The Postal Rule - Contract Law

In this lesson, what we're going to do is talk about the method of communication when it comes to an acceptance of an offer in contract law. And we're going to begin by focusing on this idea of the postal rule, which is something of an archaic and potentially not that useful use of the Royal Mail these days, especially given the fact that contracts are formed in far more electronic and far more instantaneous methods. But the postal rule was very, very important for a very long time and was justified on a very interesting basis. So we're going to examine essentially the first rule in relation to the actualizing of an acceptance of an offer. Because one of the things that we're going to learn and that we're going to look at in future lessons is this idea that in order for the acceptance of an offer to be valid and for therefore an agreement to be valid and therefore for a contract to be valid, assuming the other factors like consideration are also present, you have to be able to communicate the acceptance of that offer to the offeror, which seems to be something of a simple thing to understand and relatively obvious. But there are examples and cases where people have tried to argue that silence, for example, and no returning communication of acceptance could still validate the existence of an offer, or an acceptance should I say. All of these things are going to be important to examine, especially when we look at the postal rule. Essentially when we're asking the question of when an acceptance of an offer is sufficient for a contract to then be in operation, we have to think about one of the earliest principles, which is this idea of the postal rule. It sought to regulate this area of the law. Now ultimately what the postal rule does is provide an exception to the view that in order for an offer to be accepted it must be communicated to the offeror. So in today's understanding of contract law and in the original understanding of contract law from the sort of early beginnings, there was this view that if you are going to accept an offer and for that acceptance to be valid and for that acceptance to be actualized and therefore for a contract to start and to begin, the question is the offeror has to have been communicated that the offer that has been accepted. Now what the postal rule does is provide something of an exception to this view, because under the postal rule there is not this need for the communication to the offeror. The offeror does not need to know that an offer has been accepted for a contract to exist. The effectiveness of the acceptance will be determined on the basis of whether or not it has been made clear to the offeror, but what the postal rule does is provide an exception to this principle. What this essentially does is tell us that when it comes to postal acceptances, so when it comes to an agreement that is formed via the post, the acceptance will be valid as soon as it has been posted, not as soon as it has been received. So it could be the case, and it was the case very many years ago in the 1800s for example, that post was a lot slower than it is today and that it may take multiple days for a letter to arrive, but as long as that has been posted, as soon as that post has been has gone into the letterbox and has been put into the the Royal Mail system, then it has been accepted and the acceptance is valid. The authority of this, the leading authority, is the case of Adams and Lindsell from 1818, so a very very very old case, and this is why some textbooks spend quite a lot of time talking about the postal rule and talking about a lot of the implications of the postal rule. Other textbooks don't, because of the fact that in today's modern contractual understanding and contractual context, the postal rule isn't as important as it used to be. But we'll talk about it in this lesson and if you want me to go into more detail in future lessons, then just let me know. So the case of Adams and Lindsell from 1818 was a case involving the following facts. So the defendant in this case had sent a letter to the claimant. The claimant, the letter sorry, had contained an offer for the sale of wool. Now the claimant received the letter on the 5th of September and would respond with an acceptance on the same day. So the offer of wool was sent, it was received on the 5th of September, and then acceptance of this offer was sent back on the 5th of September, that very same day. But of course it would take a few days for it to arrive, given the fact we're in 1818. It would take four days specifically for the letter to arrive back to the defendant, at which point the defendant had thought, well this person clearly doesn't want them, the wool, or I found another person who I would rather sell the wool to, and so had already sold the wool to a third party. So the letter was sent back, it was sent on the 5th of September, it was received by the defendant on the 9th of September, but on the 7th of September, a couple of days prior, the wool had already been sold to a third party. So we have a bit of an issue here. The claimant was, as you can imagine, quite a bit quite annoyed at the fact that they had sold his wool, that he had accepted, and he accepted this wool on the 5th of September, owing to the postal wool, which we'll get to in a second, and so sued for breach of contract. The argument was, the defendant argued, that owing to the fact that no acceptance was communicated, there was no contract, and so therefore when the wool was sold on the 7th, there was no contract, because he only received communication of acceptance on the 9th, which was a few days later. And this would traditionally fit into the ordinary meaning of the basic rules of contract, that an acceptance has to be communicated back to the offeror, but the postal rule applied in this situation. In fact, it was established in this situation. The defendant was in breach for selling the wool to the third party, and this is because acceptance of the contract was valid as soon as the acceptance was posted, despite the fact it hadn't been communicated to the defendant at all. So if we go back to the original facts of the case, the acceptance of the offer was valid on the 5th of September, the day the letter was received, because it was the day the letter of acceptance was sent. And so therefore, even though it took four days for the letter to arrive back into the hands of the claimant, of the defendant sorry, on the 9th, it was already accepted. And so as a result of which, there was a contract, which was then breached by the fact that the defendant sold the wool on the 7th of September to a third party. And so this established the principle of the postal rule. And so while one of the most important elements of contract law relates to acceptance of contract, the postal rule appears to be something of an outdated principle. This is why I'm not going to spend too much time on it, and ultimately we're just going to begin and end with the postal rule in this video. But if you want me to go into more detail, as I've said, then you then feel free to comment down below. Of course, there are lots of reasons why the postal rule isn't as important in today's modern contractual context. Firstly, the Royal Mail makes deliveries far quicker, so it doesn't often take four days for a letter to arrive anymore, it often will take one or two. Nice! This means that this idea of this big time gap in which the acceptance is valid but is not communicated is a lot smaller in most cases and most circumstances, so this lowers the risk of being able to sell the property to a third party having not known about the communication of the acceptance. But the more important reason why the postal rule isn't as valid is because the vast majority of contracts these days are probably not made by post, by the Royal Mail, by letter. They're performed often by electronic communication, which is potentially instantaneous. So if I'm making a contract these days, I'll often do so, if I ever make a contract these days, I'll do so by email, for example, or even by text. These are things which are instantaneous, potentially instantaneous, and so as a result of which we have to think about a whole new set of laws and principles of law relating to how we apply acceptance and communication of acceptance in circumstances where we have digital communication of acceptance rather than postal communication of acceptance. So one of the principles which is established by the postal rule is this idea that it must be used reasonably. So one of the things that is important to note is that if you're using the postal rule or even weaponizing the postal rule against a particular party in a contract, then it would be invalid. So if the offeree, for example, knows that there might be a significant delay in receiving of post, then it may be argued that the use of the postal rule would be unreasonable and they would be using it for unreasonable means and therefore not valid. So for example, if there was a contract in place, at least an offer that was made by post, and the offeree, the person who is supposed to accept this offer, isn't a particularly nice individual, knows that there's going to be a postal strike the next day that's going to last two weeks, for example, and they make sure that they delay the posting of their letter of acceptance until the day of the postal strike so that there's going to be a massive long delay, then it doesn't seem to be particularly reasonable to apply the postal rule in this regard, because in that case they would have deliberately done so in this way and it would have led to a situation where a valid acceptance and therefore a valid contract may exist for up to potentially weeks without the offeror knowing about it. A good indication of this is the case of Holwell Securities and Hughes from 1974. This case establishes the principle that the postal rule, in fact, can actually be disapplied in certain circumstances and it can be disapplied in certain circumstances, one of which is a circumstance where the offeror makes it very explicit that they want to disapply the postal rule. So, for example, in this case an offer was made between the defendants and the claimant to purchase some land and clause two of this offer included a provision in which stated that the offer must be exercisable by notice in writing. Now, the potential purchasers would send acceptance by writing, but this would never actually arrive, and so the arguments that were had here was, by the claimants at least, that there was an acceptance and therefore a valid contract owing to this idea of the postal rule, but it was held that it was not valid owing to the fact that the postal rule had been excluded by clause two of the offer. So, if the offer explicitly says, I want you to return, if you accept these terms or you accept this contract, you need to accept this contract in this form by this date, for example, and this form excludes the postal rule, then the postal rule will be disapplied. So, if I make an offer to somebody for a contract and I say in the offer that the acceptance of this offer must be done by email or any other kind of digital electronic communication using these different ways and methods of communicating me, and I instead receive a letter in which the individual is trying to utilise the postal rule, that may and almost very likely will disapply the postal rule because the offer itself made it very clear that there are specific ways in which the acceptance of the offer ought to be communicated.