CAN THE POSTAL RULE BE APPLIED FOR MODERN

COMMUNICATION METHODS SUCH AS TELEX AND E-MAIL?

A contract is an agreement that is legally binding between the

concerning parties of the contract. A contract can be made between
two or more parties or even with the general public.

There are few important features about contracts. A person may not
be liable in a contract unless he indicates he wishes to enter a
legally binding agreement. Second, when the Participants enter a
contract they give away benefits to each other and receive some
rights in return. Third, liability regarding contractual agreements is
very strict. If a person can be proved that he did not honour the
contract he may be liable to a fine. Finally any damages arising as a
result of breach of contract shall be compensated. Damages for
breach of contract are targeted to compensate the victim for all
reasonable losses arising from the breach.

There are a few vital terms relating to contract. It is important to

understand these terms before we proceed further.

Offer and invitation to treat

Almost all contracts are reached through the procedure of offer and
acceptance. One party will make an offer (the offeror) suggesting a
few terms with intentions to create legally binding agreements with
the party the offer is made (the offeree) to. If the offeree wishes to
enter a contract he has to let know the offeror by written, spoken or
any other form of conduct (except in unilateral contracts). As soon
as a contract is made the concerning participants are legally bound
to honour the contract.
Another important term relating to contracts is ‘invitation to treat’.
What it means is that it is an invitation to negotiate or to bargain. It
does not count as an offer. For instance, a book displayed in a shop
cannot be considered as an offer. It is an invitation to treat or an
invitation to negotiate. A customer makes an offer to purchase
when he takes it to the checkout.

Acceptance of offer

As soon as an offer is accepted, a contract is formed. Acceptance

can take forms of written, spoken or any other form of conduct. If
the contract is bilateral the acceptance should be communicated to
the offeror for a contract to be formed.
A person may not accept a contract by silence, even if the offeror
demanded so. The offeree has to make acceptance in the form of
written, spoken or any other mode of conduct.

It is clearly important to identify the offer and acceptance of a case

before judging upon it. Let’s do this by taking a simple example

Let us assume that Cole decides to sell antique furniture in an

auction.
The auctioneer, who sells the vase on behalf of Cole, will give an
introduction about the antique furniture before asking for bids. As
he proceeds with the bids if someone (say, Terry) offers an amount
which the auctioneer thinks is the highest he can get for the antique
furniture, then he may hit the hammer on the table and conclude
the auction.
In this instance, the auctioneer invites bidders to make offers. The
person who makes the highest bid makes an offer i.e. Terry. The
auctioneer accepts his offer by hitting the hammer on the table.
Until the hammer hits the table the antique belonged to Mr. Cole. As
soon as the hammer hits the table the ownership of the antique
transfers to Terry and a contract is formed. Mr. Cole can no longer
change his mind, nor can terry. They have come to an agreement
that is legally binding.

As in the above example most cases you may come across relate to
bilateral ( i.e. two party) contracts. In bilateral contracts, for a
contract to be formed the offeree should communicate the
acceptance to the offeror. The communication may be spoken,
written or any other recognised mode. The contract will not be
complete until the communication is made. E.g.

Felthouse v Bindley (1862)

The claimant thought he had purchased the horse which belonged

to his nephew for £30. The claimant’s nephew thought he had sold
the horse for 30 guineas. The error here resulted in no contract. The
claimant wrote to his nephew offering to split the difference. His
writing also said that if he didn’t hear anything from his nephew, he
regards the horse to be his for 30. 15 shillings. His nephew was
interested to sell at this price but didn’t reply. Weeks after, an
auctioneer accidentally sold the horse to someone else, though the
claimant’s nephew had warned him not to. Hearing this, the
claimant sued the auctioneer for auctioning his property. But the
auctioneer William Bindley, argued that there was no acceptance to
his offer by his nephew, which would result in a contract and there
for the horse he sold had nothing to do with him.

Leading judge in this case, Willies J gave the judgement that silence
does not mean acceptance. Acceptance has to be made in any clear
mode of communication, where the acceptance is communicated
back to the offeror. Since the claimant’s nephew did not respond to
his offer a contract didn’t result. There for Bindley, the auctioneer
had sold a property that belonged to the claimant’s nephew, not to
the claimant.

This case clearly shows that for a bilateral contract to be formed,

the acceptance has to be communicated to the offeror.

In the case of a unilateral contract the offer can be only be accepted

by acting upon the terms by the offeror. Communication is not
necessary. E.g.

Carlill v The carbolic Smoke Ball Company.

In this case the carbolic smoke ball company offered a reward of

£100 to anybody who correctly used a smoke ball yet still caught
flu. Mrs Carlill the claimant, correctly used the smoke ball and still
caught flu. She claimed the £100 reward. But the company refused
to pay on several grounds insisting that the advertisement was
intended to generate sales and also that a contract cannot be made
with the whole world. But the judges in this case considered there to
be a contract. The advertisement was a unilateral offer made to the
entire world. The offer also said anybody can accept it by taking the
smoke ball in the right way and by catching flu. Mrs Carlill satisfied
theses conditions hence accepted the offer. There for carbolic
smoke company is liable to pay Mrs Carlill the £100 reward they
promised.

The postal rule

The generally accepted principle is that for a contract to be formed,

the offeror should be communicated with regards to the acceptance
of the offer. The postal rule or the mailbox rule is an exception to
this. According to the postal rule, a contract is formed when the
letter of acceptance is properly addressed and properly posted,
regardless of whether the recepient receives it or not. One reason
behind this law is that the offeree considers the post office as an
agent in the process of accepting the agreement. This law
originated in the 19th century. Let’s take an example to understand
this law.

The Household Fire and Carriage Accident Insurance Company

(Limited) v Grant (1878-79)

Mr Grant applied for shares in household fire and carriage accident

insurance Company. The company posted him a letter of
acceptance saying that he has been allotted the particular shares.
But Mr. Grant never received the letter. Later when the company
went into administration, the liquidator demanded that Mr. Gant pay
the outstanding amount. But actually was Mr. Grant’s offer to
purchase shares accepted, did a legally binding contract take
place?

The judge in this case Lord Cottenham decided that there was a
contract made. The judge said that a contract is made as soon as
the letter of acceptance is properly addressed and posted, even if it
is never received.

Can the postal rule be applied for instantaneous

communication methods?

In the event of instantaneous communication modes used to form a

contract, the postal rule cannot be applied. Modes such as telex and
telephone communicate the offer and acceptance between the
offeror and offeree faster than post, almost instantly. There for a
contract is considered to be formed when the acceptance is
communicated to the offeror, Not when the offeree uses an
instantaneous communication method to say that he has accepted.
This is somewhat a modern development in common law, as
instantaneous modes became more popular communication
methods in the mid 20th century. We can examine this law/rule by
considering the following case.

Entores Ltd v miles Far East Corporation (1955)

The claimants, Entores ltd made an offer via telex from London to
miles Far East Corporation, which is based in Amsterdam to
purchase copper cathodes. Later when conditions were not fulfilled
and sued for breach of contract, the defendants argued that the
contract was made in Amsterdam and there for English law cannot
be applied. The defendants argued that the contract was made as
soon as the acceptance was typed in Holland. But the claimants said
the contract was made London after the acceptance was printed in
London, there for the contract originated in England.

The judge in this law case, Lord Denning clarified that acceptance
via instantaneous communication modes can only be legally
enforced after the offeror gets to know/hears the acceptance. This
would only be possible if the offeree knew that the acceptance has
not been heard by the offeror. Lord denning also explained that if
the offeror doesn’t make it known to the offeree that he did not hear
the acceptance, then a contract will be formed. He also considered
that if ink ran out in the telex machine, and the offeror did not
make it known to the offeree it would have similar consequences.

Lord Denning used an example to explain this law.

If an offeror shouts out an offer to someone on the other side of the
river , and he accepts it, he has to shout back to let know the offeror
that he accepted the offer. If his acceptance gets interrupted by any
means, a contract will not result. He has to shout back again loud
and clear enough for the offeror to hear his acceptance for a
contract to be formed.

This case clearly explains that in the case of instantaneous

communication methods used for acceptance, the offeror should be
notified about the acceptance. The contract will not be complete if
the offeror didn’t hear the acceptance. This will only be the case if
the offeree knew that the offeror didn’t hear the acceptance. If the
offeror did not let know the offeree that he had not received the
acceptance, then a case will be formed.

Can the postal rule be applied for acceptance made via e-

mail

E-mail is considered to be an un-instantaneous communication

mode. When an e-mail is sent, the recipient may not receive it
immediately due to time delays caused by ISP’s, network failures
etc. if an e-mail is sent on a Friday evening and the intended
recipient leaves the office for lunch and doesn’t return until Monday
morning, then the arising situation is similar to communication via
the post.

In some cases late delivery, hacking, network failure, wrong address

might delay or prevent an email from being received by the
intended recipient. In this case the law suggest that the risk of non
delivery should lie with the offeror, making it similar to the postal
situation. Also delays which are related to telex communication can
also cause delays in e-mails. There for there isn’t a globally
accepted rule that can be applied for all situations arising from
communication via e-mail. What law suggest is that a judgement
should be made upon identifying the intentions of the concerning
parties, identifying the context, good business practice and in a few
situations where the risk should liei.

References
i
http://www.jiclt.com/index.php/JICLT/article/viewFile/33/20

Bibliography

• McIntyre, E 2005. Business Law. 2nd Edition, Pearson education

• Adams, A 2006. Law for business students, Pearson education
• Beale, H 2002. Contract Law. Hart publishing
• Richards, P 2006. 7th Edition. Pearson education