The decision of distance contracts has been one of the major issues that arise within contract law. In which questions had risen in regards to the application of the postal rule and whether it should continue. A strong debate has been frequent lately in regards to its relevance, especially in a time where postal systems aren’t as reliable as the once were, in which agreements are more likely to be discussed throughout electronic means. This paper will discuss two main arguments.
The first one conversing justification of the postal acceptance rule, whilst the other analyses the application of the postal acceptance rule throughout electronic communications such as email or fax. II What is the postal acceptance rule? It is the rule (stated by the High Court in a case in 1957 which is still good law) that a contractual offer may be accepted by post and will be deemed accepted at the time the letter is sent – not when it is proven received – if it was contemplated that post was a means by which the offer might be accepted.
In which a contractual offer is an agreement that contains promises between two or more parties with intentions of constructing certain legal rights and obligations, which is enforceable within a court of law. This can be a written or orally offered. The Postal Acceptance rule is a rule that has been embedded to decide upon the moment of contract formation by post. Which was found difficult to disclose when communicating acceptance or agreement terms by post, where a precise time of the acceptance was unsure. Due to the delay in the postal communication, the parties could not simultaneously be knowledgeable of an acceptance.
This then raised a frequent amount of cases involving this type of arguments, which lead to the formation of the rule. Which was first seen within the court of Adams v Lindsell ([1818] 1 B &Ald, 681) III Justification of The Rule When the Postal acceptance rule was established with the Adams v Lindsell case. It was stated that “Where the circumstances are such that it must have been wihin 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, the acceptance is complete as soon as it is posted”.
A statement of the postal acceptance rule is found in Henthorn v Fraser [1892] discusses that, when the rule applies, acceptance takes place at the time the letter is posted, and not at the later time when the letter is received. Clearly the effect of the rule is that communication of acceptance is not required in cases where the rule applies. A universal validation for the postal acceptance rule has not been found to be accepted.
It was suggested that the postal rule applies because the post office is the common ground for both the offered and the person to offer and therefore receives the acceptance letter as the middle man for the person who has offered. This explanation was rejected in Henthorn v Fraser. Others suggest the rule is explained by the argument that those who offer, in posting the letter has done all they can possibly do to communicate to the destination host as communication can only take place when the letter is received and that the letter is, after posting, beyond their control.
Some say the best explanation is that the common law has recognised that when letters are used one of the parties inevitably must accept the risk involved. If acceptance occurs when the letter is posted the risk is that the seller does something that amounts to a glitch in the contract although they are not aware of the contract coming into effect. For example a vendor sells goods that are the subject of an offer to a third party, not knowing that the offer has already been accepted by letter or telegram that the person who was offered has not yet received, as occurred in Stevenson Jacques v McLean.
If the acceptance occurs when the letter is received, the person who offered is at risk because he has no way of knowing that the letter has arrived and therefore does not know whether a contract has seen by the other party. As both risks cannot be avoided a choice has been made that the person who offered accept the risk. This is an example of when the postal rule comes into play. And although postal communication is ageing, the postal rule can still be useful within the other sources of communication. IV Application of the postal rule
Opinions are divided when it comes to the application of the acceptance rule to email. With relevant legislation regulating electronic transactions is unclear on the issue as well. Throughout some old English cases, it states that the postal acceptance rule should not apply when almost instantaneous forms of communication are used. Fax and telex can be regarded as a form of communication. At in more recent times with the increase in technology email. The argument is, if an email is accepted almost instantaneously should this not be an exception to the rule?
The postal rule being an exception to the general rule of contract law, as in common law acceptance takes place when communicated. The posting rule differs, and proposes that acceptance takes effect when a letter is posted. Well if an email is accepted as almost instantaneous, the argument is that rule does not apply. Which questions the fact that if a majority of communications is email based, or another source of instant technology, is the postal acceptance necessary. Despite operating instantaneously, email does not go directly to its destination.
This differs from other instantaneous forms of communication such as fax or telex. Due to this fact, it cannot be said that the sender has any control over the message or the message is actually reaching its intended destination host, or in some cases, any way of actually knowing that it ever reached the destination host at all, which has strikingly enormous similarities to normal mail, in fact is just like it. Therefore the postal rule should be applied in this case. However, although it travels in gradual steps toward its destination host.
When used correctly and working efficiently, an email occurs almost instantaneously. This therefore differs from the post method of delivery. As a result it cannot be said that there would be a delay to either party during the transaction of a contract. Which eliminates the risk of time affecting a bearing contract. In this case the postal rule does not apply. The rule also applies to telegrams, given that the telegram is similar to letters and given to the destination host through the post office. However, the courts have been profound to restrict the glitch in the rule.
Federal court judge on 20th of may 2009 in the case Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA, expressed there view on email in relation to the rule. Stating, “email is often, but not invariably, a form of near instantaneous communication. I consider that there are analogies to be drawn with the way the law developed in relation to telex communications in an earlier era where what I have termed “the instantaneous communication rule” expressing the two sides involved with the postal rule and email communication regarding contracts.
Though, it does not apply to telephone or telex communications, where contracts were seen to not apply to the postal rule of acceptance, as seen in cases such as Entores v Miles Far East Corporation and Brinkibon Ltd v Stahag Stahl GmbH. A fax being a form of instantaneous communication, the acceptance rule does it apply in which can be seen in the following cases, Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd, and Eastern Power Ltd v Azienda Communale Energia & Ambiente. V Conclusion
The constant issue of whether the Postal acceptance rule should be applied in the present day was presented within the given piece. Which expresses that the need of the acceptance rule in the age of post was necessary. However given new methods of communications such as email, arguments are left open in regards to its application. It has been discussed that in respect to instantaneous sources of communication such as telephone telex or fax, when a binding contract or agreement is presented the postal rule should not be applied.
Given that, an email can be considered as both an instantaneous, and a non-instantaneous method of communication. Which leaves our argument. In my final conclusion an Email cannot be considered as an instantaneous method of communication due to delays and processes between sending and receiving which therefore the postal rule should be applied. Having observed the basic development of the postal rule and applying the reasoning above, the valid conclusion would be that e-mail acceptances do benefit from the postal rule, and email withholds the need of application of the postal acceptance rule
VI Bibliography Texts/Journals/Articles/Websites BLO1105 Business Law, (2nd edn; Pearsons: Freser and Gibson, 2012), LEGAL IT, ‘Does the postal acceptance rule apply to email? ’, Legal it [web page] (2012)
