Contract | Formation
Acceptance: Postal Rule
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Introduction
- communication of acceptance by post raises issues of contractual timing and when acceptance is complete, due to lapse of time between posting and arrival
- therefore the
postal rule
has been developed
Definition
- the postal rule creates an exemption to principle that acceptance is not completed until it is communicated, by stating that acceptance is complete on posting
Adams v Lindsell (1818) 1 B & A 681
Facts:
- 2 September: defendant (D) sent a letter offering to sell wool to plaintiff (P), requiring a response
in course of post
- 5 September: letter delivered to P (it was addressed insufficiently so took longer than usual), that evening P accepted by post
- 8 September: D sold the wool to a third party, considering the offer had lapsed
- 9 September: D received P's accpetance, normally a response
in course of post
would have arrived on 7 September
Issue:
- when was acceptance complete?
Held:
- acceptance complete and binding contract formed on evening of 5 September, when P posted letter, D was in breach of contract
- today, revocation of the offer would only be effective once it had been communicated to offeree, so D selling the wool without notifying P would not mean offer was revoked, rules on revocation less well defined in 1818
- 2 September: defendant (D) sent a letter offering to sell wool to plaintiff (P), requiring a response
Certainty
- postal rule provides certainty for acceptor, he knows there is a binding contract as soon as he postsletter of acceptance.
- offeror can create certainty for himself by stipulating he must receive acceptance before it is binding, he can oust the rule but if he chooses not to then he is subject to limitations of postal communication
Household Fire & Carriage Accident Insurance Co. v Grant (1879) 4 Ex D 216
Facts:
- D offered to buy shares in P's company
- P allotted shares to D and sent him a confirmation letter, which was lost in the post
- P's company went bankrupt and liquidator requested D make outstanding payments on his shares, D refused stating there was no binding contract
Issue:
- had D's offer been accepted?
Held:
- was a binding contract, postal rule applied: irrelevant acceptance was lost because a binding contract formed once 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...
- Thesiger LJ:
..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...
- Bramwell LJ noted offeror could avoid postal rule by stating
Your answer by post is only to bind if it reaches me...
Limitations
- postal rule only applies to acceptance, not to other communication between contracting parties
- postal rule does not apply: where not reasonable for acceptance to be sent by post
Quenerduaine v Cole (1883) 32 WR 185
Facts:
- D made an offer by telegram which P purported to accept by letter
Issue:
- was it reasonable to accept by letter when the offer was made by telegram?
Held:
- postal rule did not apply, an offer made by telegram (instantaneous), implied that an equally quick acceptance was required
- postal rule does not apply: if letter was not properly stamped, addressed and posted
Re London & Northern Bank, ex p. Jones [1900] 1 Ch 220
Facts:
- Dr Jones makes an offer to the bank, at 07.00 a letter of acceptance, addressed correctly, was handed to a postman, who had no authority to receive letters only to deliver post
- 09.30: Dr Jones delivered letter to bank revoking his offer
- 19.30: bank's acceptance delivered to Dr Jones
Issue:
- was the postal rule invoked?
Held:
- postal rule did not apply due to incorrect posting, a letter must be posted in post box or handed to post office employee authorised to receive mail
- postal rule can be displaced by the offeror
Holwell Securities Ltd v Hughes [1974] 1 WLR 155
Facts:
- D issued a grant to sell a property to P, containing clause stipulating option must
be exercised by notice in writing to the Intending Vendor
within six months - P sent letter exercising the option, within the time limit, it was lost in the post and never received by D
Issue:
- did the postal rule apply?
Held:
- postal rule did not apply: post was suitable method of acceptance but language of offer implied D required receipt of written acceptance
- Lawton LJ:
.. the requirement of 'notice ... to', in my judgment, is language which should be taken expressly to assert the ordinary situation in law that acceptance requires to be communicated or notified to the offeror, and is inconsistent with the theory that acceptance can be constituted by the act of posting...
- additionally, to allow the acceptance to be effective, without communication would
produce manifest inconvenience and absurdity
- Lawton LJ:
In my judgment, the factors of inconvenience and absurdity are but illustrations of a wider principle, namely, that the rule does not apply if, having regard to all the circumstances, including the nature of the subject-matter under consideration, the negotiating parties cannot have intended that there should be a binding agreement until the party accepting an offer or exercising an option had in fact communicated the acceptance or exercise to the other. In my judgment, when this principle is applied to the facts of this case it becomes clear that the parties cannot have intended that the posting of a letter should constitute the exercise of the option...
- D issued a grant to sell a property to P, containing clause stipulating option must
- if postal rule does not apply: acceptance only effective on communication (receipt of the letter)
Retraction
- is the acceptor able to retract the acceptance before it comes to the attention of the offeror? strict application of postal rule means retraction not possible, there is binding contract once letter is sent
- postal rule developed to benefit the acceptor, so argued that it should not be applied in way which is disadvantageous to him
- if acceptor changes his mind after posting and offeror has yet to receive, imposing postal rule detrimental to acceptor, not imposing would not cause offeror to suffer: withdrawal of acceptance occur prior to him realising it had been given, so he would not yet been able to act upon it
- allowing retraction creates unfair bias in favour of the acceptor (benefits from certainty and able to use retraction to speculate at the expense of offeror) imbalance would exist where binding contract is formed by virtue of postal rule: acceptor could retract acceptance but offeror not revoke offer
- no English authority on retraction so situation is unclear, issue has been considered in other jurisdictions
Wenkheim v Arndt (1873) 1 JR 73
Facts:
- New Zealand case: P offered to marry D, who sent acceptance by letter
- D's mother purported to retract acceptance by telegram (prior to acceptance being received by P)
Issue:
- was the acceptance retracted?
Held:
- retraction was invalid
- case cited to support view retraction is not possible, however, unanuthorised third party also factor in decision
Countess of Dunmore v Alexander (1830) 9 Shaw 190
Facts:
- Scottish case: dispute over correspondence regarding the employemnet of a servant
Issue:
- whether a letter sent later could retract a previous acceptance letter, if both arrived at same time
Held:
- no contract, so it appears postal acceptance could be withdrawn by speedier means
- case cited to support view retraction may be possible, however, majority decision and reasoning very unclear