contract
The place of contract is governed by the place of acceptance of the offer; and
acceptance takes place at the place where it is received. Where acceptance is
communicated by letter it is regarded as received at the place of posting rather than at
the place of actual receipt. This is because, once a letter has been posted, the Post
Office holds it on behalf of the addressee. Where telephone communication is used the
place of acceptance is the place where the recipient of the acceptance is. That is the
general rule for instantaneous communication. It would apply also to an acceptance
sent by telex or fax directly from the acceptor's office to the offeror's office. The general
rule may need qualifying when a cable company's services are used. A telegram like a
letter is regarded as received when put into the hands of the Post Office.
Acceptance of an Offer by Fax:
If you accept an offer by fax, it will probably be deemed to be accepted as it is printed
out by the offeror's fax machine, whether or not there is anyone there to receive it. In
NM Superannuation Pty Limited v. Hughes (1992), a decision of the New South Wales
Supreme Court, Cohen J held that if a fax is left switched on its owner is indicating their
preparedness to receive messages on it and in such circumstances it was sufficient for
a notice to be communicated by fax, even though the document might arrive outside
normal business hours. The same principles probably apply to other electronic means of
communications, such as email but these have so far not been tested in a court.
Basically, acceptance must be communicated effectively. Where timing is, or may be
critical, you should agree on a method of acceptance and its timing at the beginning.
Various complications can arise with regard to whether offer/acceptance sent during
office hours. In the case of the Brimnes (1975), notice of withdrawal sent by fax during
office hours but not seen by staff until the following Monday. The Court held that the
contract became effective when the message was received. Possible factor was staffs
negligence. Conversely if sent outside office hours, acceptance will be effective from the
first new day. Some problems might also arise if the fax machine that has run out of
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paper and cannot store messages electronically? In this case, is there a contract?
Acceptance will not have been effectively communicated, and therefore no contract!
repeated and in the BRIMNES case (1975) where acceptance is sent by Telex during
business hours, but is simply not read by anyone in the Offerors office.
As in the case of Brinkibon Ltd v SSUSM, a situation whereby an instantaneous mode
of communication is used (e.g. telex sent from Tanzania to Kenya), the time and place
of acceptance is the time and place of actual communication (in this case, Kenya). The
Entores case is used as authority in this situation.
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A further complication concerns whether the acceptance message can be read by the
recipient in the same way as it was sent (a problem which applies equally to
communicating acceptance and which I shall consider below).
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Take, for example, a party to a dispute who sends an email to the claimant intending to
make a counter-offer for TShs. 10,000 but the message is corrupted and states instead
that he will settle for TShs. 1,000. Is the email in fact a counter-offer, as it was intended
to be, or an acceptance giving rise to an enforceable agreement? In the case of Henkel
-v- Pape in 1870 dealt with a garbled telegram message where a seller had offered 50
rifles and the buyer sent a telegram saying send three rifles. This arrived at the
seller as send the rifles. The court held that the buyer was only liable to buy three
rifles and that the risk of garbled messages lay with the seller as he had the risk of a lost
acceptance. The principle should be the same for electronic communications but may
be different if the party making the offer does not take the risk of communication by, for
example, specifying when acceptance is communicated. In which case the respondent
may be forced to take the risk in communication reversing the outcome in Henkel -vPape.
long as the electronic communication is able to fulfill the same function as a paper
message, i.e., that it can be saved (retrieved) and understood (perceived).
Concluding Remarks:
Times have changed. The Law of Contract Act, 2002 does not cope with the
requirements of the development in Information and Communication technology. It is
advisable that the Law be revised to incorporate the needs of the modern-day life,
especially in business relations and e-commerce. There are challenges to the
successful incorporation of ICT elements in our legal system, but if we dont many
people might use the loophole to defraud others and possibly get away with it. It is now
or never. We cannot rely on cases decided in foreign countries while we have our own
Contract Law. We need to equip ourselves with the requisite knowledge on ICT, and
amend our laws accordingly, not just the Law of Contract Act.
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References
1.
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Web resources
15. http://en.wikipedia.org/wiki/ Instantaneous Communication
16. http://www.oecd.org/contracts
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