Postal Rule Essay

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INTRODUCTION

The general rule governing the acceptance of an offer is well established to be that acceptance is not effective until it is communicated to the offeror[1] However, an equally well established exception to this general proposition is the postal acceptance rule. Although the postal acceptance rule is deeply entrenched within our legal system, the range of the rule and its applicability to more advanced modern forms of communication are issues, which have not been conclusively determined by the courts and remain an area of uncertainty within the area of contract law.

THE POSTAL RULE OF ACCEPTANCE

Since the creation of the postal acceptance rule, communication technology has dramatically adapted and evolved to meet the needs and wants of society. As each new innovative method of communication has emerged, it has become a matter of utmost importance for the courts to consider and determine the applicability of the postal acceptance rule in today’s society. The development of email and instant messaging is an issue of great concern in this matter and has thusly been under much consideration. Due to the paramount increase in the use of e-mail and instant messaging services especially for business, it has become crucial that this issue of the applicability of the postal rule be resolved to enable parties to a contract to make use of this technology effectively and applicably

The postal rule of acceptance is used when the parties use the post as an exchange of promises. It states that the offeror must have considered and intended that the offer be accepted by the act of posting. Thusly making the rules of the time of acceptance change. It is found that an offer made by letter is not made until the offeree receives it and acceptance is effective as soon as it is posted[2] Eg. A letter for the sale of goods, which needs to be returned by a specific date, will be accepted and bound as soon as the offeree posts the agreement. If delays occur the postal rule still states the date the letter was posted is the date the offer was accepted and therefore is legally bound.

The case of Household Fire was one of the first cases to establish the applicability of the postal rule of acceptance.[3] For contracts that were formed through the use of the postal system as a means for correspondence, the judge stated that the "post office becomes the agent of both parties. 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 complete and final and absolutely 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."[4]

In the case of Adams v Lindsell (1818)[5] it was said there that if a simultaneous expression of agreement were required from both parties, then no contract could be completed by post. If the offeror were not bound until the acceptance was received, then the offeree should not to be bound until they had received notice that the acceptance had been received. If this logic was to be adopted, this process would have no end and the ruling would be irrelevant. Therefore, the offer must be seen as continuing whilst the letter is on its way to the other party, and the contract is thusly completed by the acceptance of it.

This is the main exception to the rule of acceptance that states acceptances have to be communicated, to be effective. In contracts made through the use of the post as an exchange of the promise the acceptance is effective upon posting - even though there may be delay or even non-delivery.

The case of Household Fire Insurance v. Grant[6] is a clear example of the possibility for injustice that could result from the application of the postal rule as it stands. In this case, the company posted back their acceptance to the offer made and received from Grant to take up an...
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