Postal Acceptance Rule - Essay Example

Postal Acceptance Rule The postal acceptance rule s that an acceptance by post becomes effective, provided the post is a reasonable means of communication, at the time of posting and not at the time of its receipt. This rule is an exception to the principle that the offeree must communicate acceptance to the offeror. Acceptance takes place when the letter of acceptance is posted, not when it is received. The postal acceptance rule was of great importance in contracts. The advent of this rule was with Adams v. Lindsell, wherein the court ruled that placing the letter of acceptance in the mailbox was tantamount to an explicit act that depicted acceptance (Adams v. Lindsell, 1818). Agreement One of the major advantages provided by the postal rule to commercial contracts lies in the fact that the offeror cannot take undue advantage of delay or difficulty encountered in communication. This is especially true of situations where the offeree has no knowledge regarding the receipt of the acceptance by the offeror(Raymond 2006, p. 7). In accordance with this rule, whenever communication of acceptance of an offer is from a place that is not nearby or contiguous, then the acceptance is rendered binding from the moment that it is mailed or dispatched. This has a major bearing on the receipt rule; because, the acceptance of an offer becomes binding with dispatch of the acceptance by the offeree, and does not depend upon the receipt of the acceptance by the offeror (Raymond 2006, p. 5). The operation of the postal rule is unaffected by factors, such as the receipt of the acceptance by the offeror or the intimation of a revocation from the offeror, whilst the message regarding the acceptance of the offer has not been received. In effect, any risk attendant upon a failure to communicate clearly has to be borne by the offeror. This is one of the major outcomes of the postal rule. Subsequent to the decision in the Adams case, the postal rule has enjoyed wide support, as it has proved to be expedient for business transactions (Raymond 2006, p. 6). There is considerable support for the postal rule, because it is seen to apportion the risk involved in the transmission of acceptance on the offeror. Such allocation of risk is justified because; first, risk has to allocated to either of the parties, and it is difficult to make a choice; second, compelling the offeror to bear the risk is equitable, as the offeror originates the offer and consequently is in a better position to control transmission risk, although he preferred to abstain from exercising such control(Raymond 2006, p. 8). Several reasons have been ascribed to the development of the postal rule, with some scholars contending that it comes into play, whenever communication involves a trusted third party. However, other scholars have stressed upon a method of communication that is not instantaneous. Disagreement There are some disadvantages inherent in the postal rule. For instance, it places the offeror at a distinct disadvantage, as it permits the offeree to assume the existence of a contract, prior to the offeror. Moreover, the offeror cannot withdraw his offer, before coming to know of its acceptance or rejection. As such, there are no forceful reasons to promote the postal rule; and it is incumbent upon the law to prefer either the offeror or the offeree, in the interests of ensuring certainty. Moreover, no specific cause can be attributed to having a bias towards the offeror or offeree (Chen – Wishart 2007, p. 90). Furthermore, the postal rule can sometimes have illogical results. For instance, in instances wherein an offeree posts his acceptance to the offeror, and subsequently intimates his rejection of the offer to the offeror; the offeree is deemed to be bound by his acceptance, even if his communication regarding the rejection reaches the offeror, before the letter of acceptance. This is patently, absurd; because, it becomes obvious that the offeree is not interested in entering into a binding contract with the offeror (Chen – Wishart 2007, p. 90). Jurisdiction, in respect of the relevant court in cross border contractual disputes, is to determined by the place of formation of the contract and the nature of the contract; namely, whether the contract was a non – consumer or consumer contract. For instance, in Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft the House of Lords ruled that the time of receipt of the acceptance in Vienna was the time at which the acceptance was rendered effective, and not the time at which the acceptance was transmitted in London (Brinkibon Ltd v. Stahag Stahl und Stahlwarenhandelsgesellschaft m.b.H, 1983). Their Lordships also held that the applicable law, in respect of that contract was that of Austria and not English law. However, one of presiding Lords emphasised that this decision was not to be applied universally, and that factors like the intention of the parties to the contract and allocation of risk were also to have a bearing (Werner Winter 2000/2001, p.8). In Holwell Securities Ltd v. Hughes, the following principles emerged; namely that the postal rule is inapplicable if it is excluded either explicitly or implicitly in the offer. In this case, a contract was entered into between Holwell Securities and Hughes, whereby the former was to communicate acceptance of an offer to purchase a specific piece of property, by dispatching a written notice, before the expiry of 6 months. Accordingly, Holwell Securities dispatched a letter of acceptance to Hughes. The latter failed to receive this letter (Holwell Securities Ltd v Hughes , 1974). The court ruled that notice in writing was to be construed as an actual notice. As no notice was received by Hughes, this condition was not fulfilled; hence there was no binding contract between Holwell Securities and Hughes. In other words, the postal rule was inapplicable to this case; due to the fact that it had been the intention of the parties that there should be no binding agreement between them, until such time as the acceptance had been communicated (Holwell Securities Ltd v Hughes , 1974). The only saving grace for this rule is that it aims to protect the offeree from any disadvantage resulting from a withdrawal from the contract by the offeror, on account of changing market conditions, during the time that the acceptance is awaited. However, even this protection is inadequate; because, the offeree could rely on his acceptance to prevent the offeror from selling the goods in question to a third party (Chen – Wishart 2007, p. 90). The postal rule has lost its significance, as it pertained to an age, in which messages were frequently transmitted by private messengers, and the postal system emerged as a reliable and speedier mode of communication. With the proliferation of near instantaneous communication methods, the postal rule has been rendered, seemingly obsolete. This rule is relevant at times when post is the sole means of communication. Due to the proliferation of computers, the Internet, electronic communications, and globalisation the means of conducting business has changed drastically. This has resulted in a dramatic change in the manner, in which contracts are formed. Moreover, present day communication is almost instantaneous. Consequently, the postal acceptance rule has been rendered obsolete. List of References Adams v. Lindsell, EWHC KB J59 (Kings Bench 1818). Brinkibon Ltd v. Stahag Stahl und Stahlwarenhandelsgesellschaft m.b.H, 2 AC 34 (House of Lords 1983). Chen – Wishart, M. (2007). Contract Law. Oxford University Press. Holwell Securities Ltd v. Hughes , 1 WLR 155 (1974). Raymond, A. H. (2006). Manner, Method, Receipt or Dispatch: the use of Electronic Media is Nothing New to the Law. Loyola Law Review , vol. 52, no. 1, pp. 1 – 38. Werner, J. (Winter 2000/2001). E - commerce.co.uk - Local Rules In A Global Net. International Journal of Communications Law and Policy: Online Business Transactions and the Applicability of Traditional English Contract Law Rules , no. 6, pp. 1 - 10. Read More