Essay question

Compare and contrast the approach taken by the courts when determining the acceptance of an offer through the post and using instantaneous forms of communication. Why were opposing rules established and what impact does this have for the parties?

Answer:

•   Note that the 'traditional' requirement of communication of acceptance is that it is effective upon receipt. However, this may not be appropriate when negotiating through the post - there exists the possibility that such communication may be lost, undelivered, or delayed through postal strikes or public holidays.

•   The general rule established with the post (and to be effective it must be a valid means of acceptance) is that acceptance is valid on posting rather than when received - Adams v Lindsell.

•   In reaching this decision, the court in Adams hypothesised that if the offeror was not bound under a contract until the acceptance by the offeree had been received, then the offeree should not be bound until he received notification that the offeror had received his acceptance and assented to it. This system could not enable businesses to carry out their operations with any certainty and consequently the decision was based on business efficacy.

•   Further note that even if the letter was delayed, as long as this is not the fault of the offeree, there was still valid acceptance (The Household Fire and Carriage Accident Insurance Company v Grant).

•   However, the postal rule is not effective in situations where the express terms of the contract state that the acceptance must be received and in writing (Holwell Securities v Hughes) or where to use the postal rule would ‘produce manifest inconvenience and absurdity.’

•   As the question asks for a comparison of the postal rule and its ‘business efficacy’ decision, with that involving instantaneous forms of communication, Entores v Miles Far East Corporation must be considered.

The postal rule remains good law, but the parties are in a position to remove its effect given the ubiquitous instantaneous forms of communication available.