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Contracts/Mailbox rule: Difference between revisions
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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 (law)|accommodation]], which is a form of [[counter-offer]]. | 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 (law)|accommodation]], which is a form of [[counter-offer]]. | ||
The mailbox rule does not apply to instantaneous forms of communications. Thus, the Courts have held that the rule does not apply to communications by [[telephone]], [[telegraph]] or [[fax]]. There is considerable debate whether the rule should apply to [[e-mail]]. 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 ''un''reasonable means - by cross-country [[pony express]], for example - the acceptance would not be effective until it had actually been received. | |||
The mailbox rule does '''not''' apply to option contracts, where acceptance is still only effective upon receipt. | The mailbox rule does '''not''' apply to option contracts, where acceptance is still only effective upon receipt. | ||
Revision as of 03:54, March 27, 2006
Template:ContractLaw The mailbox rule or the postal acceptance rule is a term of common law contracts which determines when a contract has been formed where the parties are communicating via the mail. The basic thrust of the rule is that an acceptance of an offer that is sent before a revocation of the offer is received. However, if a communication is sent rejecting the offer, and a later communication is sent accepting the contract, then the first one to be received by the offeror will prevail. The leading case in the mailbox rule is Henthorn v Fraser [1892] 2 Ch 77.
For example, suppose A makes an offer to B on January 1; A then decides to revoke the offer on January 2, and puts a letter in the mail to B revoking the offer; however, B puts a letter accepting the offer in the mail on January 3, and does not receive A's revocation letter until January 4. Because B sent his acceptance before receiving A's revocation, the mailbox rule dictates that B's acceptance is effective. A will therefore be bound to the contract, and can no longer revoke the offer.
Suppose, on the other hand, that A makes an offer to B on January 1, and B decides to reject the offer on January 2, and puts a letter in the mail to A rejecting the offer; however, the next day B changes his mind and sends A a fax accepting the offer. In this situation, whichever communication A receives first will govern.
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.
The mailbox rule does not apply to instantaneous forms of communications. Thus, the Courts have held that the rule does not apply to communications by telephone, telegraph or fax. There is considerable debate whether the rule should apply to e-mail. 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.
The mailbox rule does not apply to option contracts, where acceptance is still only effective upon receipt.
