BetterLawNotes-5 (2)

CONTRACT LAW

Where the post, a non-instantaneous form of communication, is used to communicate acceptance of an offer, the general rule is that acceptance is deemed to be communicated when posted.

Adams v Lindsell (1818) 1 B & A 681

On 2 September the Ds wrote to the Cs who carried on business in Bromsgrove, Worcestershire offering to sell some wool ‘receiving your answer in course of post’. However, the Ds misdirected the letter to Bromsgrove, Leicestershire and as a result the letter was not received by the Cs until 5 September. The Cs replied accepting the offer on the same day, their letter reaching the Ds on 9 September. The Ds could normally have expected to receive a reply by return of post by 7 September and having heard nothing from the Cs, the Ds sold the wool to T on 8 September. The Cs brought an action against the Ds for breach of contract. The Court of King’s Bench held that the Ds were liable for their failure to deliver the wool to the Cs. Given that the delay in notification of the acceptance arose entirely due to the fault of the Ds, the Cs’ answer had to be regarded as having been received in the course of post.

When Does the Postal Rule Apply?

It is important to grasp at the outset/bear in mind that the postal rule does not automatically apply whenever the offeree uses the post for communicating an acceptance. Rather, it applies ‘[w]here the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer . . .’1

1 Henthorn v Fraser [1892] 2 Ch 27, 33 (Lord Herschell).

Henthorn v Fraser [1892] 2 Ch 27 (CA)

Henthorn, who lived in Birkenhead, called at the offices of a building society in Liverpool. The society’s secretary handed Henthorn a written offer for the sale to Henthorn of certain houses in Birkenhead for £750. The offer was expressed to be open for 14 days. The following morning, a third party offered to buy the houses for £760. The society accepted this offer subject to a right to withdraw if the society was unable to revoke its offer to Henthorn. At mid-day that day, the secretary posted a letter to Henthorn revoking the previous day’s offer. Later that afternoon in Birkenhead, Henthorn’s solicitor posted a letter accepting the Society’s offer. Henthorn received the revocation letter later the same evening. Subsequently, Henthorn’s acceptance letter was delivered at the Society’s offices. The Court of Appeal held that a binding contract between Henthorn and the society for the sale of the houses was formed when Henthorn’s acceptance letter was posted in Birkenhead.

‘I think in the present case an authority to accept by post must be implied. Although the Plaintiff received the offer at the Defendants’ office in Liverpool, he resided in another town, and it must have been in contemplation that he would take the offer, which by its terms was to remain open for some days, with him to his place of residence, and those who made the offer must have known that it would be according to the ordinary usages of mankind that if he accepted it he should communicate his acceptance by means of the post.’ (Lord Herschell at 33).

Note that where the court concludes that the parties would not have contemplated the use of the post to communicate acceptance the general rule as to notification will apply: acceptance will not be effective until actually communicated. As such, the acceptance is not void and might be effective to bring a contract into being, but the offer may have lapsed or been withdrawn by the time the acceptance is actually communicated. 1

See, eg, Quenerduaine v Cole (1883) 32 WR 185, discussed below.

Application of the Postal Rule: the Letter of Acceptance Never Arrives

The effect of the postal rule is that communication of the acceptance is deemed to occur at the moment when the acceptance is posted. It follows from this that the contract comes into being at the moment the acceptance is posted. This follows even though the acceptance may subsequently arrive late or not at all.

Household Fire & Carriage Accident Insurance Co Ltd v Grant (1879) 4 Ex D 216

D applied for shares in a company, C. The shares were duly allotted to D and a letter containing a notice of allotment was posted to him. The letter was never received by D. The Court of Appeal held that D was a shareholder in C.

Application of the Postal Rule: the Acceptance is Wrongly Addressed

On the other hand, the postal rule will not apply where the acceptance is wrongly addressed by the offeree.

Korbetis v Transgrain Shipping BV [2005] EWHC 1345 (QB)

At issue was whether an arbitrator had been validly appointed under a charterparty. Following a dispute as to demurrage, the charterers sent a fax to the owners proposing that the owners choose one of three named individuals to act as a single arbitrator. The owners replied by fax agreeing to the appointment of the one of the named individuals but due to an error on the part of the person sending the fax, it was sent to the wrong number and was not received by the charterers. The owners subsequently claimed that the individual named in their fax had been validly appointed because the agreement was concluded the moment that the fax was sent and it was irrelevant that it was sent to the wrong number. Toulson J rejected the argument. He held that the postal rule did not apply where the acceptance was wrongly addressed due to the fault of the offeree. Such an acceptance should be held to take effect, if at all, at the time least favourable to the offeree.

Prescribed Methods of Acceptance

Nor will the postal rule be applicable where the terms of the offer make it clear, whether expressly or by implication, that acceptance must actually be received by the offeror to be effective.

Holwell Securities Ltd v Hughes [1974] 1 WLR 155

Under the terms of a written agreement the defendant had granted the claimant an option to acquire certain property. The agreement stipulated that the option had to be exercised ‘by notice in writing to’ the defendant. The claimant subsequently sent to the defendant a notice by post exercising the option, but the notice never arrived. The Court of Appeal held that the requirement of ‘notice in writing’ was inconsistent with the exercise of the option taking effect on posting, and hence the postal rule had no application on the facts of the case.

The requirement that acceptance be communicated in a particular form may be implied by the form of the offer.

Quenerduaine v Cole (1883) 32 WR 185

S sent a telegram to B offering to sell a cargo of potatoes. B replied by letter accepting the offer. The Court held that there was no contract: the fact of receiving the offer by telegram implied the expectation of a prompt reply and the acceptance by letter was not communicated within a reasonable time.

Note, however, that it does not follow that just because the offer provides a method for communicating acceptance, that the adoption of an alternative means of communication will be ineffective. In other words, just because an offer states that acceptance may take a certain form, it does not necessarily follow that it must adopt that form.

Manchester Diocesan Council of Education v Commercial and General Investments Ltd [1970] 1 WLR 241

C invited offers for a certain property. The invitation stated that that the person whose offer was accepted would be notified by letter sent to the address given in that person’s tender. In its offer D gave its address in Berkeley Street in London. Subsequently, C’s surveyor wrote to D’s surveyor stating that D’s offer had been accepted by C. D later argued there was no contract between the parties as the letter had been sent to its surveyor and not its Berkeley Street address. Buckley J held that the letter from C’s surveyor was an effective communication of C’s acceptance of D’s offer.

‘Where . . . the offeror has prescribed a particular method of acceptance, but not in terms insisting that only acceptance in that mode shall be binding, I am of opinion that acceptance communicated to the offeror by any other mode which is no less advantageous to him will conclude the contract.’ Buckley J at 246.

Scope of the Postal Rule

The postal rule applies to non-instantaneous forms of communication. As such it has been applied to telegrams (although it may be doubted how relevant telegrams continue to be). 1

But note that it only applies to non-instantaneous forms of communication: the postal rule does not apply to instantaneous forms of communication. Thus it has been held to be inapplicable to acceptances sent by telex and fax. 2

Likewise, it seems that the postal rule does not apply to acceptances sent by email or instant messaging.

1 Cowan v O’Connor (1888) 20 QBD 640.


2 See JSC Zestafoni G Nikoladze Ferroalloy Plant v Ronly Holdings Ltd [2004] EWHC 245 (Comm) at [75].

You cannot copy content of this page