Acceptance of Offers by E-Mail -

How Far Should the Postal

Acceptance Rule Extend?

Kathryn O'Shea* and Kylie Skeahan**

Abstract
Since the inception of the postal acceptance rule in 1818, numerous alternative methods
of communication have been developed, including the telephone, telex, telegraph,
facsimile and e-mail. This article examines whether the postal acceptance rule will be
applied to acceptances communicated by e-mail. In resolving this issue the authors
consider how an e-mail is transmitted, the ambit of the postal acceptance rule and its
underlying policy considerations and how the Courts have resolved this issue in relation
to other modern forms of communication.

I. Introduction
It is well established that the general rule governing the acceptance of an offer is
that acceptance is not effective until it is communicated to the offeror.1 However,
an equally well established exception to this general proposition is the postal
acceptance rule. Although the postal acceptance rule is deeply entrenched within
our legal system, the scope of the rule and its applicability to modern forms of
communication are issues which have not been conclusively determined by the
courts.
Since the initial formulation of the postal acceptance rule, communication
technology has dramatically changed. As each new method of communication has
emerged, the courts have been compelled to determine the applicability of the postal
acceptance rule. The development of e-mail means that this issue has once again
arisen for consideration. Due to the increase in the use of e-mail as a tool of
commerce, it is essential that this issue be resolved to enable contracting parties to
utilise this new technology with a degree of certainty.

* LLB (Hons) (QUT); Articled Clerk - Hopgood & Ganim, Solicitors & Notary; Part time tutor -
Queensland University of Technology. Editors' note: QUT Medallist (1997 Graduation ceremony).
** B Info Tech (Dist), LLB (Hons) (QUT); Articled Clerk - Clayton Utz Solicitors; Part time tutor -
Queensland University of Technology.
1 Byrne & Co v Leon Van Tienhoven and Co (1880) 5 CPD 344.
KATHRYN O ' S H E A & KYLIE SKEAHAN (1997)

2. The Postal Acceptance Rule.

a. Development of the postal acceptance rule
The origin of the postal acceptance rule may be traced back to 1818 and the case of
Adams v Lindsell.2 The most renowned formulation of the rule is that propounded
by Lord Herschell in Henthorn v Fraser, where his Lordship stated:

Where the circumstances are such that it must have been within the contemplation of
the parties that, according to the ordinary usages of mankind, the post might be used as
a means of communicating the acceptance of an offer, the acceptance is complete as
soon as it is posted.3

Essentially, the effect of the rule is that an offeree's acceptance will be effective
the moment the acceptance is correctly posted and it is irrelevant whether the
acceptance is delayed or in fact never reaches the hands of the offeror.4 The conse-
quences which flow from the application of the rule are of particular importance in
situations where either the time or place of formation of a contract are at issue.
Indeed, the courts have been concerned with locating the place of formation of a
contract in the majority of cases which have considered the applicability of the postal
acceptance rule to 'modern' forms of communication.5

b. Exclusion of the postal acceptance rule

Although the rule is deeply entrenched in our legal system, it can easily be excluded
by parties to a contract. The postal acceptance rule can be displaced if the parties
either expressly or by implication from the terms of their contract require that
acceptance be received by the offeror.6
The ease by which the rule can be excluded is exemplified by the case of Bressan
v Squires J In this case, clause 1 of an option agreement provided that "This option
may be exercised by you by notice in writing addressed to me at any time on or
before 20th December 1972." The plaintiff posted a notice of exercise of the option
addressed to the defendant on 18 December 1972, which the defendant received on
21 December 1972 (1 day after the prescribed time period). The plaintiff sued the
defendant claiming that he had validly exercised the option to purchase the

2 (1818) B&Ald 681; The rule was first applied in Australia in the case of Tooth v Fleming (1859)
Legge 1152.
3 Henthorn v Fraser [1892] 2 Ch 27 at 33.
4 Ibid ; Household Fire and Carriage Accident and Insurance Company (Limited) v Grant (1879) 4
ExD 216.
5 For example: Entores Ltd v Miles Far East Corporation [1955] 2 QB 327, Brinkibon Ltd v Stahag
Stahl und Stahlwarenhandelsgesellschaft mbH [1982] 1 All ER 293.
6 Holwell Securities Ltd v Hughes [1974] 1 All ER 161, Elizabeth City Centre Pty Ltd v Corralyn Pty
Ltd (1994) 63 SASR 235, Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74
7 [1974] 2 NSWLR 460.
13 QUTLJ Acceptance of Offers by E-mail

defendant's property. The issue before the court was whether the notice had been
validly given within time, which necessarily involved consideration of the applicability
of the postal acceptance rule. Chief Justice Bowen held that in the circumstances of
the case and upon a true construction of the option agreement, clause 1 of the
agreement required actual notice to be given to the defendant on or before 20th
December 1972 to effect a valid exercise of the option.8 Accordingly, the material
date to be considered was the date of receipt by the defendant of the notice of
exercise and not the date of posting by the plaintiff. Since the defendant did not
receive the notice until 21 December 1972, it was held that the option had not been
validly exercised by the plaintiff.9
It has also been suggested by several judges that the rule can be excluded by
virtue of the circumstances of a particular case. In Tallerman & Co Pty Ltd v Nathan's
Merchandise (Victoria) Pty Ltd, Dixon CJ and Fullagar J stated:

The general rule is that a contract is not completed until acceptance of an offer is actually
communicated to the offeror, and a finding that a contract is completed by the posting of
a letter of acceptance cannot be justified unless it is inferred that the offeror contem-
plated and intended that his offer might be accepted by the doing of that act: seeHenthorn
v Fraser per Kay LJ. In that case as in Household Fire & Carriage Accident Insurance Co
(Ltd) v Grant, it was easy to draw such an inference, but, in such a case as the present,
where solicitors are conducting a highly contentious correspondence, one would have
thought that actual communication would be regarded as essential to the conclusion of
agreement of anything. However, the understanding of counsel was plainly based on a
contrary assumption and the case must be dealt with on that assumption.10

Similarly, in the case of Holwell Securities Ltd v Hughes, Lawton LJ suggested

that the postal acceptance rule "probably does not operate if its application would
produce manifest inconvenience and absurdity...".11 He stated that:

In my judgment, the factors of inconvenience and absurdity are but illustrations of a

wider principle, namely, that the rule does not apply if, having regard to all the circum-
stances, including the nature of the subject-matter under consideration, the negotiating
parties cannot have intended that there should be a binding agreement until the party
accepting an offer or exercising an option had in fact communicated the acceptance or
exercise to the other.12

In light of the above comments, it would prima facie appear that if the
circumstances are such as to indicate that the offeror and offeree could not have

8 Ibid at 463.
9 This follows the earlier decision of the English Court of Appeal in Holwell Securities Ltd v Hughes
[1974] 1 All ER 161.
10 (1957) 98 CLR 93 at 111-112.
11 [1974] 1 All ER 161 at 166.
12 Ibid at 167.
KATHRYN O ' S H E A & K Y U E SKEAHAN (1997)

intended the postal rule to apply, then the postal rule will be displaced. Although
the correctness of this proposition has not been authoritatively determined by the
courts,13 it would appear to be consistent with the fact that for the postal rule to
apply the parties must have contemplated that the post might be used as a means of
communicating the acceptance of an offer.

3. Policy Underlying the Postal Acceptance Rule

The postal acceptance rule was initially formulated as an attempt to provide some
degree of certainty to an offeree accepting an offer by post. In support of the postal
acceptance rule, the courts maintained that if the general rule relating to accept-
ance of an offer is applied to an acceptance sent by post, then an offeree would
never truly be certain of the existence of a binding contract until the offeror
communicated the fact of receipt of the letter of acceptance. This justification was
utilised by the court in Adams v Lindsell, where it was held that:

...if the defendants were not bound by their offer when accepted by the plaintiffs till the
answer was received, then the plaintiffs ought not be bound till after they had received
the notification that the defendants had received their answer and assented to it. And so
it might go on, ad infinitum.14

Although this logical justification enjoys popularity, as the postal system became
increasingly efficient the courts were compelled to examine further policy consid-
erations in order to determine whether the postal acceptance rule should be retained.
In the latter stage of the nineteenth century the courts formed the view that the
postal acceptance rule could be justified on the grounds of agency. It was argued
that the post office was the agent of the offeror and offeree and that consequently,
acceptance must be viewed as complete upon delivery to the post office. This
argument was partially dispelled by Kay L.J in Henthorn v Fraser:

That reason is not satisfactory. The Post Office are only carriers between them. They
are agents to convey the communication, not to receive it...The difference is between
saying 'Tell my agent A, if you accept' and 'Send your answer to me by A.' In the former
case A is to be the intelligent recipient of the acceptance, in the latter he is only to
convey the communication to the person making the offer which he may do by letter,
knowing nothing of its contents. The Post Office are only agents in the latter sense. 15

In modern times, it would appear that the agency justification for the postal
acceptance rule can be completely disregarded. The most persuasive reason for
wholly rejecting the justification based on agency has been stated by Simon Gardner,

13 See Bressan v Squires [1974] 2 NSWLR 460 at 462.

14 Adams v Lindsell (1818) 1 B & Aid 681 at 683.
15 [1892] 2 Ch 27 at 35.
13 QUTLJ Acceptance of Offers by E-mail

who correctly argues that an offeror's agreement to use the post as a means of
communicating acceptance "...surely does not establish a relevant agency. Even if it
is possible to regard the post office as his agent to carry the letter (which still seems
unreal, with a prepaid letter), there is surely no agency to receive it and so conclude
a contract on his behalf, which is what would be needed to justify the rule."16
The most frequently cited justification for retention of the rule is that of business
convenience, which stems from the need to create certainty in contractual relations.
If acceptance is complete upon proper posting, this effectively allows the offeree to
structure his or her affairs on the basis that a binding contract is formed on postage.17
Additionally, it has also been held that upon posting an acceptance the offeree has
done all that he or she can do to communicate acceptance to the offeror and should
therefore not be held responsible for any events which may occur after the offeree
effectively loses control over the letter of acceptance.18
Although the business convenience justification has been the subject of criticism
on the basis that it unfairly favours the interests of the offeree, Thesiger LJ in the
case of Household Fire Insurance Company v Grant19 presents a persuasive case in
favour of the postal acceptance rule on this basis:

There is no doubt that the implication of a complete, final, and absolutely binding contract
being formed, as soon as the acceptance of an offer is posted, may in some cases lead to
inconvenience and hardship. But such there must be at times in every view of the law.
It is impossible in transactions which pass between parties at a distance, and have to be
carried on through the medium of correspondence, to adjust conflicting rights between
innocent parties, so as to make the consequences of mistake on the part of a mutual
agent fall equally upon the shoulders of both. At the same time I am not prepared to
admit that the implication in question will lead to any great or general inconvenience or
hardship. An offeror, if [he] chooses, may always make the formation of the contract
which [he] proposes dependant upon the actual communication to [himself] of the
acceptance. If [he] trusts to the post [he] trusts to a means of communication which, as
a rule, does not fail, and if no answer to [his] offer is received by [him], and the matter
is of importance to [him], [he] can make inquires of the person to whom [his] offer was
addressed. On the other hand, if the contract is not finally concluded, except in the
event of the acceptance actually reaching the offeror, the door would be opened to the
perpetration of much fraud, and, putting aside this consideration, considerable delay in
commercial transactions, in which dispatch is, as a rule, of the greatest consequence,
would be occasioned; for the acceptor would never be entirely safe in acting upon his
acceptance until [he] has received notice that his letter of acceptance had reached its
destination.20

16 S Gardner Trashing with Trollope : A Deconstruction of the Postal Rules in Contract' (1992) 12
OJLS 170,173.
17 Re Imperial Land Co of Marseilles (Harris' Case) (1872) 7 Ch App 587, Byrne & Co v Leon Van
Tienhoven & Co (1880) 5 CPD 344.
18 Dunlop v Higgins (1848) 1 HL Cas 381; Re Imperial Land Co of Marseilles (Wall's Case) (1872) LR
15 Eq 18.
19 (1879) 4 ExD 216.
20 Ibid at 223-224.
KATHRYN O ' S H E A & K Y U E SKEAHAN (1997)

Although it has been argued that the efficiency of the modern postal system
undermines the traditional policy considerations used to justify the postal accept-
ance rule, the rule has not been abandoned and will still apply to acceptances
communicated by post if the parties to the contract contemplate that the post may
be used as a means of communicating acceptance. However, as discussed below,
the courts have shown an unwillingness to extend the scope of the rule to modern,
virtually instantaneous forms of communication.

4. Modern Forms of Communication

Technology has rapidly advanced since the 1800's when the postal acceptance rule
was initially formulated. Prior to the advent of e-mail and the Internet, communica-
tion technologies such as the telephone, telex, telegram and facsimile had been
developed. As each of these technologies became a tool of commerce the courts
were forced to grapple with the application of the postal acceptance rule.

a. Telephone
In Entores v Miles Far East Corporation21 Denning LJ drew a distinction between
the telephone and the postal system on the basis that communications via the
telephone are virtuously instantaneous and are therefore analogous to face to face
negotiations between the offeror and offeree. It is well established that acceptance
of an offer by telephone is subject to the general rule that acceptance is not effective
until communicated to the offeror.22

b. Telegrams
The application of the postal acceptance rule to telegrams (or telegraphs as they
are also known) was first addressed by the English Courts in Cowan v O'Connor.23
This case held, with remarkably little reasoning or justification, that where an
acceptance is communicated to an offeror by telegram, a contract is formed when
the telegram is given to the post office for dispatch.24 This decision is based on the
assumption that the sending of a telegram is analogous to the mailing of a letter,
however it has been criticised in subsequent decisions25 due to the inadequacy of
the reasons provided by the court. The applicability of the postal acceptance rule to
telegrams was also assumed in the case oiBruner v Moore,2* but again the Court
failed to provide comprehensive reasons for the adoption of this position.

21 [1955] 2 QB 327 at 332.

22 The New Zealand case of Union Steamship Co v Ewart (1893) 13 NZLR 9 applies this principle.
23 (1888) 20 QBD 640.
24 Ibid.
25 See Leach Nominees Pty Ltd v Walter Wright Pty Ltd [1986] WAR 244 at 251 per Master Seaman QC.
26 [1904] 1 Ch 305 at 316.
13 QUTLJ Acceptance of Offers by E-mail

Despite this lack of judicial reasoning, subsequent decisions have proceeded

upon the basis that acceptance by telegram will be complete when it is given to the
post office.27 Consequently, it appears that the postal acceptance rule will extend to
communication of an acceptance by telegram.

c. Telexes
The extension of the postal acceptance rule to modern forms of communication has
primarily been considered in relation to telexes. In Entores v Miles Far East
Corporation28 it was held that a telex is a "virtually instantaneous" method of com-
munication.29 As a result, when an acceptance is sent by telex "it is not until [the
offeree's] message is received that the contract is complete".30
The decisive factor which motivated Lord Denning's decision not to extend the
application of the postal acceptance rule to telexes is the ability of the contracting
parties to ascertain whether the acceptance has been received by the offeror. He
reasoned that where an instantaneous method of communication is used, usually
one party will know if some part of the acceptance has not been received, which
effectively removes the risk of a party proceeding upon the mistaken assumption
that an acceptance has been communicated. This reasoning circumvents the policy
considerations (such as certainty and business convenience) which have tradition-
ally been relied upon to support the existence and continued application of the postal
acceptance rule.
In 1982 the House of Lords reconsidered this issue in the case of Brinkibon Ltd
v Stahag Stahl mbH.31 In this case Lord Wilberforce recognised the extensive and
differing uses of telex communication.32 He also noted that in some instances, there
may be considerable delay between the time when a message is sent by the offeree
and the time that it comes to the attention of the offeror:

The senders and recipients may not be the principals to the contemplated contract.
They may be servants or agents with limited authority. 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.33

While no universal rule can apply to all situations, the case before the court

27 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1982] 1 All ER 293 at 295.
28 [1955] 2 QB 327.
29 Ibid at 332.
30 Ibid.
31 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1982] 1 All ER 293.
32 Ibid at 296.
33 Ibid.
KATHRYN O ' S H E A & KYLIE SKEAHAN (1997)

involved a direct communication between the contracting parties and it was there-
fore held that the acceptance was not effective until communicated to the offeror.
However, Lord Wilberforce did note that in cases where there is some delay, the
point of acceptance of the contract "must be resolved by reference to the intentions
of the parties, by sound business practice and in some cases by a judgement where
the risks should lie."34 This statement appears to provide courts with a degree of
flexibility in determining the point of acceptance of an offer.
As a result of the above authorities, it is well established that the postal accept-
ance rule will not apply to acceptances communicated by telex.

d. Facsimiles
Although there has been no detailed judicial analysis on the application of the postal
acceptance rule to facsimiles, in several recent decisions Australian courts have
proceeded upon the assumption that as a facsimile transmission is a virtually
instantaneous method of communication, acceptance of an offer will not be effec-
tive until it is received by the offeror.35
In Hamon-Sobelco Australia Pty Ltd v Reese Bros Plastics Limited,36 Smart J of
the Supreme Court of New South Wales did not give specific consideration to the
application of the postal acceptance rule to facsimiles, however his Honour did make
the following comments in relation to the application of the rule:

Consequent upon the decisions in Mendelson-Zellerv T&C Providores [1981] 1NSWLR

366 at 369, Entires Ltd v Miles Far East Corporation [1955] 2 QB 327 at 332-334 and
Brinkibon Ltd v Stahag Stahl etc [1983] AC 34 at 42 it was common ground that telex
andfacsimile transmissions were forms of instantaneous or near instantaneous methods
of communication and that with these the contract is made where the acceptance is
received.37

The comments of Smart J have been referred to by the Victorian Supreme Court
in the case of Tallangalook Pty Ltd v Duketon Goldfields NL,3S although again this
issue was not extensively considered. The court noted:

Counsel for the plaintiffs (but not for the defendant) addressed me briefly on the question
of when and where contracts are formed in a case where acceptance is made by fac-
simile, although he was unable to find authority precisely on point (as opposed to cases

34 Ibid at 296 and 302.

35 Tallangalook Pty Ltd v Duketon Goldfields NL (Unreported) SCVic 13 February 1997; Hamon-
Sobelco Aust Pty Ltd v Reese Brothers Plastics Ltd (Unreported) SCNSW 18 February 1988; Reese
Brothers Plastics Ltd v Hamon-Sobelco Aust Pty Ltd (1988) 5 BPR 11,106.
36 (Unreported) SCNSW 18 February 1988, which was approved on appeal in Reese Brothers Plastics
Ltd v Hamon-Sobelco Aust Pty Ltd (1988) 5 BPR 11,106.
37 (Unreported) SCNSW 18 February 1988 at 6.
38 (Unreported) SCVic 13 February 1997.
13 QUTLJ Acceptance of Offers by E-mail

in which telexes have been exchanged). The answer, I think, is that the contract is
formed when and where the acceptance is received. So much was assumed by the New
South Wales Court of Appeal in Reese Bros Plastic Ltd v Hamon-Sobelco Australia Pty
Ltd..™

Given the obvious similarities between communications via facsimile and telex,
this approach seems logical and is likely to be followed in future decisions.

e. Combination of Technologies
Despite the apparent ease with which Courts have been able to categorise new
methods of communication as either "instantaneous" or "non-instantaneous", two
relatively recent decisions have demonstrated the confusion which may occur when
several methods of communication are used to accept an offer.
In the case of Express Airways v Port Augusta Air Services,40 the Queensland
Supreme Court was confronted with a situation where a telegram containing an
offeree's acceptance was sent by the Post Office as a telex to the telex machine of
the offeror. The problem encountered by the court was that the postal acceptance
rule had been held to apply to acceptances communicated by telegram, but not to
acceptances communicated by telex.
Due to the absence of authoritative case law, Douglas J relied upon the views of
Professor Winfield,41 who maintained that the operation of the postal acceptance
rule would be excluded by communication of the contents of a telegram by telephone.
Although Douglas J noted that this was contrary to the views of other textbook
writers, he held that the communication of a telegram by telex would also exclude
the postal acceptance rule.42
This reasoning was considered but not followed by the Supreme Court of Western
Australia in Leach Nominees Pty Ltd v Walter Wright,43 where an acceptance that
was contained in a telex given over the telephone to the post office was to be
transmitted via a public telex facility. Unlike Douglas J, Master Seaman QC was
reluctant to be guided by the views of Professor Winfield.44 In holding that the
postal acceptance rule applied, Master Seaman QC was heavily influenced by the
fact that once an offeree has communicated an acceptance to a telex operator to be
transmitted via a public telex facility, he or she would not know whether the accept-
ance has been received by the offeror.45

39 Ibid.
40 [1980] Qd R 543.
41 PH Winfield 'Some Aspects of Offer and Acceptance' (1939) 55 LQR 499, 513.
42 Trietel The Law of Contracts 4th ed Butterworths London 1970, pl9; Chitty on Contracts 24th ed
Sweet & Maxwell London 1977 para 64.
43 [1986] WAR 244.
44 Ibid at 251.
45 Ibid at 251 - 252.
KATHRYN O ' S H E A & K Y U E SKEAHAN (1997)

5. E-mail and the Postal Acceptance Rule

In light of the above discussions, the inevitable question remains: Will the courts
apply the postal acceptance rule to e-mail communications? The answer to this
question seems dependant upon whether the courts classify e-mail as a virtually
instantaneous method of communication.

a. What is e-mail?
Essentially, 'e-mail' is a generic term that is used to describe, a variety of forms of
electronic messaging. Technically, a distinction may be drawn between EDI46 and
e-mail on the basis that EDI involves the exchange of data as opposed to text-based
messages. However, for the purposes of this article, the term 'e-mail' is referred to
in its generic sense as it is unnecessary to maintain the above distinction in the
context of an analysis of the legal implications of using e-mail as a mechanism to
form contracts.
Before embarking on an analysis of the legal principles relating to the formation
of contracts and their applicability to contracts purportedly formed by e-mail, it is
essential to examine the process involved in sending an e-mail. There are various
methods by which an e-mail may be transmitted by a sender to a recipient and
perhaps the most commonly employed method is transmission via the Internet.
The illustration below displays the passage of an Internet e-mail, however it is also
possible to have a direct e-mail link between two computers.

1
3
Server

Server Recipient's Computer

46 EDI refers to Electronic Data Interchange or Electronic Document Interchange.

13 QUTLJ Acceptance of Offers by E-mail

1. E-mail is composed by sender

2. Sender activates command to "send" e-mail.
3. E-mail is stored on sender's ISP's47 server.
4. The e-mail is transmitted over the Internet. This may involve the e-mail being
transferred between numerous servers before it reaches the recipient's ISP.
5. The e-mail is stored on the recipient's ISP's server until it is downloaded by
the recipient.
6. The recipient reads the e-mail.

Internet e-mail is, in many ways, similar to the process which occurs when
sending a letter via the conventional postal system. Once a message is "sent" or
"posted" by the e-mail sender it may pass through a variety of different computer
systems owned by a number of third parties. At the time of sending the e-mail the
sender has no means of knowing the path that the message will take before it is
received by the recipient's computer system. Quite often this involves the e-mail
being sent between countries or States notwithstanding the fact the sender and
recipient may be in adjacent buildings. Key similarities between the systems of
communication are the intervention of third parties and the inability to foresee the
pathway of the message or letter once it is "sent" or "posted".48
However, where organisations make extensive use of EDI a direct e-mail link
may be established between them. This arrangement is more akin to facsimiles as
the two computer systems are directly connected over telephone lines.

b. Control over e-mail messages

There are a wide variety of commercial e-mail software packages currently available
on the market and it is not intended to examine the full functionality provided by
each available software package. However, for present purposes it is important to
note the possible extent of control and status monitoring which a sender has over
his or her e-mail messages. In relation to other methods of communication, issues
of control and knowledge have proven to be decisive factors in determining the
applicability of the postal acceptance rule.49
Many modern e-mail systems allow a sender to monitor whether an e-mail has
been received, opened or deleted by the recipient. Like facsimiles, these confirma-
tion messages do not provide conclusive evidence of receipt, however they provide
at least some information about the status of the e-mail. Depending upon the e-mail
system involved, the sender may be advised of the time when the e-mail is received
by the recipient's ISP, downloaded to the recipient's computer system or actually

47 Internet Service Provider.

48 Issues of distinction between the systems, such as retraction and status monitoring are consid-
ered below.
49 For example, see the discussion in relation to telexes by Denning LJ in Entores v Miles Far East
Corporation Pty Ltd [1955] 2 QB 327.
KATHRYN O ' S H E A & KYLIE SKEAHAN (1997)

opened by the recipient. It is also possible for users to delete e-mails which have
been sent but not yet opened by the intended recipient depending upon the restric-
tions imposed by the recipient's ISP and computer system. To a large extent the
sender is in control of the e-mail up until the point it is read by the recipient, or at
least is able to monitor the progress of the e-mail.
While the functionality provided by e-mail systems varies, it is unlikely that a
Court will make a determination regarding the applicability of the postal acceptance
rule based solely upon the functionality of the particular system used by the sender.

c. Is e-mail instantaneous?
There has been a considerable amount of conjecture to date as to whether e-mail is
or should be considered to be an instantaneous form of communication. This debate
has largely been driven by the 20th century cases which have shown a tendency to
determine the applicability of the postal acceptance rule by classifying all means of
communication as either instantaneous or non-instantaneous.
There appears to be some confusion as to what is required to constitute a
"virtually instantaneous" communication.50 Recently, it has been suggested that
issues such as incorrect addressing of e-mail, failure to read e-mail by recipients
and delay in the internal distribution of e-mails by organisations demonstrate that
e-mail is not an instantaneous means of communication.51 With respect, these factors
are external to the e-mail communication network and are not determinative of the
"instantaneous" nature of e-mail communications.
Where there is a direct link between computers it is suggested that the e-mail
system is a virtually instantaneous form of communication notwithstanding the fact
that there may be delays between the sending and receipt of an e-mail message. In
this arrangement the e-mail does not pass into the control of third parties and the
only delay which may be experienced results from either the processing power of
the computer systems used or the bandwidth of the communication network. There
is a strong argument analogous to that applied to telexes that this form of commu-
nication is virtually instantaneous.
However, with Internet e-mail (which provides a greater degree of flexibility of
use) considerable delays may occur between when a message is sent and when it is
received by the recipient. These delays result from the complex path over which
the e-mail is sent. For example: If person A in Australia sends an e-mail message to
person B in the United States of America, usually there will be no direct link between
the computer systems. However, for the message to be sent by A to B a link must
be found. In a simple situation, this link could occur through C's computer system
as C's system may have links to both A and B's systems. However, in the majority

50 This is the test applied in Entores v Miles Far East Corporation Pty Ltd [1955] 2 QB 327. It was
accepted in the case of telex, that sending and receiving a message did not occur simultaneously,
however it was accepted as an instantaneous means of communication.
51 B Clark The E-Mail Acceptance Rule' (1997) June Proctor 13.
13 QUTLJ Acceptance of Offers by E-mail

of situations the e-mail will have to pass through a large number of computer systems
owned by third parties before the message sent by A is able to reach B. At each link
in this chain there is the possibility of delay either due to the processing power of
the computer system, technical faults or bottlenecks in communication lines. This
parallels to a degree the possibility of delay in the postal system. It is possible for a
delay of hours or even days to occur between when an e-mail is sent and when it is
received even if the sender and recipient are in close proximity. The delay which
may be experienced when sending an e-mail message via the Internet may there-
fore give rise to the suggestion that this method of communication is not virtually
instantaneous.
In light of the above analysis, it becomes apparent that it is difficult to classify
e-mail as either an "instantaneous" or "non-instantaneous" means of communica-
tion. However, despite the possibility that a delay may occur between the sending
and receipt of an e-mail message, given the decisions of the courts in relation to
telexes and facsimiles it is most likely that the courts will conclude that e-mail is a
"virtually instantaneous" method of communication. E-mails are transmitted via
the telephone network at the same speed as facsimiles and the time delays which
are experienced when sending an e-mail are generally shorter than the delays which
occur when sending a letter via the conventional postal system52. The transmission
time of an e-mail message may vary, however the delays which may be experienced
are often brief and unlike the postal system, are unrelated to the physical distance
between the offeror and the offeree.
It is therefore probable that the courts will expand the notion of virtually in-
stantaneous communications to encompass communications transmitted by e-mail.

d. Application of the postal acceptance rule to e-mail

If it is concluded that e-mail is a virtually instantaneous method of communication,
the consequence which generally flows from this conclusion is that the postal
acceptance rule will not apply to acceptances transmitted by e-mail.
However, an argument which may be raised in support of the application of the
postal acceptance rule is that the offeree should not be held responsible for any
faults which occur after he or she has transmitted the message of acceptance. The
foundation of this argument is that the offeree has effectively lost control over the
acceptance and has done everything possible to communicate acceptance to the
offeror. Implicit in this argument is the assumption that the offeror should bear the
risk of problems which may occur after the e-mail is transmitted by the offeree.
In light of the functionality provided by available e-mail systems, this argument
is unconvincing. An offeree may be able to monitor the progress of an e-mailed
acceptance and may also be able to retract it up until the time when it is opened by

52 It is however conceded that in exceptional circumstances this may not be the case as it is possible
for an e-mail transmission to take longer to reach a recipient than a letter sent by post.
KATHRYN O ' S H E A & KYLIE SKEAHAN (1997)

the offeror.53 Effectively, the offeree retains a degree of control over the acceptance
until it is read by the offeror. This shift in the balance of power undermines the
majority of policy considerations which have been used to justify the existence of
the postal acceptance rule. It should also be borne in mind that an offeree can easily
make a telephone call to confirm that the e-mail acceptance message has in fact
been received by the offeror. He or she can therefore ascertain when a binding
contract is formed and can structure his or her affairs accordingly.
The success and sheer volume of commercial transactions which are currently
conducted over the Internet indicate that contracting parties do not need a rule
such as the postal acceptance rule to overcome any delays experienced in
communicating by e-mail. Moreover, in recent decisions the courts have displayed
an unwillingness to extend the application of the postal acceptance rule to modern,
virtually instantaneous methods of communication. This position has been expressly
recognised by Hedigan J of the Supreme Court of Victoria in the case of Nunin
Holdings v Tullamarine Estates, where he stated:

Recent authority has been concerned with the more modern methods of virtually
instantaneous communication, preferring to confine the postal acceptance rule strictly
enough to its original sphere and, subject always to the parties' intentions, applying the
primary principle that acceptance must be actually communicated to be effective...54

It therefore seems probable that in accordance with the general rule which
governs the acceptance of offers, an acceptance which is sent by e-mail will not be
effective until it is communicated to the offeror.

e. When is communication complete ?

If it is accepted that the postal acceptance rule does not apply to e-mail, an accept-
ance which is sent by e-mail will only be effective once it has been communicated to
the offeror. However, an issue which has not been satisfactorily determined by the
English or Australian Courts is the point at which communication occurs.
In true forms of instantaneous communications, such as where parties are in
each others' presence or are communicating by telephone, communication occurs
when the acceptance is heard55 by the other party. In these situations the message
travels directly between the parties and there is no facility for delay of the message
between the parties.56
This issue is not as easily determined where the message is not directly relayed

53 This is dependant upon the functionality of the e-mail system used by the sender and the access
permitted by the recipient's computer system.
54 [1994] 1VR 74 at 83.
55 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1982] 1 All ER 293 at 295.
56 However, would the situation be different if the acceptance was left on the answering machine or
voice mail of the offeror? See B. Coote 'The Instantaneous Transmission of Acceptances' (1971) 4
NZULR 331.
13 QUTLJ Acceptance of Offers by E-mail

to the offeror as is the case with telex, facsimile or e-mail communications. In these
situations it is possible for the message to be placed within the custody and control
of the offeror by delivery to its telex or facsimile machine or its e-mail server, but
not to come to the attention of the offeror for some time. The following question
therefore arises: Is mere receipt of the message into the offeror's custody sufficient
for communication to occur, or is the further step of knowledge required?
Some guidance on this issue can be found in the judgement of Lord Denning in
Entires.57 In this case, Lord Denning thought that the only situations in which an
offeror is bound by an acceptance communicated by a virtually instantaneous means
of communication which he or she has not received, is where the non-receipt is due
to the offeror's fault.58 In this situation, the offeror is estopped from denying com-
munication. This approach adequately addresses the concerns of fraud and system
failure. (For example: where an offeror deliberately abstains from receiving
knowledge of the acceptance, the offeror is estopped from denying that communi-
cation has occurred).
However, where the e-mail is lost through a system fault or failure there are
several possible outcomes. The functionality of current e-mail systems may alert
the offeree to the fact that the message has not been delivered, in which case the
offeree would be required to repeat the acceptance. If, despite the system failure,
the offeror's system maintains a log of messages received, it would be appear to be
incumbent on the offeror to request retransmission. If, however, due to the fault of
neither party a message is not received, it appears that no binding contract would
be formed.59
If this interpretation is followed, it seems that acceptance will not occur until
the offeror has actual knowledge (or would be in a position to have actual know-
ledge but for its own act or omission) of the acceptance.
In the context of e-mail communications it has been suggested60 that accept-
ance occurs at the point where the e-mail is received by the offeror's computer
system on the basis of an analogy with telegrams. With respect, this analogy does
not provide a great deal of assistance. As acceptance by telegram is effective when
the offeree gives the telegram to the post office, if this analogy is applied, an accept-
ance sent by e-mail would be effective when the e-mail is communicated to the
offeree's e-mail server, as opposed to the offeror's.
The argument in favour of acceptance upon actual communication is supported
by the functionality provided by e-mail systems. As some e-mail systems allow a
sender to retract a message up until the point when it is opened by the recipient, it
would seem appropriate that acceptance should not occur until the message is read.61

57 Entores v Miles Far East Corporation Pty Ltd [1955] 2 QB 327 at 333.
58 Ibid.
59 Ibid.
60 C Reed 'Advising Clients on EDI Contracts' (1994) 10(3) Computer Law & Practice 90; C Reed
'EDI - Contractual and Liability Issues' (1990) 6(2) Computer Law & Practice 36.
61 However, this argument is not the same for facsimiles and telexes where it is not open for the
sender to retract the message once it has been sent.
KATHRYN O'SHEA & K Y U E SKEAHAN (1997)

To decide otherwise could lead to the absurd consequence that an offeree may be
legally bound by an acceptance which has been retracted by the offeree prior to the
offeror gaining knowledge of the acceptance.62

6. Practice Points
Despite the strong arguments outlined above against extending the postal accept-
ance rule to e-mail communication, the law in this area "is very much in its infancy".63
Consequently, contracting parties cannot predict with any certainty when an
acceptance transmitted by e-mail will be effective. However, this uncertainty can
be avoided by parties to a contract if they exclude the operation of the postal
acceptance rule.
Although it is often assumed that a binding contract will not come into operation
until the e-mail message is received by the offeror,64 to avoid any uncertainty the
terms of an offer should clearly specify when an acceptance of the offer will be
effective. The uncertainty surrounding the applicability of the postal acceptance
rule to e-mail communications, can easily be avoided by careful drafting.

7. Conclusion
In summary, while the postal acceptance rule remains deeply entrenched in our
legal system, it is unlikely that the Courts will extend the scope of this rule to
encompass acceptances communicated by e-mail. Consequently, the general rule
that governs the acceptance of offers will apply and an acceptance which is sent by
e-mail will not be effective until it is communicated to the offeror. This conclusion
is consistent with the approach taken with other forms of virtually instantaneous
communication and accords with the current policy of the Courts to restrict the
scope of the postal acceptance rule.

62 The Courts have struggled with this issue in the case where an offeree retracts an acceptance
sent by post by a faster means of communication. Dunmore v Alexander (1830) 9 Sh (Ct of Sess)
190; Wenkheim v Arndt (1873) 1JR 73.
63 C Reed 'Advising Clients on EDI Contracts' (1994) 10(3) Computer Law & Practice 90 at 96.
64 Ibid at 93 and EDI Association Electronic Data Interchange Agreement.