Postal Rule

What is the Postal Rule?

According to the postal rule, an acceptance of an offer takes effect as soon as it is posted rather than as soon as the offeror receives it. In other words, a letter of acceptance becomes legally enforceable after it has been properly addressed, stamped, and deposited in a mailbox. The rule was first created to solve the time problems that occur when acceptance is sent by postal systems. In the event that it is misplaced or delayed in the mail, it guarantees the validity and enforceability of the acceptance. There may be certain exceptions, however, such when the offer calls for a different manner of acceptance or when the acceptance is sent by an immediate channel like an email or fax. The Postal Rule establishes the point at which a contract becomes legally binding, which, in turn, brings clarity and certainty to the establishment of contracts.

Household Fire Insurance v Grant (1879) 4 ExD 216

Facts: Grant took an interest in potentially buying shares in the plaintiff’s company. The company was content with the application, and sent Grant a letter in the post stating this, but it got lost in the postal system. The company liquidated soon afterwards. The liquidator, acting for the company, brought action against Grant in relation to any outstanding balance on the shares. Grant disputed the fact that he had to pay. He said he did not have to because he had not received a reply to his offer to buy the shares. Ratio: The court held that a contract came into existence the moment the letter of allotment of shares (the acceptance) was posted. Application: The “postal rule” still applies if the letter which communicates acceptance is lost in the post. Similarly to Adams v Lindsell, a contract is formed as soon as the letter is mailed, the fate of the letter has no effect on the validity of the contract.

The Postal Rule and Instantaneous Communication

The rapid expansion of means of electronic communication has brought up challenging and, as of yet, not fully addressed questions concerning the how the postal rule applies when people communicate using e-mail and any other messaging forum or medium on the whole internet, like Facebook™ and Twitter ™. On one side of the coin, there are those who argue that an e-mail exchange is more or less simultaneous and instantaneous and because of this the postal rule should not apply. What this does not take account of however is that e-mails are occasionally rejected by server service providers such as Google™ or a private server for a company. Even if it does arrive, the recipient of the message   might not actually read the message straight away. Many academic commentators have, on that basis, leaned towards the view that e-mail ought to be treated as a kind of mail to which the postal rule should normally apply. This would, of course, be subject to when there is expressly agreed upon exclusion of the rule by the parties' themselves,

It is imperative to remember that the postal rule, should it even be able to be applied, applies to acceptances alone. It does not apply to an offer that has been communicated by post that is being revoked. It is a common misconception that an offer can be revoked by letter at the time it was put into the post box because of the applicability of the postal rule.

As such, the main applicable principle in the postal rule is that acceptance by post comes into effect when it is posted as opposed to when it is delivered. When an offeror establishes a website that has a reply form included on it, a near instantaneous means of communication is achieved. This is because the offeree can immediately learn as to whether his acceptance has been received or not. There are a lot of theories that advocate that the postal rule should not apply in these situations (and a quite sustainable view that a web page, like a shop window, normally amounts to an invitation to treat as opposed to an offer). However, because the internet facilitates such an expanding means through which people can communicate, there are strong policy reasons that exist to make sure that the rules for accepting offers electronically are consistently the same, regardless of which kind of software is in operation. We have addressed this issue in a full answer in our Question and Answer below. Have a look at our free notes.

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