The Postal Acceptance Rule in Contract Law

Introduction

An arrangement of a contract needs an agreement; it follows that, in sort for such agreement to be reached. There have to have an offer offered by one party which is accepted by the other. An acceptance is that, a concluding and incompetent expression of consent to the terms of an offer. To determine whether an agreement has been reached under a historical contract theory, an acceptance which matches the offer that has been made is essential. In accordance to an acceptance, the communication of an acceptance can be broken down into a mixture of components depending on the circumstances. An acceptance can be made or through carry out, private courier, silence, electronic communication, internet transaction, and finally, by post. In this current world, communication can take place in many ways. That being said there might be deferred among the sending of an acceptance. The rule functional here is that no communication is successful until it is acknowledged and understood by the person to whom it is addressed. This however does not valid to the postal rule. The postal rule is an exemption to the general rule that an acceptance must come up to to the attention of the offeror. Fundamentally, this rule can be defined as a rule of contract law that makes exclusion to the common rule and the principle acknowledged was that, a contract is formed the instant the acceptance letter is sent, relatively than when they are communicated. The statute is intended to remove ambiguity from the contract arrangement process. It provides the offeree with assurance that an acceptance once it is posted will be efficient, even though the postal system delays delivery of the acceptance letter away from the offer date. The main cause for this is historical, as at the time when postage of a letter is slower and less dependable than it is today, in this modern century. In the sensible allegation of the postal rule today, it is much easier to establish that a letter of acceptance has been sent than to verify whether it has been acknowledged or reached the attention of the offeror. Definition The postal rule is a theory of contract law that is generally referred to as the mailbox rule. It was created at a time when contracting parties did a large amount of their bargaining from a distance. Bargaining at a distance, typically through the mail, formed a problem, because the parties could not discern at the same time whether they had formed a contract. As a result, a general rule dictating the time of an efficient acceptance was obligatory. Thus, the postal rule was created and stands for the suggestion that acceptance is efficient on dispatch.

The postal rule is exclusion to the general rule, which dictates that acceptance is effectual on receipt. The rationale behind the postal rule is that it encourages contracting by parties at a distance by making the person in the position of giving an acceptance just as protected as if the contract was being completed face to face. From the policy perspective, it also fosters the formation of contracts at the earliest possible minute. The postal rule creates an exception to the belief that acceptance is incomplete until it is communicated to the offeror. The postal rule states that acceptance is absolute on posting. This vagueness led to the creation of the postal rule to make contract formation more just for the offeree. By implying the rule, the offeree’s acceptance is good from the minute it is mailed; in other words, it becomes effective once it is dispatch. By eradicating a lot of the ambiguity involved in bargaining through the mail, the postal rule did what it was intended to do. It created safety for the offeree, and by expansion, it encouraged contracting between two parties when meeting face to face was difficult, if not unattainable. Adam v Lindsell case law is the starting point where postal rule was recognized around 19th century. Adams v Lindsell (1818)

Facts: The case concerned two parties in the sale of wool. On September 2nd, the defendants wrote to the plaintiff offering to trade them certain fleeces (wooly coat of sheep) of wool and requiring an answer in the course of post. The defendants misdirected the letter so that the plaintiffs did not receive it until September 5th. The plaintiff posted their acceptance on the same day but it was not received until September 9th. Meanwhile, on September 8th, the defendant, not having received an answer by September 7th as they had expected, sold the wool to someone else. The defendant argued that there could not be a binding contract until the answer was actually received, and until then they were free to sell the wool to another buyer.

Held: Law J said that, “If that was true it would be impossible to complete any contract through the post, if the defendant was not bound by their offer until the answer was received, then the plaintiff would not be bound until they had received confirmation that the defendant had received their acceptance, and this could go on indefinitely.”[1] Conclusion: The postal rule does not concern to option contracts or permanent offers where acceptance is still efficient only ahead of acceptance. This is because the offeree no longer needs security against consequently mailed revocations of the offer.

Result: The plaintiffs succeed in their claim. The defendant had committed a breach of contract. To have a change in mind or withdraw from an offer, or made an offer with someone else is possible by the offeror but nonetheless, the court looked into the manner, business would be better served by giving the offeree assurance, thus the postal rule was formed. This case had created innumerable problems and has led to a creation of the rule. This rule as acknowledged in the common law legal system is: Lord Herschell stated that, “Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.”[2] The ambiguity regarding the moment of contract arrangement does not take place in the environment of. In face-to-face communication or in distance contracting there is no vagueness on the moment when the contract is formed because of the immediate method of communication used. In this method of contracting, all parties are conscious of contract wrapping up and they do not face sticky topics for example malfunction of transmission or delay which take place in non instantaneous communications. Certainty The postal rule stated that, certainty is for the acceptor as he knows that there is a binding contract the moment he posts his acceptance letter.

The offeror can construct certainty for him by stipulating that he must obtain acceptance before it is requisite or set other such confines. The offeror is in a point to efficiently get rid of the postal rule and if he selects not to then he is subjected to the limitations of postal communication. Household Fire & Carriage Accident Insurance Co. v Grant (1879)

Fact: The plaintiff’s company was offered by the defendants to sell their shares to them. The plaintiff fixed the shares to the defendant and sent him a letter to verify. The letter was missing in the post. The liquidator requested that the defendant make the exceptional payments on his shares when the plaintiff’s company went into bankruptcy. The defendant refused to pay as they stated that there was no binding contract in the first place.

Held: There was a binding contract formed. The postal rule had been applied, meaning that it was irrelevant for the defendant to say that there is no binding contract, even though the letter of acceptance was lost in the post because a binding contract is formed once the letter was actually posted. Thesiger LJ: ‘…if the post office be such common agent then it seems to me to follow that as soon as the letter of acceptance is delivered to the post office, the contract is made as complete and binding as if the acceptor had put his letter into the hands of a messenger sent by the offeror himself as his agent to deliver the offer and receive the acceptance…’[3] Thesiger LJ noted that when communicating by post: ‘…it is impossible…to adjust conflicting rights between innocent parties, so as to make the consequences of mistake on the part of a mutual agent fall equally on the shoulders of both…’[3] Bramwell LJ noted the offeror could avoid the postal rule by stating ‘your answer by post is only to bind if it reaches me…’[3] Nevertheless, Yates Building co. Ltd v Pulleyn & Son (York) Ltd (1975) stated that every necessity about the manner of acceptance must be visibly stated to be applicable. Yates Building Co. Ltd. V Pulleyn & Son (York) (1975) Facts: the defendant contracted the plaintiff an opportunity to buy land, exercisable by notice in writing to be sent by “registered or recorded delivery post”. The plaintiff sent a letter compliant to the offer by regular post, which was accepted by the defendant who refused to acknowledge it as valid.

Held: It was held that this manner of acceptance was legitimate and was no disadvantage to the offeror, as the manner fixed was only to guarantee the delivery and that had happened. In addition, the verdict in Tinn v Hoffman & Co. (1873) defines that where a necessity for a certain category of reply has been made, an evenly efficient manner of communication will also be deemed adequate provided it is just as immediate and does not disadvantage the offeror. An offer by email could consequently be accepted for example, by telephone. Tinn v Hoffman & Co. (1873) Acceptance was requested by return of post. Honeyman J. said: “That does not mean exclusively a reply by letter or return of post, but you may reply by telegram or by verbal message or by any means not later than a letter written by return of post.”[4]

Limitations

The postal rule only applies to acceptance and to other communication between contracting parties. The postal rule does not apply where it was unreasonable for the acceptance letter to be sent by post. Quenerduaine v Cole (1883)

Fact: The defendant made an offer by telegram which the plaintiff supposed to accept by letter.

Held: The postal rule did not apply. The court found that an offer which was prepared by telegram which is an instantaneous kind of way implied that an equally quick acceptance was required. The postal rule does not apply if the letter was not properly addressed, stamped, and posted. Re London & Northern Bank, Ex P. Jones (1900) Fact: Dr. Jones makes an offer to the London Northern Bank. At 7.00 am, a letter of acceptance, being addressed to Dr. Jones, was handed to a postman in a post office foyer. The postman had no right to collect letters, only to deliver post. At 9.30 am, Dr. Jones delivered a letter to the bank revoking his offer. At 7.30 pm, the bank’s acceptance letter was delivered to Dr. Jones.

Held: The postal rule did not relevant as a result of the incorrect posting. A letter must be placed in a mail box or given to a post office employee who is allowed to receive mail. The postal rule can be displaced by the offeror. Holwell Securities Ltd v Hughes (1974) Facts: Facts: Dr. Hughes contracted Holwell Securities an opportunity to acquire his house for A£45, 000. The decision was to be exercisable ‘by notice in writing’ within 6 months. Holwell posted a letter exercising the option, five days before the expiry. This letter was never acknowledged by Hughes. Holwell wanted to enforce the decision relying on the postal rule stating the acceptance took place before the expiry of the decision.

Held: By requiring ‘notice in writing’, Dr. Hughes had precise that he had to actually accept the communication and had therefore disqualified the postal rule. Acceptance is only effective on communication which is receipt of the letter, when the postal rule does not apply. Retraction In cases where the postal rule applies and acceptance is efficient on posting, is the acceptor party able to retract the acceptance letter before it comes to the consideration of the offeror? Without a doubt, firm appliance of the postal rule defines that retraction of acceptance is impossible as there is a binding contract once a letter is sent. On the other hand, the postal rule has developed with the purpose of benefit the acceptor so it can be debated that it should not be applied in a way which is disadvantageous to him. For example, if he wishes to change his decision after posting and the offeror has yet to receive his communication of acceptance to inflict the postal rule would be to his loss.

It would not cause the offeror to put up with as the removal of acceptance would take place aforementioned to him realizing it had been agreed, so he would not yet have been capable to act ahead it. Allowing retraction can also be seen as making an iniquitous preconceived notion in favor of the acceptor, whom would benefit both from the sureness of the postal rule and be able to make use of retraction to cogitate at the expense of the offeror. An imbalance would subsist where a binding contract is formed by good worth of the postal rule and the acceptor could retract but an offeror is not allowed to revoke the offer. Byrne & Co. v Van Tienhoven & Co. (1880)

Facts: the defendant posted a letter offering goods for sale to the plaintiff on October 1st. However, the defendant revoked the offer which arrived at the plaintiff’s place on October 20th. By October 11th, the plaintiff had accepted the offer by telegram and had posted a letter confirming the acceptance on October 15th.

Held: It was apprehended that the defendant’s revocation was ineffective until it was received on October 20th. This was too behind schedule as the contract was prepared on the 11th when the plaintiff sent a telegram. Verdict was set for the plaintiff. In Byrne & Co. v Van Tienhoven & Co. (1880), the courts established the venerable thought that any revocation of an offer must be communicated to the offeree; even though, again there are some exceptions to this statute. The offeror required to communicate this revocation to the offeree himself, though. It is not always possible for a company, or even an individual, to communicate straightly with the other contracting party and this is reflected in the judgment of Dickinson v Dodds (1876) that revocation may be communicated by a dependable third party. Dickinson v Dodds (1876) Facts: Dodds offered to trade his house to Dickinson, the offer being release until Friday, 9 am. On Thursday, Dodds sold the house to Allan. Dickinson was being told about the sale by Berry, the estate agent, and he delivered an acceptance before 9 am Friday. The trial judge awarded Dickinson a ruling of specific performance.

The Court of Appeal reversed the decision of the judge. Held: James LJ stated that the plaintiff knew that Dodds was no longer minded to trade the property to him as obvious and undoubtedly as if Dodds had told him in so many words, “I withdraw the offer.” This was apparent from the plaintiff’s own statements. It was lucid that before there was any attempt at acceptance by the plaintiff, he was completely well conscious that Dodds had altered his mind, and that he had indeed agreed to trade the property to Allan. It was not possible, as a result to say there was ever that existence of the same mind between the two parties which is crucial in point of law to the making of an agreement. The issue has also being considered in other jurisdictions. Wenkheim v Arndt (1873)

Fact: This case is originated from New Zealand. The plaintiff offered to marry the defendant, which had sent an acceptance by letter. The defendant’s mother professed to draw back the acceptance by telegram which is prior to the acceptance (acceptance letter) being received by the plaintiff. Held: The retraction was unacceptable. The case is cited to hold up the view that retraction is impossible. Yet, whether the third party was certified was also an concern in this case. Countess of Dunmore v Alexander (1830)

Facts: The case was originated from Scotland. A disagreement over whether communication between two prospective employers had formed a contract to employ a servant. Held: No contract was produced. As a result, it appears that a postal acceptance could be withdrawn by a speedier means. The case is cited to hold up the vision that retraction may be possible. On the other hand, it was a majority decision and the reasoning is very vague. Recommendation In the new world of the 21st century, the technology is ahead of our imagination. The method of forming a contract, say, for instance, an offer, acceptance and the invitation to treat are theoretically depending on the electronic communication. The well-known form of an acceptance in the world nowadays can be made by a simple click by an email. An electronic mail is frequently being seen as a digital requirement of the postal arrangement, of course, in the modern age.

Thus, the postal rule can be applied to the acceptance sent by the mail. On the other hand, to settle on whether a postal rule is relevant to the acceptance by mail, some modes of communication advantage from the rule or not needs to be ascertained. The still unending disagreement is that the postal rule only applies when the offer contemplates acceptance by non-instantaneous way of communication. Conclusion In conclusion, it is perhaps the time that postal rules shall be restated for the 21st century. A potential reformulation would focus on the non-instantaneous nature of communications which gain from the rule. Perhaps the new rule should state that, ‘The acceptance is effective from the time it leaves the acceptor’s control, where an offer contemplates acceptance by a non-immediate form of communication.’ Such a description would eliminate the need for a trusted third party and would cover all non-instantaneous methods of communication which is also includes those not yet created. It does though necessitate that methods of communication can be divide into instantaneous and non-instantaneous, a difference that may be become distorted with potential technological advances.

Reference

1. The postal rule in contract law. Available from: https://www.ockadvocates.com/2013/02/the-postal-rule-in-contract-law/ [Accessed 5 April 2014]
2. Acceptance: postal rule. Available from: https://www.bitsoflaw.org/contract/formation/revision-note/degree/acceptance-postal-rule [Accessed 5 April 2014]
3. The postal rule in English contract law. Available from: https://suite.io/zoe-kirk-robinson/3a99230 [accessed 5April 2014]
4. Relevance of the postal rule of acceptance. Available from: https://www.ukessays.com/essays/law/relevance-of-the-postal-rule-of-acceptance-law-essay.php [Accessed 5 April 2014]
5. What is the postal rule? Available from: https://www.wisegeek.com/what-is-the-postal-rule.htm [Accessed 5 April 2014]
6. Does the postal rule apply to revocation? Available from: https://www.experts123.com/q/does-the-postal-rule-ap [Accessed 5April 2014]
7. Holwell Securities v Hughes. Available from: https://www.e-lawresources.co.uk/Holwell-Securities- [Accessed 5 April 2014]

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