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Contracts/Mailbox rule
Template:ContractLaw The mailbox rule or the postal rule is a term of common law contracts which determines when a contract has been formed where the parties are communicating via the mail. One of the earliest reported cases on the mailbox rule is Adams v Lindsell (1818) B & Ald 681 according to which, when a letter of acceptance is posted, acceptance is complete as soon as the letter is posted.
The mailbox rule only applies for letters of acceptance; other letters don't take effect until the letter is delivered as in Stevenson v McLean (1880) 5 QBD 346. The immediate implication of this is that it is possible for a letter of acceptance to be posted after a letter of revocation or rejection is posted, but before it is delivered, and acceptance will be complete.
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 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.
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, for example, acceptance has still taken place.
According to the rule in Entores Ltd v Miles Far East Corporation [1955] 2 QB 327, a message of acceptance takes effect when received by the offeror when communicated through instantaneous means of communication, in other words, the mailbox rule does not apply. In this particular case, it was a telex, but the courts have held that that the mailbox rule does not apply to acceptance by telephone or fax, in other words, an offeree someone accepts an offer by telephone, but a loud noise prevents the offeror from hearing it, acceptance has not taken place, and if an offeree sends a fax of acceptance, but the fax never arrives at the machine of the offeror, there is no acceptance.
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.
It should be noted, that in the context of determining whether the mailbox rule applies, 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. In other words, a letter of acceptance is not considered "posted" if it is handed to an agent to deliver.
The mailbox rule does not apply to option contracts, where acceptance is still only effective upon receipt.
