The postal acceptance rule is now out of step with the electronic age and no longer serves

a useful purpose in the law relating to the formation of contracts. Discuss.

Introduction
A contract is an important part of everyday life and has an essential role in economical
transactions. The two principal elements of a contract, offer and acceptance, have to be
properly communicated.

However the way people communicate with each other has drastically changed over the last
century, but some principles and theories of the English law system that are in use are centuries
old. One such principle is the postal rule of acceptance. Over the course of years since the rule
was introduced in the early 19 th century, technology and ways of communication have change.
Nowadays offer and acceptance is communicated more and more electronically besides the
traditional way of written letters.

Binding contracts require definite offer and corresponding, unconditional acceptance. The
general rule is that, in bilateral contracts, the fact of acceptance must be communicated such
that the offeror is aware that his offer has been accepted. Needless to say, the rule has always
applied to oral communication, but an exception in the form of the posting rule was needed to
cover situations where an inevitable time delay would be experienced between an offeree
communicating acceptance and the offeror becoming aware that the offer has been accepted,
such as when letter post is used.

The Postal Rule of Acceptance

Until the postal rule was introduced, the general rule of acceptance was that an acceptance was
only effective when it was actually communicated to the offeror. Meaning that the acceptance
by post had to be brought to his attention. This however was changed when it was introduced
in 1818 as an conclusion of the case Adams v Lindsell. In Adams v Lindsell, 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.

At the time this decision was made, communication between two parties was slow. Letters took
days to weeks to be delivered with higher possibilities as today to be lost, delayed or damaged
in the process. The reason behind this decision was that it was convenient to reduce the risk
and the court said:

...that if that were so, no contract could ever be completed by the post. For if the defendants
were not bound by their offer when accepted by the plaintiffs till the answer was received, then
the plaintiffs ought not to be bound till after they had received the notification that the
defendants had received their answer and assented to it. And so it might go on ad infinitum.
The defendants must be considered in law as making, during every instant of the time their
letter was travelling, the same identical offer to the plaintiffs; and then the contract is
completed by the acceptance of it by the latter. Then as to the delay in notifying the
acceptance, that arises entirely from the mistake of the defendants, and it therefore must be
taken as against them, that the plaintiffs' answer was received in course of post.

A limitation to this rule was made by Lord Herschell in the Case Henthorn v Fraser, in which he
stated that the rule only applies if communicating the acceptance by letter is appointed as it or
the ordinary way to do so. It was later decided in Dunlop v Higgins, that the offeror is bound to
his offer even if the acceptance never arrives. Thus moving the risk to the offeror who chose the
post as a mean of communication in formation of a contract and therefore bearing the risks
stated above, which could be described as a "risk to receive".

Contradictory to this was the view of Scottish Law by Lord Shand in the case Mason v Benhard
Coal Co. Lord Shand had the opinion, that the offeree had to take steps to check if the
acceptance actually reach the offeror. This would however move again the risk to the offeree
and make the decision in Adams v Lindsell negligible. Therefore English law sticks to the
position as the contract is concluded when the letter of acceptance is posted. In case the
acceptance never arrives, the rule does not apply if the offeree uses a wrong address. This
reducing the risk for the offeror which would be caused by carelessness of the offeree. The
postal rule also does not apply to other contractual letters like revocations, which have to be
actually delivered.

Summarized, the rules of contracts by post include the following:

1. An offer made by post is not effective until received by the offeree.

2. Acceptance is effective as soon as it is posted.
3. For revocation to be effective, it must be received by the offeree before they post their
letter of acceptance.

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, 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 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. 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.

In terms of practically applying this to the modern context, it would directly relate to any
negotiations that were communicated by email, for example. If a negotiation was commenced
by email, then it would be reasonable to assume that the acceptance would be replied by
email. Modern technology would appear to not allow for a reasonable comprehension of the
use of post, unless some form of the negotiation was conducted by post, or the offeror
specifically requested the acceptance be communicated by post. While a great deal of
communication still takes place by post in modern times, it would appear that the need for the
use of post has decreased over the course of the last century, when the Postal rule was
introduced, due to the increase in alternative (and instantaneous) means of communication
available to modern individuals and businesses. This means that the reasonableness factor may
prevent the Postal rule from taking effect in many contractual negotiations, given that it may
not be reasonable (or necessary) to use the post in many circumstances.
Given the advances in technology, it is also important to have some idea as to the time of
acceptance guidelines that would now apply. Under the Postal rules, it would be reasonable to
assume that a posted letter would arrive at the offeror’s premises during a reasonable hour, if
not business hours. However, given that technology such as email and faxes can be accessed 24
hours a day, 7 days a week, then it is important to understand what the law considers as a
‘reasonable time’ for such a communication to reach the offeror. If, for example, a person was
to send an email in order to communicate and acceptance, then it would be reasonable to
assume that a person monitors their business email during business hours. This could lead to a
delay in the offeror reading the acceptance until the following business day, if it was sent after
hours. This would turn an instantaneous communic/ation into a non-instantaneous form,
despite all the best efforts of the offeree. The leading authority on this principle is Brinkibon Ltd
v Stahag-Stahl und Stahlwarenhandelsgesellschaft mbH GmbH,[25] and was further enforced by
certain elements of The Brimnes[26] case. An offeree must be mindful of such possibilities, and
must not take advantage of the highly instantaneous forms of communication that exist today,
as they can easily cause delays and problems in the event of an acceptance not being
communicated to the offeror properly.