Business Law

1.1 Definition

The post office rule only applies to the communication of acceptances and not to the communication of offers or counter-offers. Briefly, the postal rule states that where acceptance which is made by post is contemplated by the parties, acceptance will have taken place and will be deemed to have been completed the moment the letter containing the acceptance is deposited in the post office for transmission to the offeror. The contract comes into existence at that moment even if there is a delay in delivery or no delivery, or the letter is lost. The postal rule applies to contracts made by telegram. Authorities confirming this proposition include Henthorn v Fraser [1892] 2 Ch 27; and Holwell Securities Ltd v Hughes [1973] 1 WLR 757.

1.2 History

In the nineteenth century when the rule was firstly proposed, the only methods of communication between negotiating parties were to deal in person or by mail. There were no telephones or other complicated methods of communication. Thus, most contracts were created by one of these two methods.

The birth of the postal rule's precedent and a pertinent example of it in effect took place in 1818, the courts hearing of Adams v Lindsell. The facts of the case were that; a letter was posted by the defendant (Lindsell) on 2 September requesting a reply by return of post. However, the letter of offer did not reach plaintiff (Adams) until 5 September because the letter was incorrectly addressed. The plaintiff accepted by post on the same day, but the letter didn't reach to the defendant until 9 September which was two days later than expected to arrive. Believing that there was no reply, the defendant sold the goods to a third party on 8 September. Hence, the issue presented to the court; when was the contract concluded- on posting or on receipt? The Court of King Bench found that the acceptance was completed on 5 September, the date of posting the letter accepting the offer. Upon acceptance, there was a binding contract between the parties and the plaintiff successfully sued for breach of contract.

1.3 Application of the rule

The post office acceptance rule applies only in the absence of a statement or conduct by the offeror specifying a contrary mode of acceptance. For example, if the offeror specifies that acceptance must be in writing it the offeror, the postal rule will be displaced so that acceptance will not be affected merely by depositing a letter of acceptance in the post office. (Holwell Securities)

The postal rule does not apply when the communication is by means of fax, telex, telephone, email or facsimile transmission. This means that where there is communication between the parties using instant methods then acceptance must be received by the offeror to create the agreement. [ Brinkibon Ltd v Stahag Stahl und GM^H [1983] 2 AC34

Importantly, the postal rule does not apply to revocations and counter-offers. The revocation to be effected must be brought to notice of the other party. As see in Ramsgate Victoria Hotel Co Ltd v Montfiore (1866) LR 1 Exch 109, the defendant applied for shares on 8 June, but the shares were not allotted to him until 23 November. It was held, in the circumstances that the offer to take the shares had lapsed as the company had taken too long to send their acceptance.

1.4 Rationale

The rule was born in consideration of commercial convenience in the pre-telecommunication era. The post office was the major means of communication messages and was reliable. For seasons of certainty between dealings between parties, the rule was thought to be justified. This decision is reflected by the ability of the offeror being able more quickly concluded, thus benefiting the economy by increasing the number of transactions. Today, when instant forms of communication are available, the rule might be thought to be quaint and potentially troublesome. However, it is still firmly entrenched in the law.

2.0 Comparison or contrast

The difference between postal rule and the rules acceptances sent by fax or email is amount of time for the offer to reach the offeree. The postal service is not referred to theses days as "snail mail" without reason. It takes longer to reach your intended offeree than by using the instant communications such as telephone or fax. When using standard mail, the delivery time is even longer, especially when you're mailing across wide geographic regions.

3.0 Arguments for keeping postal rule

There are several reasons why postal rule should be kept as part of Australian contract law. The postal rule helps in determining the time and place of acceptance, as well as determining which jurisdiction will apply if the parties live in different states or countries. This can be an important consideration of a dispute arises between the parties because the law is not uniform even within Australia, much less the rest or world. The High Court in Tallerman & Co v Nathan's Merchandise Ltd (1957) 98 CLR 93 affirmed that the contract is made at the place where the letter of acceptance is posted. Another example is that, if a person sends his email acceptance late Friday afternoon and the recipient left his office at lunchtime not to return until the following Monday, at what time can we consider the time of receipt? Is it on Monday morning when the recipient returns to work or at any time when he opens his email account and accesses the particular email, even if it was out of the working hours? In fact, applying the postal rule will ensure that offeree is not disadvantage and create a definite time regarding to email contract conclusion.

In addition, the rule was made to be one