Electronic Transactions Act (Contract Formation) Amendment Bill

A Bill to confirm that standard offer-and-acceptance principles applies to electronic contract formation has been drawn from the Members’ Ballot. It is the Electronic Transactions Act (Contract Formation) Amendment Bill, in the name of National MP Paul Goldsmith. The operative provision of the Bill reads:

“32A Contract formation

An offer that can be accepted by electronic communication is deemed to be accepted at the time of receipt of the acceptance by the offeror.”

Which simply confirms the general law that is presumed to apply anyway. The only exception is the old postal acceptance rule, which says that a contract is formed as soon as acceptance is posted in the mail (which could be several days before the offeror hears about the acceptance). There has been occasional talk over the years about whether the postal acceptance rule should extend to online scenarios – it’s good law school fodder – but the prevailing view is it should not. The issue was briefly considered in a 2009 Australian Federal Court case, Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA (No 4) [2009] FCA 522, in which the judge concluded in effect that the postal acceptance rule should not apply to acceptance by email.

So it will be perhaps somewhat nice to have this confirmed, but having such an anodyne and relatively trifling Bill in the Members’ Ballot does raise the prospect of (smart) “ballot stuffing” by Government MPs, to reduce the chances of more controversial bills, such as same-sex marriage or euthanasia bills, being drawn!

2 thoughts on “Electronic Transactions Act (Contract Formation) Amendment Bill

  1. Guy – could you please let me know your view of whether the proposed amendment (s32A) is intended to mean that the contract is formed when a message can be established by electronic means as having “arrived” at the recipient’s electronic address (whether by server records or some other electronic means). Or when the offeror actually reads the message? There could be a considerable time difference between the two (or the latter option may never happen) and it is not at all clear to me which one is meant. I would be very grateful for your view.

    • Hi Jacqui,

      The Bill is silent on that issue (it’s perhaps admirable for its brevity!) however I think the Brinkibon case still correctly states the general principles, and together with s 11 of the Electronic Transactions Act, I would say that the contract is formed when an email arrives rather than when it is read. That is, if an offeror has designated email as a mode of acceptance, then it is implicit that they are responsibile for promptly clearing their emails and will take the risk of a malfunction in their own email systems, rather than putting the risk on the offeree. However, as with the “fax cases”, if the offeree is aware that the email was not received (e.g. they got a “mailbox full” message), then there would be no contract.


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