The Question about Validity of Postal Rule

The postal rule remains one of the most controversial and confusing part of modern contract law as it diverts from the general rule of acceptance. Through history this special exception remains unchanged even after about 200 years after its introduction into the contract law. It has to be noted that nearly two centuries has passed since its establishment, and whether this rule shall be applied as the same as it is or it should be modified or abolished remains for further discussion. As time changes, the question about validity of postal rule arises. First, it must be known what is the exact reason and purposes of establishing this postal rule. Why it was introduced at the first place and what are the impacts? Of course, even the application of postal rule might be different and can be distinguished from the year of 1818 and 2010. It is no doubt that society and technology has changed and resistance to change this postal rule might create irrelevant rules to be applied today and may cause problems in judicial decisions. Better ways have to be made in order to create more appropriate law in terms of postal rule, whether without not so amendment in it or totally creating a new law that is in line with modern era.

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As stated earlier, the reason behind the creation of postal shall be discussed first. In Adams v Lindsell [1] , the defendants wrote to plaintiff offering to sell their wool and require the plaintiff to reply the acceptance in the method of post. Unfortunately, the offer letter was misdirected and reached to the plaintiff late. Due to this, the defendants did not receive the acceptance letter as planned and decided to sell the wool stock to a third person. The court held that the acceptance has been completed once it is posted although here, the defendants actually did not receive the letter before they sold it to someone else. So there is a contract and therefore the defendant is liable in breach of contract. Viewing this in modern time would seem to be illogical because it contradicts with the general rule of acceptance. It would be more appropriate and sense if we were back to 1818, that is when was this case decided. During this time, it was very a good method to send and receive contract agreements via post as everyone lives far apart from each other. Furthermore, advancement in technology was yet in early blooms and progress. It might be nothing more perfect method than post to communicate during that time. Due to this, agreements or contracts via post became normal and thus creating some legal problems. Another notable case regarding postal rule is Household Fire and Carriage Accident Insurance Co v Grant [2] , here the defendant made an offer to buy shares in a company. He sent his letter of offer and the company sent their acceptance letter but never reached the defendant. Moreover, the company allocated some of the shares for him. Held that contract existed as in earlier decision of Adams v Lindsell. It has to be clear that postal rule was established to ease the transaction of contract in 1818 and not for modern era like now. The court showed and strengthens this rule in more recent case. In Brinkibon Ltd v Stahag Stahl and Stahlwarenhandelsgesellschaft GmbH [3] , Brikinbon was a London based company bought steel from Stahag which was from Austria. Brikinbon accepted the offer by posting the acceptance via telex to Vienna. Unfortunately the contract failed and Brikinbon issued writ against Stahag. Although the main issue here was where the contract formed as it was held that contract was formed in Vienna instead of London and meaning to say that acceptance is effective when it is transferred to Post Office.

Some rules and theory can be observed in Adams v Lindsell, firstly that the rule prevents the offeree from replying the offer via post thus invalidate the acceptance by rejecting it with faster means of communication. Secondly, the offeree would have not known for sure whether they had entered into contract or not. It can be seen that in most of the decision regarding postal rule, one of the parties may suffer loss or detrimental effects and it might be quite unfair to the party that suffers the loss. There are reasons that the court still reluctant to change the special rule in postal rule. In postal rule, the offeror actually has the choice whether he want to be bound with the rule or not. This is proven when the offeror can expressly state in their offer that no contract will be created unless they do receive the letter of acceptance. Otherwise if not stated clearly, the offeror is understood and expected to be bound with the rule and all its consequences in postal rule. This point made a good basis for the court not to change the law in postal rule as offeror is properly acknowledged and assumed to have a general idea about this method. The other reason might be that the ease it provides to the offeree. Let’s say that postal rule follows the general rule in acceptance, how would the offeree know when his acceptance was received by the other party? Moreover fraud may result if postal acceptance is only valid when it is received by the offeror. The court has made it clear that postal rule is only applied when it is reasonable to use it. If an offer was made via telephone then the offeree must reply his acceptance with either the same method or a faster one. However the real discretion actually is up to the courts, in Henthorn v Fraser [4] , held that it was reasonable to accept an offer made orally via post because the parties live some distance away from each other.

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Of course this postal rule has been subject to a lot of criticism from the commentators. If a postal acceptance has been lost in the post, the offeror may believe that since no reply received, the offeree is not interested with his offer. This may lead to the offeror believing that there is no contract and thus no breach of contract and will maybe offer it to third party. A further criticism was made by Bramwell LJ in Household Fire and Carriage Accident Insurance Co. Ltd Grant [5] , was that operation of such rule is arbitrary since it does not apply to non-postal acceptances and little conscious thought may have been given to the decision to communicate the acceptance using one form of communication rather than another. [6] Furthermore, the offeror may seek protection by using the postal rule as he can stipulate the condition to receive the acceptance by any other means. This is what the offeror has achieved in Holwell Securities Ltd. v Hughes [7] , the defendant granted to sell a property in Wembley. In the offer post there is a clause requiring that acceptance must be received in writing within six month. The plaintiff accepted the offer and sent their acceptance within the required time but the letter failed to arrive the defendant. The Court of Appeal held that due there is a clause in the offer so it was sufficient to oust the postal rule. It might be straightforward that if the offeror wants to avoid the postal rule then he just needs to emphasize it in his offer. The other criticism is that is it possible to retract a postal acceptance before it reaches the offeror? Is it possible if the offeree changes his mind after posting the acceptance and decides to retract it by orally such as via telephone or directly?. There is no English case authority regarding this and there has been much academic discussion on this. One of these, it is not possible to retract a postal acceptance. If postal rule is a compulsory ‘rule’, then acceptance shall be valid once it is posted. No more further question on this as the postal acceptance has become valid and there will be no way to retract this. The other view is it is possible to overtake a postal acceptance where the offeror suffers no loss. As the offeror might accept faster means whether it is an acceptance or a retraction and this makes the offeror suffers no disadvantages.

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The postal rule might be appropriate to be used with posts but can it be used in instantaneous methods of communication? No doubt that posts are a method of non-instantaneous method but methods such as telephones, telex, fax and emails are instantaneous. So, the acceptance will be treated as both parties are present and the words of acceptance must be clearly heard by the offeror. In Entores Ltd v Miles Far East Corporation [8] , Entores Company sent an offer to Dutch based company offering to purchase copper cathodes by telex. The company replied their acceptance via telex. Unfortunately the contract was not fulfilled by the defendant and Entores sued the company for damages. The court held that the contract was formed in England where the acceptance was received. The telex message took effect where it was received. The court confirmed this in a more recent case JSC Zestafoni Nikoladze Ferroalloy Plant v Ronly Holdings Ltd [9] which dealt with acceptance by fax. Lord Denning also summarized great principles to be applied to communication of acceptance by an instantaneous method.

A great way to see and compare whether postal rule still can be used nowadays is by its application in electronic mail system. First it should be known how this e-mail system works. A user first will draft his email and sends it to another user via a server. The moment emails are actually sent is when the user clicks the send button. After this the email might travel across the network and will finally reach the recipient. There are some approaches to the communication of email acceptance. First is the postal analogy, the messages sent in emails can be argued are same with postal acceptances. Email is actually sent when the user clicked on the send button. If postal rule is applied, then the acceptance would be binding the time the message was sent. Another approach is by using the receipt rule or an actual communication. This is due to that in email, the sender will know if his email is sent or not. This is approved in a Singaporean case, Chwee Kin Keong v Digilandmall.com Pte Ltd [10] . Here the respondent is a company involved in business of selling Information Technology (IT) products over internet and inadvertently placed a wrong price for an item. The plaintiff placed orders for the item before the company realized their mistakes. Later when the defendant learnt the error, they removed the advertisement and informed to all whom placed the order about their error and thus rendering all the transactions. Held, using receipt rule the court dismissed the plaintiff’s claim. Unfortunately either receipt rule does not escape from criticisms. As one of these is when the actual time this rule applies? Is it when it received by the computer, server or only when it is read?

There are some advantages of email and make it different is because of its instantaneous operation. Emails arrive to the recipient indirectly and require distinct stages in the process, unlike fax and telex which sent directly. Here the sender actually has no control in the process and this makes the postal rule applicable. Although it proceed in steps towards its destination but it’s still instantaneous as the process occur in no more than couple of minutes. Whereas post requires considerable amount of time to reach the other party and they should bear the risks if anything goes wrong. Telex and email might seem to be similar if not inspected closely.