Contracts/Mailbox rule: Difference between revisions

Template:ContractLaw The mailbox rule or the postal 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 mailbox.

The leading case in the mailbox rule is Henthorn v. Fraser [1892] 2 Ch 77 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 letters 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.

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. The letter of revocation can be effective only when received, that is January 4. However, the contract was formed on January 3 when the letter of acceptance was posted. It is too late to revoke the offer.

Suppose that A makes an offer to B on January 1, and initially B intends to reject the offer on January 2 by putting a letter in the mail to A rejecting the offer. However, the next day B changes his mind and sends a fax to A 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.

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, 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 [1955] 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 [1900] 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.

See also

• Offer and acceptance

Where parties are at distance from one another, and an offer is sent by mail, it is universally held in this country [USA] that the reply accepting the offer may be sent through the same medium, and, if it is so sent, the contract will be complete when the acceptance is mailed,...and beyond the acceptor's control; the theory being that, when one makes an offer through the mail, he authorizes the acceptance to be made through the same medium his agent to receive his acceptance; that the acceptance, when mailed, is then constructively communicated to the offeror. -Excerpt of an opinion by Judge Kimmelman (718 A.2d 1223)