THE LEGAL ISSUES IN E-MAIL CONTRACTING AND THE ELECTRONIC TRANSACTIONS ACT 2008 (ACT 772) : HAS GHANA GOT IT RIGHT?

Introduction

Traditionally an offline contract is formed when an offer made is subsequently accepted and by the acceptance the time or moment and place the contract is formed can be easily ascertained by either the ‘postal acceptance rule’ or the ‘general rule of acceptance’.

• The Postal Acceptance Rule or Mail Box Rule

This provides that a contract is formed when the letter of acceptance is placed in the mailbox. Lord Herschell defined the above rule as:

Where the circumstances are such that it must have been made within the contemplation of the parties that …the post might be used as the means of communication the acceptance of the offer, the acceptance is complete as  soon as it is posted.

The basic assumption of the postal rule is that :

• There will be a substantial delay in delivery of the letter, depending on where the letter is to be sent
• There is a small risk that due to difficulties the message may be delayed further, or not reach its destination at all

It is evident therefore that this rule was to protect the offeree from losses from delay or failure on the part of the post office and does not apply to instantaneous forms of communication such as telex, fax or telephone.

• The General Acceptance Rule

Lord Denning in the case of Entores Ltd v Miles Far East Corporation [1955] 2 QB 327 stated amongst others that:

o   acceptance occurs , and the contract is made, at the time and place

which the acceptance is read

o   a person ought to know of the acceptance before he or she can be

 held to be bound by the contract

o   the regular postal rule of acceptance does not apply to instantaneous

means of communication

The case of Tenax Steamship Co Ltd v The Brimnes [1975] QB 929   also basically decided that:

a telex message sent to a business within office hours were actually  communicated when received by the recipient’s machine. They did not need to be actually read in order to be communicated’.

The same principle holds true for fax communications that is they must be received.. Reinforcing the above, Lord Wilberforce, in an Australian case Brinkibon Ltd v Stahag Stahl GmbH[1983] 2 AC 34)   applied the general rule and that  ‘…the contract (if any) was made when and where the acceptance was received’. I do not think this area of contract formation in the offline world is in dispute by lawyers.

The challenge is however in the online world. Should e-mail contracting be classified as “instantaneous” and for that matter apply “the general acceptance rule” or “non-instantaneous” whereby the “postal rule” applies.  There have been valid arguments for and against the application of each of the rules as far as e-mail contracts are concerned and my intention though not a technical IT person or a lawyer but someone who has the cognitive appreciation of both the technical and legal issues relating to Information Technology is to provoke thought to the lawyers, whilst reviewing how in my opinion our Electronic Transactions Act 2008 (Act 772) attempts to deal with the issues.

E-Mail As An Instantaneous Mode of Communication

Is the e-mail an instantaneous mode of communication? If yes then at what point can acceptance be deemed to have been received, made or communicated. Is it when the e-mail gets to the recipient’s (offeror’s) designated mail server? Is it when the offeror actually down loads the e-mail from the server when the computer is put on? or is it when it is actually read?. What if it is seen in the mail system but not read? It is obvious complications exist in the digital economy which needs to be addressed to facilitate electronic contracting.

Lord Parker in the Entores Case  stated that “though a telex may not be completely instantaneous the parties are to all intent and purposes in each others presence”.  This to me supposes the fact that any mode of communication that is intended to bring parties in each other’s presence such as telephone, fax, telex and for that matter e-mail may conveniently be considered instantaneous.

I guess in a situation where communication via the post could take several weeks it makes sense to provide certainty with the “postal rule” but will it really take several weeks to deliver an e-mail? Well unless of course there exist technological errors but this may also affect telexes yet has not persuaded the courts to use the postal rule on telexes

E-Mail As A Non- Instantaneous Mode of Communication

Is the e-mail a non-instantaneous mode of communication?. If yes then how fair can it be to the offeror when the e-mail technology is such that anything could go wrong during transmission of the acceptance e-mail which may end up not being communicated. What if the offeree’s computer or mail system does not really send the acceptance e-mail out? What if the offeree’s ISP’s mail server is faulty’? What if the offeror uses a corporate mail box system and that server is also faulty?. What if the offeror’s computer is also faulty to even access the mail? The points of failures may be so numerous to apply the ‘postal rule’.  How can this be reconciled with Lord Denning’s statement also in the Entores Case  that :

If a man shouts an offer to a man across a river but the reply is not heard  because of a plane flying overhead, there is no contract. The offeree must wait and then shout back his acceptance so that the offeror can hear it’ 

This no doubt raises complications with e-mail contract formation especially with respect to knowing with certainty the time and place a contract is deemed to have been formed.

Considering the way e-mail technology works there has been very convincing and logical arguments describing e-mails as “an electronic version of  the postal system synonymous with letters or telegram”  to the effect that unlike other instantaneous forms of communications e-mails do not go directly to its destination and that within the network the messages could be delayed or lost hence cannot to be strictly said to be instantaneous. The information literally travels in packets across the vast expanse of the internet whilst entrusted to service and network providers (ISPs) akin to a post office. This line of thinking seeks for the “postal rule of acceptance” to be applied. This to me does make sense from the offerree’s point of view.

Complications In B2C E-Commerce : Typical Case

A consumer is resident in Ghana. A seller, a US resident has her website and e-mail system hosted on a server in London. The Ghanaian consumer sends an offer by e-mail to the US seller who sends an acceptance by e-mail. The acceptance e-mail is sent at 12.00GMT from the seller’s computer in the US but does not reach the Ghanaian consumer’s ISP server in Ghana until 12.30 GMT. The e-mail is only seen by consumer when he turns on his computer at 14.00GMT but not read until 15.00GMT

The issue is where and when was the acceptance communicated for the contract to be deemed to have been made?

The case of Domins Fisheries Ltd v. Bremen-Vegessacker Fisscherei [1973] 2 G.L.R enforces the fact that an acceptance must be communicated to the offeror for a contract to be valid.

What a field day for lawyers. This creates very interesting intellectual and legal arguments from the application of traditional (offline) rules of contract law which may still not resolve the issue with the certainty it deserves. A legislation defining certain rules may be appropriate and this is where the Electronic Transactions Act 2008 (Act 772) comes in.

The Electronic Transactions Act 2008 (Act 772)

Sections 18 to 24, ETA 2008(Act772) touches on the areas of despatch, receipt, acknowledgement of electronic records and its attribution to the originator. Since the meaning given to electronic record by Act 772 says it ‘includes data, generated, sent, received or stored by electronic means..’, e-mail contracting can therefore be said to fall under these provisions for the purposes of ascertaining the issues of time and receipt with respect to offers and acceptance in the contracting process.

Under S(19b) of the above law:

if the addressee has not designated an information system, receipt occurs when the electronic record enters an information system of the addressee through which the addressee retrieves the electronic record

 Though the Ghanaian law seems to have been framed around Article 15 of UNCITRAL Model Law of Electronic Commerce, there appears to be some ambiguity in terminology. Under S18, ETA2008 (Act 772) the wording ‘information processing system’ is used with respect to the despatch of an electronic record whilst under ‘receipt of electronic record’ the wording “information system” is mentioned. Whilst no meaning is given to “information processing system”, the interpretation of “information system” by Act 772 is “includes a system for generating, sending, receiving, storing, displaying or otherwise processing electronic records and the Internet”

The addition of ‘the Internet’ in the meaning of ‘information system’ may have been for a purpose but it makes when and where an electronic record is deemed to have been received very open and vague. The UNCITRAL model law however excludes the Internet in its definition of an information system and this narrows the “where” since the description of an ‘information system’ could be attributed to either a known computer, server or specific network.

Once the Internet is said to be part of “an information system” as in the Ghanaian law then in my opinion the addressee (offeror) may be deemed to have received an electronic record (acceptance) when it entered the Internet? This is most ambiguous.

Without the addition of the Internet with respect to the earlier case study an “information system” can be narrowed down to :

• The computer of the Ghanaian consumer ( addressee and offeror)
• The mail server or network of the ISP in Ghana

If I am not mistaken, with respect to the Ghanaian law and from the case study, the US seller’s acceptance of the offer can be anywhere after the mail left the computer of the seller in the US.

The Australian law (S14, Electronic Transaction Act 1999) seems to better deal with the likely controversy surrounding time of receipt as per the Ghanaian law by making it much more definite in not including the Internet in the definition of ‘an information system’ as well as stating that:

…if the addressee of an electronic communication has not designated an information system for the purpose of receiving electronic communication then, unless, otherwise agreed between the originator and the addressee of the electronic communication, the time of receipt of the electronic communication is the time when the electronic communication comes to the attention of the addressee

This then means that once the electronic communication (e-mail) has subject matter indicated, the time of receipt is when the addressee retrieved messages into the inbox and saw the mail but if subject matter not clearly indicated then it may come to the addressee’s attention when it was read.

Of course in the case of e-mail contracting once an offeror is expecting an acceptance mail from the offeree, even if there is no subject matter for the electronic communication it may be arguable that at least the offeror should have opened the mail to check its contents and therefore the electronic communication may be said to have come to the offeror’s attention.

Again under the Australian Law:

…if the addressee of an electronic communication has designated an information system for the purpose of receiving electronic communications…..the time of receipt of the electronic communication is the time when the electronic communication enters that information system

Also under S(19a) of the Ghanaian law:

… if the addressee has designated an information system for the purpose of receiving electronic records, receipt occurs at the time when the electronic record enters the designated information system.

The two seem to have the same spirit or intention but the definitions given to “information system” where Ghana includes the “Internet” but Australia does not, changes the legal issues that may arise with e-mail contract formation with regards to acceptance.

As the Ghanaian law stands, with time, case law is most likely to determine actual  ‘time of receipt’ as well as when a ‘contract was formed’ as seems to have been done by the United Kingdom (UK) on a case-by-case basis. In my opinion the ETA 2008 (Act 772) could have limited the likely controversies in court as per the Australian approach.

Conclusion

It can generally by common law of contract be agreed that, when the message by way of acceptance reaches the electronic mail system (information system) used by the recipient, it is deemed to be received. Therefore, the offeree does not bear the risk for the time between the message reaching the mail system and the offeror retrieving the message from the system. This however does not completely remove subjectivity as to what is meant by an information system thereby transferring the risk in this case to the offeror in times when through no fault of the offeror he is unable to retrieve the acceptance message to be certain of a contract formation.

In my opinion , time and receipt of electronic communication, for that matter e-mail contracting modelled around the Australian law is a more harmonious approach though the law courts would definitely still need to interpret the legislation with respect to any permutation of situations that may arise as a result of any change in technology taking cognisance of the intentions of the parties.