Electronic Communications Convention- Impact on common law jurisdictions 2008

IX. Electronic Contracts

[36] The UECA provides for explicit recognition of making or accepting an offer “by any action in electronic form, including touching or clicking an appropriately designated icon.”[40] Article 8 of the Convention permits contracts to be in the form of “electronic communications”, which is defined as “any communication that the parties make by means of data messages.”[41] The term “data message” is broadly defined to include “electronic, magnetic, optical or similar means.”[42] .  Under both regimes, electronic communications are clearly acceptable for forming contractual relations.

[37] Article 11 of the Convention states that electronic communications that are generally accessible, and not addressed to specific parties, are considered to be mere invitations to make offers, unless the party making the proposal clearly indicates an intention to be bound in case of acceptance. Although provincial and territorial electronic commerce legislation does not contain a similar provision, the Convention’s position is in accordance with established common law principles,[43] and courts in Canada have generally been willing to apply the established rules of the common law of contract to analogous situations in the electronic environment.[44] Article 11 conforms to traditional common law considerations of the legal effect of advertising in the paper-based environment.

[38] The time and place of acceptance are fundamental to contract formation and  the rules that will apply to it. The general rule of contract formation indicates that acceptance takes place when and where the offeror receives notice of acceptance. The mailbox rule deviates from the general rule: acceptance of an offer is made once a letter addressed to the offeror is posted, despite the fact that the offeror does not yet have actual notice of acceptance. The application of the mailbox rule to more technologically advanced modes of communication, such as telephone and fax, has been evaluated by Canadian courts.[45] Generally, courts have determined that because telecommunications are instantaneous, the mailbox rule should not apply, and acceptance occurs when it is actually received by the offeror.

[39] There has not been any decision on the timing of acceptance via online communications in Canada. Presumably, one must ascertain whether online communications, such as e-mail or “clicking”, are analogous to telephone or fax communications. Several complicating factors, such as the many intermediate servers through which such communications are shunted and mechanisms that can stop delivery (such as spam filters), may indicate that online communications are not, in fact, instantaneous.

[40] This issue is fundamental to the Convention for two reasons. First, Article 10 of the Convention deals with time of dispatch and receipt of electronic communications. It does not deal with the issue of acceptance, on which the formation of a contract depends. Second, Article 5 requires the rules of private international law to be applied in these circumstances, which could result in the application of the domestic law of contract formation.

[41] The Explanatory Note unequivocally states that the Convention does not attempt to provide a rule governing the timing of contract formation.[46] Rather, the Convention provides guidance on the time and place of dispatch and receipt of electronic communications, issues that are important to the concepts of offer and acceptance, but are not determinative of contract formation.

[42] Under the Convention, the time of dispatch of an electronic communication is the time when a message leaves an information system under the control of the sender.[47] Under the UECA, the focus is on the time it enters an information system out of the originator’s control.[48] Although the reason for the change in focus is not obvious, there does not appear to have been any intention by UNCITRAL to refer to a different time in the newer Convention.[49]

[43] The time of receipt of an electronic communication under the Convention is the time it becomes capable of being retrieved by the addressee at an electronic address designated by the addressee.[50] The UECA states that an electronic document is received when it enters an information system designated or used by the addressee, and is capable of being retrieved by the addressee.[51] The Convention avoids the concept of “entering another information system” because of the perceived growing use of message screening devices (such as spam filters) that could prevent reception,[52] although there is a presumption that an electronic communication is capable of being retrieved when it reaches the addressee’s electronic address.[53]

[44] In the circumstance where an electronic message is received by the addressee at an electronic address not designated, the time of receipt is when the message becomes capable of being retrieved by the addressee at that address and the addressee becomes aware that the electronic communication has been sent to that address.[54] The UECA provision is similar, except it focuses again on entering an addressee’s information system.[55]

[45] It is difficult to predict whether the difference in wording between Canada’s domestic electronic commerce legislation and the Convention will have any practical differential impact. Neither the Convention nor the domestic legislation dictates when acceptance occurs. For example, in a circumstance when an addressee designates an address, an electronic message is received when it enters an addressee’s information system and is capable of being retrieved and processed (in the case of UECA) or when it becomes capable of being retrieved at that address (in the case of the Convention). But neither stipulates whether an offer contained in an electronic message is accepted when sent, when received, or when retrieved. The timing of the contract formation will be governed by the applicable law which, if it is Canadian, awaits resolution by the courts.[56]

[46] Despite these uncertainties, the determination of when acceptance occurs in electronic contracts involving an international sale of goods may be more ascertainable. Article 20 of the Convention[57] stipulates that the Convention’s provisions are applicable to the use of electronic communications in connection with the formation or performance of a contract to which the United Nations Convention on Contracts for the International Sale of Goods (CISG)[58] applies. Canada has ratified the CISG,[59] and Canadian provinces have adopted it into their domestic legislation.[60] Article 18(2) of the CISG states:

An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed, or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offer or…..

[47] Applying Article 10.2 of the Convention to the CISG, it would appear that acceptance occurs when the electronic message is capable of being retrieved by the offeror (assuming the terms “reaches the offeror” in the CISG and “receipt” in the Convention are equivalent concepts). If this is a logical assessment of the interaction of these two instruments, it would appear that the mailbox rule does not apply to electronic contracts involving the international sale of goods.

[48] Under both the Convention and the UECA, an electronic communication is deemed to be dispatched at the place where the originator has its place of business and is deemed to be received at the addressee’s place of business.[61] These provisions provide certainty of time and place for contractual purposes in an era of mobile communications and in circumstances where servers may be in other jurisdictions. Article 10.4 reinforces the concept that the timing of receipt of electronic communications is not determined by the location where the information system supporting an electronic address.

[49] It should be noted that these deeming time and place provisions have no counterparts for telephonic or postal communication, which means that different legal outcomes might result from using these means to conduct business.  For this reason, New Brunswick’s Electronic Transactions Act[62] does not include an equivalent of the UECA s. 23(3). Other provincial and territorial electronic commerce legislation adopt the deemed place of business approach to dispatch and receipt taken by the UECA and the Convention.

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August 12 - 16, 2018