The Postal Acceptance Rule in the Digital Age

• Author: Marwan Al Ibrahim; Ala'eldin Ababneh; Hisham Tahat
• Position: Asst. Professor in commercial and Company law, Amman Arab University for graduate studies - Jordan. Assistant Professor in Private Law at Amman Arab University for Graduate Studies-Jordan.PHD student, University of Aberdeen
• Pages: 47-53

Keywords: E-commerce, Email, Contract law, Conclusion of Contract, Postal Acceptance Rule.

A version of this paper was published in Kierkegaard, S. (2006) Business Law and Technology Vol.1 and presented in the 2006 IBLT Conference, Denmark.

Page 47

1. Introduction

The conclusion of distance contracts has been one of the controversial issues in the law of contract formation. It raises some question marks, especially with regard to the type of rules that should govern the timing of contract formation. More specifically, a strong debate has been emerged recently as to whether the postal acceptance rule may apply in respect to contracting through email. This paper is divided into two main parts. The first one examines the justifications of the postal acceptance rule, while the second part analyses thoroughly the application of postal acceptance rules to email contracting.

2. The Justifications of the Postal Acceptance Rule

The postal acceptance rule was first established in Adams v Lindsell ([1818] 1 B &Ald, 681) when the court had to decide the moment of contract formation by post. The court found that parties when communicating acceptance by post were not sure at the precise time the acceptance had been communicated. As postal communication is subject to delay, the parties were not simultaneously aware of the communication. This created a number of problems and led to a formulation of the rule. (Yamaguchi, 2004) This rule as accepted in the common law legal systems is: "Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted". (Adams v Lindsell [1818] 1 B &Ald 681 and Henthorn v Fraser [1892] 2 Ch 27 at 33)

The uncertainty regarding the moment of contract formation does not happen in the environment of face-to-face communication or even in distance contracting where an instantaneous method of communication is used. In this kind of contracting, all parties are aware of contract conclusion and they do not face problematic issues, such as delay or failure of transmission which occur in non instantaneous communications. (Fascianp, 1996-97)

In contrast, the case of Adams v Lindsell, adopted the rule to avoid "the extraordinary and mischievous" consequences which could follow if it were held that an offer might be revoked at any time until the offeree was in the position of "accepting it had been actually received". (See, House hold Fire and Carriage Accident Ins.Co.V. Grant (1879) LR Ex D 216 at 221; see also Re Imperial Land Co of Marseilles (1872) LR 7 Ch App 587 at 594) This justification for the postal rule appears to provide the best solution in determining the time that the parties reach consensus ad item and it was felt, that at the time of posting the letter, there would be a greater chance of a 'meeting of minds' occurring than at the later time when the letter was delivered. (Evans, 1966) Page 48 Another reason which has been suggested for the validity of this rule is that the offeror must be considered as having made the offer throughout the whole time that his offer is in the post, and that therefore, the agreement between the parties is complete as soon as the acceptance is posted. (Henthorn V. Fraser [1892] 2 Ch.27, 31). This idea is based on the assumption that the offer creates a power that binds both parties and that an acceptance is an exercise of that power. Consequently, the offeror has, in the beginning, full power to determine the acts that are to constitute acceptance. However, after the offeror makes that determination, the offer has then become effective and the offeree has an advantage over the offeror in the contract formation process. The offeree may need additional time to decide whether or not to accept the offer and during that time, may need to spend money and effort in reaching a decision. (Payton, 2003)

Some go further, considering the post office as an agent of the offeror. In Household Fire and Carriage Accident Insurance Co. v. Grant ((1879) LR 4 Ex D 216), Thesiger LJ suggested agency as a basis for this rule as he affirmed:

"How then are these elements of law to be harmonized in the case of contracts formed by correspondence through the post? I see no better mode than that of treating the post office as the agent of both parties". (Ibid) This argument has not accepted by the literature, as the post office and telegram company are clearly not agents, to which acceptance may be communicated, especially as we know that the post office as a governmental agency for public service working under its own regulations could never be an agent in this area.( Evans, 1966) Moreover, letters are always sealed when posted, thus the contents of a sealed letter cannot realistically be said to have been communicated to the post office, which in any case is at most an agent to transmit the acceptance, and not to receive it. The mere delivery of letters by post does not of itself complete a contract.

In fact, it can be said that this rule is efficacious as it is cognizant of both of the business convenience of the offeree and the fair allocation of risk, as it establishes a finite date for the contract and avoids circular communication. ( Watnick, 2004) Any delay which occurs between sending and receiving post letters creates potential risk for both of parties due to the uncertainty as to preciously when the message is deemed to have been received. This justification may be considered as the corner stone for application of the postal acceptance rule. Relying on contract formation in posting or dispatch, established a definite time for confirmations between parties if they ask for it, without any need for further communications. Treitel (1991) concludes that "courts in applying the postal rule aim to bring a rationale of necessity and predict that if the contract were to come into force it can best be achieved on sending the acceptance."

For example, if the offeror asks for notification, then the offeree would need notification of the receipt and so on. Another way of illustrating this is demonstrated if we consider that A is required to receive B's acceptance, then B should have the right to receive notification from A, that the acceptance was received, and A should have the right to receive notification from B, that the notification of receipt of the acceptance was received and so forth. Carrying this on to its logical conclusion, putting the risk in the hands of the offeror would appear logical since it is he who is the master of the offer and he is the position to for or stipulate a specific action in order to be exposed to the potential risk. (Evans, 1996)

These traditional justifications have been argued in respect to post contracting since there is a gap in time and a delay between sending a letter and receiving it and parties are...