Contracts are in anywhere. Contracts = “Intention”, “Agreement” and “Consideration”. The rule of Contracts will establish when offeree is accepted the offeror’s offer. “Agreement” is one important term in Contract. “Agreement” is “Offer” and “Acceptance”. Today our topic is The Postal Acceptance Rule which only applies to “Acceptance”. Hence we focus on “Acceptance” and assume that if “Acceptance” is valid, and the contract will valid too.
The general rule is formed contract acceptance is actually communicated to the offeror. But The Postal Acceptance Rule is an exception of this rule.
Today is the electronic world, communication is not only by postal service also use by electronic transaction. Now we will discuss The Postal Acceptance Rule is its rationale, effect, should it continue to be applied and compare to Electronic Transactions Act (ETA) for determining the timing of acceptance sent by fax and email. Also we will talk about expanding or restricting the types of modern communication methods affected by this rule.
2. History and Background of the Postal Acceptance Rule
The Postal Acceptance Rule is the fifth and the last of the relevant sub-rules affecting communication of acceptance. The Rule maybe summarized in this way
In 19th Century England, there only 2 method of communication between offeror and offeree deal in person or by mail. The courts had to decide the moment of contract formation by this 2 method. If the negotiating parties are deal in person, they do not face the problem of delay and failure of information transmission. If offeree accept the offer to offeror by mail, there will be a substantial delay in delivery of the letter or even totally lost in the course of post. Adams v Lindsell is the case of delay acceptance and The Postal Acceptance Rule was established by this case. In Case we saw that negotiating parties were not sure the precise time of acceptance had been communicated. This created timing of the acceptance problem and led to the formation of rule. Hence the court determined the acceptance is valid when the letter of acceptance is posted.
3. Case of the Postal Acceptance Rule
3.1 Application case of the Postal Acceptance Rule
According to Household Fire & Carriage Accident Insurance Co (Ltd) v Grant, Grant applied by a letter for shares in the Household Fire and Carriage Accident Insurance Company Ltd. The shares were allotted to him and the letter was sent to him at the address given by him. But Grant never received this letter. Later the company went bankrupt, Grant is asking for the outstanding payments. In this case, Grant is offeror, Household Fire and Carriage Accident Insurance Company Ltd is offeree and the offer is buy the shares. By the Postal Acceptance Rule, the acceptance is valid when the letter of acceptance is posted no matter that the offeror is received it or not.
Now the offer is accepted by offeree and offeree posted the acceptance to offeror. Hence Grant is legally bound to pay the outstanding payments. Further to case Dunlop v Higgins, is in same situation, Dunlop send to offer to Higgins. In the communication delay time, Dunlop’s good prices have increased. Higgins has posted the letter of acceptance when he received the offer from Dunlop. Dunlop’s won’t to supply the goods to Higgins with old prices. By Postal Acceptance Rule, hence Dunlop must comply with their offer supply the goods to Higgins with old prices.
3.2 Exclusion case of the Postal Acceptance Rule
The Postal Acceptance Rule does not apply in every case. Even if the negotiating parties involved consider the postal service is an acceptable means of communication. According to Byrne v. Van Tienhoven, the Postal Acceptance Rule cannot accept offeror revocation their posted acceptance. In this case, Van Tienhoven had been sent out the acceptance to Byrne. But Van Tienhoven withdrawal offer and sent out the new one to Byrne before Byrne received the old offer. The court determined Van Tienhoven is not allowing to revocation of posted acceptance. The withdrawal of the offer was not effective until negotiating parties was communicated. Another case Holwell Securities Ltd v Hughes, the grantee must comply strictly with the conditions stipulated for exercise by the offeror. If not, the acceptance will not be valid although negotiating parties even they have telephone conversation. The Postal Acceptance Rule cannot apply when there are express terms in the offer specifying that acceptance must reach the offeror.
4. Electronic Transactions Act
ETA was enacted by the Federal Government. And it creates a regulatory regime for using electronic communications transactions. It attempts to remove existing legal impediments that may prevent a person using electronic communications to satisfy legal obligations under Commonwealth law. For the purposes of a law of the Commonwealth, ETA provides criteria for determining the time and place of the dispatch and receipt of an electronic communication.
The following requirements imposed under a law of the Commonwealth can be met in electronic form
(a) Requirement to give information in writing
(b) Requirement to provide a signature
(c) Requirement to produce a document
(d) Requirement to record information
(e) Requirement to retain a document
(ELECTRONIC TRANSACTIONS BILL 1999)
5.1 Rationale of the Postal Acceptance Rule
Contract is formed at the time and place an acceptance is communicated to the offeror. Time of acceptance communicated is very important. Because it will affect the contract’s content. After contract established, every terms added in this contract was invalid. The Postal Acceptance Rule is established for the court to determining attempt to provide some degree of certainty to an offeree accepting an offer by post. In case of Dunlop v Higgins, the parties can not sure the precise time of acceptance when using postal service. It had a substantial delay in delivery of the acceptance or even totally lost in the course of post. This created a number of problems and has led to a formulation of the rule. Hence the Postal Acceptance Rule would complementary with Contract Acceptance for ensure the precise time of acceptance.
5.2 Effect of the Postal Acceptance Rule
The effect of the Postal Acceptance Rule is that the offeree’s acceptance will be valid when the moment the acceptance is correctly posted and it is not relevant whether the acceptance is delayed or even totally lost in the course of post. It means if the Postal Acceptance Rule is applied, establish contract have two more problem to be consideration “Time” and “Location”. Indeed, the courts have been concerned with locating the place of formation of a contract in the majority of cases which have considered the applicability of the Postal Acceptance Rule.
5.3 The Postal Acceptance Rule in currently applies circumstances Today, the Postal Acceptance Rule in currently applies circumstance is business convenience. It most frequently cited rationalization for retention of the rule. For example, the Company (offeror) sends the promotion letter (offer) to person (offeree) and the person accepts the offer and sends back the acceptance to correctly address. By Postal Acceptance Rule, the contract between company and person was established when the acceptance was posted. If acceptance is complete upon proper posting, this effectively allows the offeree to structure his affairs on the basis. And the binding contract is formed on postage.
5.4 The Postal Acceptance Rule and ETA
In instantaneous communication most likely to applied ETA or general rule of “Acceptance”, For example, offeree accept website acceptance or telephone acceptance even though the parties are not in physical proximity of one another. This is no delayed time between the offer and the acceptance. In non-instantaneous communication most likely to applied the Postal Acceptance Rule. This had delayed time between the offer and the acceptance. Postal Acceptance Rule is handle the argued of moment of contract formation and ETA is imposed under a law of the Commonwealth can be met in electronic form. Both of the rule and are they complementary with each other. If technical delay or human error, there are no universal rule can be applied and it is needed to reference to the intentions of both parties.
5.5 Rules used for acceptance sent by Fax and Email
We know that there are two types of communication, instantaneous and non-instantaneous. Instantaneous communication is no delay time between sent and received and non-instantaneous communication had delay time between sent and received. Fax is the instantaneous communication. This is because Fax transmits is same as telephone transmits. It is direct transmission from fax machines to other fax machines, transmission between sent and received is in same time. Hence Fax is instantaneous communication it most likely to applied ETA or general rules of “Acceptance”. How about of the Email? Some articles expressed that Email is instantaneous communication. Because the legislation deals a default rule for the time that Email (electronic communications) is sent and when it is received. But this is wrong, in fact according to Email transmits, it along the internet may involve travelling across the world with correctly Email address.
That’s mean after click “SEND” button the transmission may be immediacy, may be takes a moment, sometimes used a few minutes or even over an hours that’s base on the network connection until the recipient received the message. The e-mail transmission through the network depends completely on the viability of the ISP for the offeree and the offeror. Now we have millions of internet user, delays in e-mail communication is very normal situation. The communication may have delay and they are not sent and when it is received. We can study the case Chwee Kin Keong v Digilandmall.com Pte Ltd in Singapore. Hence Email is non-instantaneous communication it most likely to applied the Postal Acceptance Rule, but Email also under the ETA.
5.6 Keeping Postal Acceptance Rule in part of Australian contract law? It must be “YES”, the Postal Acceptance Rule should continue to be applied. In application level, we know that the general acceptance principle depends on whether the method of communication is “instantaneous” or “non-instantaneous”. From the above discussion, Email could be considered as a non-instantaneous communication.
Analyze the moment of contract formation is an essential point for the court to apply the Postal Rule of Acceptance in the context for e-mail transmission. As the method of communication is improving, some problem may be created. If the problem is relevant the moment of contract formation and the communication is defend as a non-instantaneous communication. The Postal Acceptance Rule is most likely applied on it, and the concept of the rule is not outdated. Another basic reason for keeping Postal Acceptance Rule is the electronic communication could not fully replaced the postal service. Maybe in laggard or destitute country, the postal service is the only way for the communication.
In content level, the Postal Acceptance Rule was not allowed the offeror withdrawal the offer when offeror posted the offer to offeree (Byrne v. Van Tienhoven). If Postal Acceptance Rule was abolished, the offeror choses he can always make the formation of the contract, until he is receive any reply. If the offeror doesn’t receive any reply from the offeree he can always make inquiries to the offeree about the offer.
If the contract is not concluded there would be considerable delay in transactions and the acceptor would never be safe until he has received notice that his letter of acceptance had reached its destination. In the Australian legal system which want to make the fair rule to negotiating parties. In case if Postal Acceptance Rule was abolished, the offeree was in unsafe situation. Because there are unfair to the offeree and offeree don’t get any protect by the Australian legal system. Hence the Postal Acceptance Rule should keeping in part of the Australian contract law.
1. Peter Gillies, ‘Business Law 12th Edition’,
2. David Parker and Gerald Box, Business Law for Business Students 2008 3. Kathryn O’Shea and Kylie Skeahan (1997) Acceptance of offer by E-Mail How Far Should the Postal Acceptance Rule Extend
4. Australasian Legal Information Institute
< http://www.austlii.edu.au/ >
5. Dave Stott, Australian Law Students’ Association
Should The Postal Acceptance Rule be Applied to E-Mail?
6. Sharon Christensen, Vol 1 No 1 QUTLJJ
Formation of Contracts by Email – Is it Just the Same as the Post? 7. Electronic Transactions Act
8. Holwell Securities Ltd v Hughes  1 WLR 155
9. Exclusion of the postal acceptance rule
< http://www.austlii.edu.au/au/journals/QUTLawJl/1997/18.pdf> 10. Exclusion of Postal Acceptance Rule
11. Chwee Kin Keong v Digilandmall.com Pte Ltd (SGCA 2)
12. Adams v Lindsell (1818) 106 ER 250.
13. Byrne v Van Tienhoven (1880) LR 5 CPD 344
14. Dunlop v Higgins [(1848) 1 H.L.C. 381]
15. Holwell Securities Ltd v Hughes  1 WLR 155
 Adams v Lindsell (1818) 106 ER 250.
 Household Fire & Carriage Accident Insurance Co (Ltd) v Grant (1879) LR ExD 216  Dunlop v Higgins [(1848) 1 H.L.C. 381]
 Byrne v. Van Tienhoven,  5 CPD 344
 Holwell Securities Ltd v Hughes  1 WLR 155
 Electronic Transactions Act
 http://www.comlaw.gov.au/Details/C2004B00505/Revised%20Explanatory%20Memorandum/Text  Dunlop v Higgins [(1848) 1 H.L.C. 381]
 Internet Service Provider
 Chwee Kin Keong v Digilandmall.com Pte Ltd (SGCA 2)  Byrne v. Van Tienhoven,  5 CPD 344
 Kathryn O’Shea and Kylie Skeahan (1997) Acceptance of offer by E-Mail How Far Should the Postal Acceptance Rule Extend