Business, Legal & Accounting Glossary
The postal rule is a fundamental rules of offer and acceptance in English contract law. It determines that effective communication of acceptance by letter is on posting.
A fundamental aspect of english contract law is the need for an offer and its acceptance. Although Entores v. Miles Far East Corp.  confirmed the long-understood need for acceptance to be communicated, what constitutes effective communication can be debatable.
What was the Decision in Adams v. Lindsell?
In 1818, the case of Adams v. Lindsell began the process of clarifying the law on accepting offers by determining when an offer was accepted, and thus when a binding contract was formed. The case revolved around an offer to sell some wool. As a result of misdirection of the offer, acceptance was delayed and the offeror sold the wool to a third party.
In his decision, Law J ruled that forming a contract by post would be impossible if the offeror were free to make a contract for the same goods with a third party before acceptance of their original offer could be communicated to them.
As a result, the beginnings of the postal rule arose whereby acceptance was said to be effective upon its posting, with some exceptions. The full postal rule that acceptance is effective from the time at which the acceptance letter is properly posted would not be ruled on until Henthorn v Fraser in 1892, however.
There are several exceptions to the postal rule, which operate in specific circumstances. In Quenerdurine v. Cole (1883), for example, the court ruled that an offer made by telegram carried an implication that acceptance must also be communicated speedily.
It is, therefore, possible to imply a quicker method of communication. Household Fire and Carriage Accident Insurance Co. v. Grant (1879), expands this to a general ability of an offeror to state a wish to have acceptance communicated to himself. However, Yates Building Co. Ltd v. Pulleyn & Son (York) Ltd (1975) states that any requirements about the method of acceptance must be clearly stated to be valid.
Furthermore, the ruling in Tinn v. Hoffman & Co. (1873) means that where a requirement for a certain type of reply has been made, an equally effective mode of communication will also be deemed acceptable provided it is just as quick and does not disadvantage the offeror. An offer by e-mail could, therefore, be accepted by telephone, for example.
In addition to its ruling about methods of acceptance, Household Fire and Carriage Accident Insurance Co. v. Grant also states that the postal rule will operate only when it is reasonable for an acceptance to be sent by post. The acceptance must also have been properly stamped, addressed and posted.
Further to the directions in Household Fire, the courts ruled in Re London and Northern Bank, ex parte Jones  that a letter of acceptance will only be deemed “properly posted” if it is either placed in a Royal Mail post box, or handed to an employee of the General Post Office who is authorised to accept post for distribution.
As the GPO has now been split into Royal Mail and The Post Office, which of these companies the ruling will apply to, if any, may be open to further judicial decisions.
In Byrne & Co. v. Van Tienhoven & Co. (1880), the courts confirmed the long-standing idea that any revocation of an offer must be communicated to the offeree; although again there are some exceptions to this rule.
The offeror needs to communicate this revocation to the offeree himself, however. It is not always practicable for a company, or even an individual, to communicate directly with the other contracting party and this is reflected in the decision in Dickinson v. Dodds (1876) that revocation may be communicated by a reliable third party.
The question is then whether a revocation sent at the same time as an acceptance will nullify an offer. In Household Fire and Carriage Accident Insurance Co. v. Grant (1879), the court ruled that the postal rule only applies to acceptances. As a result, revocation is only effective if it can be received by the offeree before they post their acceptance.
In contract law, the offeror is aware of the terms of an offer before the offeree and thus is in a better position to know when that a contract may be created. It would therefore unduly prejudice the offeree if the offeror were able to rescind their offer even after a letter of acceptance has been posted. The postal rule reflects this state of affairs and goes some way to balancing the power levels between the two parties.
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This glossary post was last updated: 5th March, 2020