Law of Contract - Modern Technology and Contract Formation (Part 2)

Internet ‘acceptance’

When making a purchase online, the company will send you a confirmation of order document, detailing the products purchased and the prices. At the very least, you will have opportunity to view your goods in a ‘virtual shopping basket’. At this stage you would be able to withdraw from the agreement.

There is no doubt that contracts can be completed by electronic means. In 2000, the European Union published the Directive on Electronic Commerce 2000/31/EC. Article 9 of this Directive stated that: “Member States shall ensure that their legal system allows contracts to be concluded by electronic means”. However, what is less clear – and is not answered by this Directive – are the acceptance mechanisms involved.

The question is therefore, how do the traditional acceptance rules fit into contemporary communication methods?

Two main arguments have been put forward. First, that all Internet communication is instantaneous and thus subject to the acceptance rule advocated in Entores and Brinkibon. The rationale for this is that Internet communications take place along telephone lines.

Second, that email communication is not instantaneous, because there are no direct links between the two people communicating by email, as all communication goes through a server (perhaps similar to a post box?). Furthermore, once you have pressed the send button on your email, there is nothing that you can do to retrieve the email (perhaps similar to putting a letter into a post box?).
A third way?

Over the past couple of decades, there has been a slight move away from traditional contractual formation rules, instead preferring to use a more subjective approach to contract formation. Cases such as: Butler Machine Tool v Ex-Cello Corp [1979] 1 All ER 965, Gibson v Manchester City Council [1979] 1 All ER 972 and Holwell Securities Ltd v Hughes [1974] 1 All ER 161 suggest a move away from traditional contractual formation rules and a move towards a more subjective ‘intention of the parties involved’. Is this practical? What problems/advantages would this have?

For instance, in Gibson Lord Diplock stated:
…there may be certain types of contract, though I think they are exceptional, which do not fit easily into the normal analysis of a contract as being constituted by offer and acceptance, but a contract alleged to have been made by an exchange of correspondence between the parties in which the successive communications other than the first are in reply to one another is not one of these.

Furthermore, Master of the Rolls, Lord Denning stated in Butler Machine Tool:
In many cases our traditional analysis of offer, counter-offer, rejection, acceptance…is out of date. The better way is to look at all the documents passing between the parties and glean from them or from the conduct of the parties whether they have reached an agreement on all material points.

It could be argued that a more subjective approach to contract formation in relation to modern technology would be more appropriate, as it would allow more flexibility and freedom.

Remember that there have been no specific cases in this area, so there is a large scope for argument and interpretation. 
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