postal rule

Definition of postal rule

Further reading

The posting rule (or "mailbox rule" in the U.S., or "postal rule" or "deposited acceptance rule") is an exception to the general rule of contract law in common law countries that acceptance takes place when communicated. The posting rule states, by contrast, that acceptance takes effect when a letter is posted.

One rationale given for the rule is that the offeror nominates the post office as implied agent and thus receipt of the acceptance by the post office is regarded as that of the offeree. The main effect of the posting rule is that the risk of acceptance being delivered late or lost in the post is placed upon the offeror. If the offeror is reluctant to accept this risk, he can always require actual receipt as a condition before being legally bound.

However, if the offeree mails a rejection and then sends an acceptance (or otherwise changes his mind), whichever communication is received by the offeror first controls.

English case law

The rule was established by Anthony in the 19th century cases, starting with Adams v Lindsell (1818) B & Ald 681, which was later confirmed in Dunlop v Higgins (1848) 1 HL Cas 381, Household Fire Insurance Company v Grant (1879) 4 Ex D 216 and Henthorn v Fraser [1892] 2 Ch 27.

The posting rule applies only to acceptance. Other contractual letters (such as one revoking the offer) do not take effect until the letter is delivered, as in Stevenson, Jacques & Co 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-the offeror's revocation would be inoperative.

Example 1:

• Day 1: A makes an offer to B.
• Day 2: A decides to revoke the offer and puts a letter in the mail to B revoking the offer.
• Day 3: B puts a letter accepting the offer in the mail.
• Day 4: B receives A's revocation letter.
  • The letter of revocation can be effective only when received, that is Day 4.
  • However, a contract was formed on Day 3 when the letter of acceptance was posted.
  • It is too late for A to revoke the offer.

Example 2:

• Day 1: A makes an offer to B.
• Day 2: B intends to reject the offer by putting a letter in the mail to A rejecting the offer.
• Day 3: B changes his mind and sends a fax to A accepting the offer.
• In this situation, whichever communication A receives first will govern.

Example 3:

• Day 1: A makes an offer to sell a parcel of land to B.
• Day 2: B mails her acceptance.
• Day 3: Before A receives B's acceptance, B telephones A and states she wishes to reject the offer.
• Day 4: B's original letter of acceptance arrives, A then records the contract as a sale.
• B's acceptance of the offer means there is a binding contract -- she is obliged to pay for the land or be liable for damages.

Under the posting 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 posting rule is that an 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 a moment later, there is no acceptance.

Further the posting 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 posting 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 posting 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 posting 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.

Where parties are at distance from one another, and an offer is sent by mail, it is universally held in this country [United States] 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)