Acceptance by post

A requirement of communication will not, however, answer all problems. In the modern world communication can take many forms: face to face conversations, telephone, letters, faxes, or email. In some of these, there will be a delay between the sending of an acceptance and its coming to the attention of the offeror. The law of contract has to have rules, therefore, to make clear what is meant by ‘communication’. The simplest rule would be to say that no communication is effective until it is received and understood by the person to whom it is addressed. This is in effect the rule that applies to offers, though as we shall see there are some cases which suggest that it may be possible to accept an offer of which you are unaware. These cases are of dubious authority, however, and can only possibly apply in very restricted circumstances. In any case, they simply suggest that in some situations, communication of an offer may not be necessary. Where communication of the offer is required, which is the case in virtually all situations, it is safe to say that communication means that the person to whom the offer is addressed is aware of it. Why should the position be any different as regards acceptances?

The problem first arose in relation to the post, where the delay is likely to be longest. Generally speaking, there will be a delay of at least 12 to 18 hours between the sending of an acceptance by post, and its receipt by the addressee. Does the sender of the acceptance have to wait until it is certain that the letter has arrived before being sure that a contract has been made? The issue was considered in Adams v Lindsell.

The defendants sent a letter to the plaintiffs offering wool for sale, and asking for a reply ‘in course of post’. The letter was misdirected by the defendants, and arrived later than would normally have been the case. The plaintiffs replied at once accepting, but the defendants, having decided that because of the delay the plaintiffs were not going to accept, had already sold the wool elsewhere. The plaintiffs sued for breach of contract. The court decided that to require a posted acceptance to arrive at its destination before it could be effective would be impractical and inefficient. The acceptor would not be able to take any action on the contract until it had been confirmed that the acceptance had arrived. The court felt that this might result in each side waiting for confirmation of receipt of the last communication ad infinitum. This would not promote business efficacy. It would be much better if, as soon as the letter was posted, the acceptor could proceed on the basis that a contract had been made, and take action accordingly. The court, in coming to this conclusion, was thus giving the practicalities of doing business priority over the question of whether at the time the contract was formed, the parties were in agreement. It was quite possible that by the time the letter of acceptance was posted, the offeror had had a change of mind and sent a withdrawal of the offer, or made a contract with someone else (as happened in Adams v Lindsell itself). Nevertheless, because in the court’s view the conduct of business would in general be better served by giving the offeree certainty in this situation, the postal rule was established.

At times the justification of the postal rule has been argued to be based on agency that is, that the Post Office was acting as agent for the offeror in receiving the acceptance from the offeree. But this analysis was strongly criticised in Henthom v Fraser. The Post Office is more obviously acting as agent for the offeree rather than the offeror, and in any case, if it is acting as agent at all, it would be more accurate to describe it as agent for the physical transfer of the acceptance letter, rather than the communication of its contents.

Gardner, adopting a ‘critical legal studies’ approach, has suggested that the real reasons for the way in which the postal rule developed are to be found in enthusiasm for the newly established ‘penny post’ (which began in 1840). He also suggests that the cases on the topic at the end of the late 19th century should be looked at in the context of the widespread ‘share offers’ which were being made at the time. The courts applied the postal rules to stop people escaping from what they felt might be ‘bad bargains’ for the purchase of shares. Neither of these explanations, however, can deal with the original statement of the rule in 1818, in Adams v Lindsell, which was 22 years before the introduction of the penny post, and 60 years before the ‘share offer’ cases. The arguments based around pragmatism and business efficiency remain the most convincing explanations for the rule’s adoption.

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