Relationship between Article 527 and 531

격지자간 (隔地者間) between/among persons in remote/distant places/ between parties that are not within each other´s presence

Article 527 (Binding Force of Offer of Contract) An offer of a contract may not be withdrawn.

Article 531 (Time Contract Inter Absentes Comes into Existence) A contract inter absentes shall come into existence at the time a notice of acceptance is dispatched.

According to articles 527 and article 111, numeral 1 of the Korean Civil Code when an offer had been made such offer, once it reaches the offeree, may not be withdrawn. For contract inter absentes, as per article 531, the contract becomes effective, at the time of the noticie of acceptance is dispatched. This seems to be an application of the mailbox rule, also know as dispatch rule, which deems the offer accepted since the moment the acceptance notice was dispatched, even in case of delay or loss of such notice. This rule is based in a principle of fairness of the transaction, because when the offeror sends an offer, it is implicit that he is giving the opportunity to the other party to accept such offer, so the offer cannot be withdrawn without the offeror given the offeree the opportunity to proof if such acceptance was delivered or not. Also, in the case for example, that the offeror used a postal services to convey his offer, he/she is granting the other party the use of the same delivery method to convey his/her answer, at least that the contrary is stated in the offer proposal.

The mailbox rules come into particular importance due to increasing e-commerce and the use of technological communication system (e-mail for example) or Electronic Data Interchange (EDI). As many of us had experienced, e-mails can reach the other party in a different date than the date they were delivered and we cannot disregard the possibility that a letter (in this case the letter of acceptance), could be lost in our postal system. These types of situations, that in most cases, escape from the control of the offeree, and prevent the offeror from receiving the acceptance notice within a fixed period of time or a reasonable period of time (wether this period was or not stated in the proposal); the mail box rules play an important role. Those situations also raise the question of when the acceptance became effective and when the contract become valid. For example: A send an offer to B. The proposal offer requests that the notice of acceptance must be delivery on or before June 23rd. B send the notification of acceptance on June 22nd through his e-mail account. However, the server of the email collapsed, as consequence A did not receives the notice of acceptance during the specified period. Therefore A doesn´t receive the notice of acceptance until June 25th. Then, when the acceptance become effective? Furthermore, is the contract binding? And if is binding, since when?

Some of the possible scenarios will be as follow:

• 1.Regardless that A received the notification of acceptance on June 25th, the acceptance is effective since June 22nd, the date that B dispatched it. Therefore the the contract is binding since that date. This seems to be the position of article 531 of the Korean Civil Code. In the other hand, article 527 doesn´t specify cases in which the offer could be withdrawn, just stated that an offer of a contract may not be withdrawn. Therefore, A cannot withdraw the offer and B acceptance is valid since the moment dispatched, even though the arrival to the destinatary was late, consequently the contract is binding for both of the parties, since the moment the acceptance was distpatched.
• 2.The other scenario, is that the acceptance become effective since June 22nd upon dispatched, but the contract will be binding since June 25th, when A received. Contract will be binding without retroactive effect, since the momento A received the notice of acceptance.

In general, the mailbox rules seems to apply to acceptance by offeree but it´s not apply to revocation of the offer. For example:

On June 20th: A sent an offer to B by mail.

On June 21st: B sent an acceptance notice to A by mail.

On June 22nd: B changed his mind and sent a rejection of offer to A by mail.

On June 23rd, 11:00 a.m.: A received the acceptance notice from B.

On June 23th, 11: 30 a.m.: A received the reject notice from B.

As per article 531, contract is binding since the moment the acceptance is distpatch. However, if A would received the rejection before the arrival, then the contract will be still valid, because the acceptance was distpatched first. Also, could happened that while B sent his acceptance notice, A withdrawn the offer. However, as per article 527 and 531, the contract still be binding.

Nevertheless the above, contracts are based in the principle of the private autonomy. Defining in the proposal offer whether the acceptance will be held as valid or not since the moment of delivery or since the moment of reception by the offeror, as well as to specify the method of delivery and communication between the parties, is a way to avoid future problems derivated form the the interpretion of the norm.

by Lill Marie Martínez Cruz