Business, Legal & Accounting Glossary
n. in contract law, making a written offer or acceptance of offer valid if sent in the mail, with postage, within the time in which the offer must be accepted, unless the offer requires acceptance by personal delivery on or before the specified date. The rule may also apply to mailing payments of insurance premiums when due. However, relying on this so-called “rule” can be dangerous, since the party awaiting the acceptance or payment may cancel the offer if there is no response in hand when the time runs out.
The mailbox rule or the postal acceptance rule (also called deposited acceptance rule) is a term of common law contracts which determines the timing of acceptance of an offer when mail is contemplated as the medium of acceptance. The general principle is that a contract is formed when acceptance is actually communicated to the offeror. The mailbox rule is an exception to the general principle. The mailbox rule provides that the contract is formed when the letter of acceptance is placed in the (outgoing) mailbox. One rationale given for the rule is that the offeror nominates the post office as an implied agent and thus receipt of the acceptance by the post office is regarded as that of the offeror.
The leading case in the mailbox rule is Henthorn v. Fraser  2 Ch 27 which was based in part on the earlier case of Adams v. Lindsell (1818) B & Ald 681.
The mailbox rule applies only to acceptance. Other contractual letters (such as one revoking the offer) do not take effect until the letter is delivered, as in Stevenson v McLean (1880) 5 QBD 346. The implication of this is that it is possible for a letter of acceptance to be posted after a letter of revocation of the offer has been posted but before it is delivered, and acceptance will be complete at the time that the letter of acceptance was posted—the offeror’s revocation would be inoperative.
Under the mailbox rule, performance is a means of acceptance. If A orders 1000 blue coathangers and B ships them out, that shipment is considered to be a conveyance of acceptance of A’s offer to buy the coathangers. Defective performance is also an acceptance, unless accompanied by an explanation. For example, if A orders 1000 blue coathangers, and B mistakenly ships 1000 red coathangers, this is still an acceptance of the contract. However, if B ships the red coathangers with a note that they sent these because they had run out of blue coathangers, this is not an acceptance, but rather an accommodation, which is a form of counter-offer.
An interesting implication of the operation of the mailbox rule is that as acceptance is complete once the letter of acceptance is posted, it makes no difference whether the offeror actually receives the letter. This was demonstrated in Byrne v Van Tienhoven (1880) 5 CPD 344. If a letter of acceptance were to be lost, acceptance has still taken place. An exception to this would be if the offeree knows or has reason to know that the letter of acceptance never reached the offeror. For example, if A brings a letter of acceptance to the local post office and A sees the post office burn down a moment later, there is no acceptance.
The mailbox rule does not apply to instantaneous forms of communications. For example in Entores Ltd v Miles Far East Corporation  2 QB 327, the Court held that the mailbox rule did not apply to an acceptance by telex as the Court regarded it as an instantaneous form of communication. The general principle that acceptance takes place when communicated applies to instantaneous forms of communication. Courts have similarly held that the mailbox rule does not apply to acceptances by telephone or fax.
The courts are yet to decide whether e-mail should be regarded as an instantaneous form of communication. If the offeree were to convey acceptance by commercially unreasonable means – by cross-country pony express, for example – the acceptance would not be effective until it had actually been received.
A letter is regarded as “posted” only when it is in the possession of the Post Office; this was established in the case of Re London & Northern Bank  1 Ch 220. A letter of acceptance is not considered “posted” if it is handed to an agent to deliver, such as a courier.
The mailbox rule does not apply to option contracts or irrevocable offers where acceptance is still effective only upon receipt. This is because the offeree no longer needs protection against subsequently mailed revocations of the offer.
– Excerpt of an opinion by Judge Kimmelman (718 A.2d 1223)
Many Nations have enacted legislation based on the UNCITRAL Model Law of Electronic Commerce. Such legislation is often entitled the Electronic Transactions Act. Among other issues, this legislation deals a default rule for the time that email (electronic communications) is sent and when it is received. However, it is mistaken to suggest that it deals with a clarification of the postal acceptance rule for electronic communications. There are two schools of thought.
(1) Ask if the postal acceptance rule applies to emails (electronic communications). If your answer is yes, then the relevant Electronic Transaction Act (ETA) can help. The postal acceptance rule states that there is a contract when posted – so we should apply the “sent” rule under the ETA. If the answer is no; then either apply the “received” rule under the ETA or ignore it and use the contract rule of communication.
(2) Instead, treat the Electronic Transactions Act as an intended substitute and statutory replacement of the postal acceptance rule; in which case the “received” rule should apply. The problem with this second school of thought is that there is nothing in the Model Law of Electronic Commerce, nor the ETAs which suggests that it was intended to replace the postal acceptance rule. We are still waiting for a court to decide.
The UNCITRAL rules on time of sending and receiving are:
(1) Unless otherwise agreed between the originator and the addressee, the dispatch of a data message occurs when it enters an information system outside the control of the originator or of the person who sent the data message on behalf of the originator.(2) Unless otherwise agreed between the originator and the addressee, the time of receipt of a data message is determined as follows:
(a) if the addressee has designated an information system for the purpose of receiving data messages, receipt occurs:
(i) at the time when the data message enters the designated information system; or
(ii) if the data message is sent to an information system of the addressee that is not the designated information system, at the time when the data message is retrieved by the addressee;
if the addressee has not designated an information system, receipt occurs when the data message enters an information system of the addressee.
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This glossary post was last updated: 28th April, 2020 | 0 Views.