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Postal rule was an arbitrary choice in the 19th Century. Modern technologies make it redundant. Therefore, it should be abandoned as an obstacle to fairness in contract law.

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Postal rule was an arbitrary choice in the 19th Century. Modern technologies make it redundant. Therefore, it should be abandoned as an obstacle to fairness in contract law.


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INTRODUCTION

The postal rule was established by arbitrary choice and it was decided because some rule, that would regulate letter contracting, was essential in the early 19th Century. It was arbitrary, because there was no range of choice for communication and the postal services were the only option for distance contracting. Modern technologies and inventions make it redundant and unfair. In this coursework, I have explored the advantages and disadvantages of the rule and whether it should be justified today. Postal rule is no longer needed because in the 21st Century, contracts can be concluded in seconds, using both instantaneous and non-instantaneous methods of communication with little or no risk of loss and delay. Therefore, it should be abandoned as an obstacle to fairness in contract law.

The Postal Rule for Acceptance

The general rule is that once a letter of acceptance is dispatched, the postal acceptance is already effective[1]. In other words – as soon as the letter is in the control of the Post Office[2], the contracting parties are legally bound. It was established in 1818 in Adam v Lindsell[3] and it was essentially a rule of convenience[4].The postal rule is supported by saying that the offeror takes the risk (i.e. the risk of failing to receive acceptance)by initiating negotiations by post originally[5]. As a result, it does not apply to instantaneous methods of communication (i.e. telephone, telex) on the ground that all the parties are aware of contract conclusion. Therefore, they are unlikely to face risks such as delays or failure of transmission[6].

The Postal Rule for Revocation

However, if it was reasonable to establish a specific postal rule for acceptance, consequently there may be another necessary rule concerning revocations of offers. In the case of communication by post, the general rule is that “Dispatch of a letter or telegram of acceptance by the offeree terminates the offeror’s power of revocation. Loss or delay of the letter of acceptance is immaterial and subsequent death of either party can have no effect on its formation”[7].  In other words, the letter of revocation is effective only on delivery[8].

Reasons for the Establishment of the Postal Rule

Generally, the reason for the establishment of the postal rule was to promote certainty within contractual formation[9]. Likewise, in 1818 postal services have been relatively slow as the first train from Liverpool to Manchester had made its first deliveries twenty years later[10]. Consequently, the main problem in the beginning of the 19th Century was that the postal service had no alternative methods of communication. It was Capps who suggested that if instantaneous modes of communication were available, it is doubtful whether effective-on-dispatch rule would have been necessary[11].

There are some arguments that it is easier to prove posting rather than receipt. The given reason is that it is the offeror who chooses to use the post and therefore it is he who should be at a disadvantage. Although it is true that he can choose to make the offer using  telephone, the above mentioned reason is not very convincing. It might have been the offeree who originally started the negotiations by letter[12].

Was it an arbitrary solution?

In truth, it is to some extent an arbitrary solution to the problem of which of the parties should be favoured where they communicate through the post[13]. In the beginning of the 19th Century, some rule was essential. That is why Evans argues that the reason for the application of the postal rule is “no more than abdication of responsibility‘’[14].

In addition, it is worth observing that the rule laid down in Adam v Lindsell[15] originated at a time when there was no general rule that acceptance need be communicated[16].As a result, Simon Gardner argues that the Adam v Lindsell case provides limited foundation for the original postal acceptance rule[17].

There have always been problems with contract negotiations by post – even at present letters may either be delayed or lost. Therefore one of the contracting parties bears a risk by choosing the postal services for a preferred method of communication[18].  Certainly, the offeror is the party who bears that risk, under effective-on-dispatch-postal rule. However, sometimes there will be the case where the offeree starts the negotiations by letter as mentioned in the previous section. Therefore, the postal rule needs reconsideration, bearing in mind all the technology developments in the 21st Century.

Justification of the Postal Rule

Thesiger LJ in Household Fire and Carriage Accident Insurance Co. v Grant[19] argues that it is impossible to produce a rule, which would be fair to both of the parties. However, he thinks that it is more convenient for acceptance to be effective on posting rather than on receipt.

Another reason for justification of the postal rule is that it is logical for the offeror to bear the risk of the distance communications.  He is the one that can manipulate the offer and introduce conditions. The offeree is less likely to change the conditions. Even if he does, we know that it will be no more an acceptance of an offer, but a counter-offer[20].

The offeror can always avoid the postal rule by stipulating actual receipt or a specific way of communication, or even initiating the negotiations by instantaneous method. He can require parties to telegraph instead of using a slower method like the postal services[21].  The offeror has the choice to set a specific time until which the acceptance should reach him. Consequently, an offer expressed to continue for a fixed time may be legally retracted before the expiration of the time limit unless previously accepted[22].

Criticism of the Postal Rule

In Household Fire and Carriage Accident Insurance Co v. Grant[23], Thesiger LJ suggested that it is reasonable to treat the post office as the agent of both of the parties[24]. Evans rejected the suggestion on the basis that the post office and telegram company do not fall within the definition of agents,[25] to which acceptance may be communicated. Moreover, Post Office, as a governmental agency for public services, works under its own regulations. In truth both Post Office and telegraph companies are independent contractors for the transmission of messages[26]. Hence, Post Office is not responsible for the receipt of a letter because it is not concerned with possible misdirections[27]. Therefore Post Office could never be an agent but only a carrier between the offer and acceptance[28].

Evans explains that under the dispatch rule, if a letter is lost it can be difficult to prove that it was correctly addressed and prepaid[29]. For example, it could be the offeree’s fault that the letter did not arrive. Does that mean the offeror is the one who should suffer the consequences? Under the dispatch principle, the postal rule is one-sided and unfair for the offeror. That’s why British and American Telegraph Co v Colson[30]proposed a compromise rule whereby, “although the letter of acceptance must be received; once received it would be retrospectively effective as from its posting”. However, this proposal was rejected[31].

Another common argument for the establishment of the postal rule can be found in the dictum from Adam v Lindsell[32]:

“If the [offerors] were not bound by their offer when accepted by the [offerees] till the answer was received, then the [offerees]  ought not to be bound till after they had received the notification that the [offerors] had received their answer and assented to it. And so it might go on ad infinitum”

However, if this reason was acceptable in the 19th Century, it is no longer relevant because of technology development and instantaneous methods of communication. Both of the parties can always check whether the offer or acceptance is successfully delivered by using telex, telephone etc.

Postal Rule in the New Era of Technology Development

Whatever the reasons for the establishment of the postal rule in 1818, currently the situation is completely different. As time has passed and technology has developed, the speed and range of communication has increased[33]. After the invention of the Press in the 15th Century, the Telegraph System in the 1830s, the Telephone (1876)  and Telex System(1930s) the world was ready to face up to new technologies that would change everything. In current times, the enormous success of Google, Amazon, Facebook, E-bay, Hotmail and Yahoo illustrates how consumer and businesses alike have embraced internet and electronic commerce in the last decade[34]. Consequently, there are many arguments that the instantaneous methods of communication and internet communications make the postal rule redundant.

E-mail communications

Unfortunately there is still ambiguity, uncertainty and legal arguments about e-mail contracting. The problem derives from the fact that there is no direct authority on the question of whether e-mail communication can be determined as an instantaneous or a non-instantaneous method[35]. The most common argument is that e-mail is not direct between the parties and messages are broken up into packets that travel around internet networks[36]. Therefore, e-mail is a non-instantaneous method of communication and Murray[37] suggested that “postal rule should apply to e-mail acceptances, because they are neither direct, nor reliable[38] and the acceptor sending his e-mail does not know immediately whether or not the communication was successful”[39]. This is true, but there is a weakness in his judgment, for he has not considered that there is always possibility for the acceptor to check the succession of his e-mail by using telephone. Furthermore, Capps argues that the acceptor has some control over a sent e-mail in that it can often be recalled[40]. Maybe this is why Murray withdraws this interpretation later in his article in 2005[41].

Edwards and Waelde propose one solution that would be convenient for both of the parties; that e-mail is deemed to be received when the sender receives the recipient’s acknowledgment of the delivery,[42]  as in 1996 UNCITRAL Model Law on E-Commerce, Art 14(3). Under this provision, if a data message has been made conditional on receipt, the data message is treated as though it has never been sent until the acknowledgement is received. This is why the postal rule is not such a burden if manipulated intelligently. In the US, another postal rule regulation can be seen in the Uniform Computer Information Transactions Act 2000 (UCITA) where section 203(4) states that “if an offer in an electronic message evokes in electronic message accepting the offer, a contract is formed when an electronic acceptance is received[43].

A frequently used moral argument for justifying the postal rule is to put the risk of delay on the party choosing the communication method[44]. However, this is no longer convincing because in the 21st Century, companies have a range of communication choice to make a contract. If they would like to protect themselves from the postal rule effect, they could use instantaneous method, which will be more safe and secure. Therefore, if A makes an offer by telephone, and B sends the acceptance by e-mail that never reaches A, then A will not be legally bound and risk is put on B’s decision.

Another reason why postal rule is no longer needed is that most e-mail servers have the option to check whether an e-mail has been received and read. If the acceptor receives a failure notification, he can choose to resend it until he is certain about the successful delivery[45]. Therefore, loss and delay are no longer a problem. Even if they occur, they can be traced and corrected.

CONCLUSION

When the postal rule was created, it provided a reasonable answer to a genuine problem, in that the inherent delays in the principle method of communication (Postal services) led to uncertainties in contract formation. Nobody knows for certain what would have been the postal rule if established after the invention of the telegraph, telephone and telex. However, if the same rule was produced in the era of Internet and e-mail communication, it would be absolutely unreasonable.Therefore, the postal rule may have been adequate in the 19th Century. However, at the present time it is inappropriate because of the technologies in our days, and the postal rule should be abandoned as an obstacle to fairness in contract law.

BIBLIOGRAPHY:

A.D. Murray “Entering into Contracts Electronically: The Real W.W.W..”, in Edwards and Waelde (eds) (2000), “Law and the Internet: A Framework for Electronic Commerce” (Oxford: Hart Publishing: 2000),

Adam v Lindsell (1818) 1 B. & Ald. 681

A.W.B. Simpson “Innovation in Nineteenth Century Contract Law”, (1975) 91 LQR 247

Brinkinbon Ltd v Stahag und Stahlwarenhandelsgesellschaft mbH [1983] 2 A.C. 34 (House of Lords)

British and American Telegraph Co v Colson (1871) LR 6 Exch 108

Byrne ξ Co v Leon Van Tienhoven (1880) L.R. 5 (C.P.D.) 344

D. Capps “Electronic Mail and the Postal Rule” (2004) I.C.C.L.R. 207

D. Capps ‘’You’ve got Mail’’ (2003) N.L.J 906

D. M. Evans ‘’The Anglo-American Mailing Rule: Some problems of offers and acceptance in contracts by correspondence’’ (1966) 15 International and Comparative Law Quarterly 553 – 575

Dunlop v Higgins(1841) 7 M. & W. 515

G.H.Treitel “The Law of Contract”, 12th edition, (London Sweet & Maxwell : 2007)

H. Blake "The Royal Mail: a History of the British Postal Service -   Telegraph.Telegraph.co.uk - Telegraph Online, Daily Telegraph and Sunday Telegraph - Telegraph. 10 June 2010. Web. 17 Dec. 2010. < http://www.telegraph.co.uk/news/uknews/royal-mail/7814591/The-Royal-Mail-a-history-of-the-British-postal-service.html >

Henthorn v Fraser [1892] 2 (Ch.) 27

I. Lloyd; D. Mellor, “Telecommunications law”,( LexisNexis UK, London : 2003)

In re Imperial Land Company of Marseilles v Harris’ Case (1871-72) L.R. 7 (Ch. App.) 587

In re Imperial Land Company of Marseilles Townsend's Case (1871-72) L.R. 13 (Eq.) 148

In re National Savings Bank Association v Hebb's Case (1867) L.R. 4 (Eq.) 9

J. Newton, (1999) “Issues of Electronic Commerce and Communications” 1 EBL 5,6 ; Issue 5, June

J. Poole ‘’Contract Law’’, 10th ed., (Oxford University Press: 2010)

L. Edwards; C. Waelde “Law and the Internet” - 3rd edition, (Hart Publishing: 2009)

L. Edwards. (ed), “The New Legal Framework for E-Commerce in Europe” (Oxford, Hart Publishing: 2005)

L. Koffman, E. Macdonald, ‘’The Law of Contract’’ 4th edition, (Tolley:2001)

MechemAgency” §§ 1926-28, 1977, 2nd edition (1914)

P. Fasciano ‘’Internet Electronic Mail: A last Bastion for the Mailbox Rule’’ (1996 – 1997) 25 Hofstra Law Review 1542

P. Todd “E-Commerce Law” 1st edition, (Routledge-Cavendish : 2005 ) 

Quenerduaine v Cole (1883), 32 W.R. 185

R.R. A by Walker “Leake’s Law of Contracts” 8th edition, (London: Stevens and Sons, Limited 119 & 120, Chancery Lane, Law publishers: 1931)

S. Gardner ‘’Trashing with Trollope: A deconstruction of the Postal rules in Contract’’ (1992) 12 O.J.L.S. 2, 170-194

Stevenson, Jacques ξ Co McLean (1880) L.R. 5 Q.B.D. 346

Stocken v Collin (1841) 151 E.R. 870, (1841) 7 M. & W. 515

The United Nations Commission on International Trade Law Model Law on E-Commerce, (1996) Art 14(3)

Uniform Computer Information Transactions Act (2000), 203(4)


[1] G.H. Treitel “The Law of Contract, 12th edition (2007), para 2-028

[2] Brinkinbon Ltd v Stahag und Stahlwarenhandelsgesellschaft mbH [1983] 2 A.C. 34 at 41

[3] (1818) 1 B & Ald 681

[4] (1999) 1 EBL 5,6 , Issue 5

[5] As above

[6] P. Fasciano ‘’Internet Electronic Mail: A last Bastion for the Mailbox Rule’’ (1996 - 1997)25 Hofstra Law Review   1542

[7] (1966) 15 ICLQ 553  at 557

[8] Established by Lindley J in Byrne ξ Co v Leon Van Tienhoven (1880) L.R. 5 (C.P.D.) 344,followed by Henthorn v Fraser [1892] 2 Ch. 27and Stevenson, Jacques ξ Co McLean (1880)L.R. 5 (Q.B.D.) 346; Exceptions are Hebb’s Case (1867) L.R. 4 Eq. 9 and Townsend’s Case (1871) L.R. 13 (Eq.) 148 – in both, the letter of revocation was posted, but not delivered before the acceptance took effect. Both regard such withdrawal effective.

[9] D. Capps “You’ve got mail” (2003) N.L.J 906, See also Adam v Lindsell (1818) 1 B & Ald 681

[10] H. Blake, http://www.telegraph.co.uk/news/uknews/royal-mail/7814591/The-Royal-Mail-a-history-of-the-British-postal-service.html

[11] D. Capps “You’ve got mail” (2003) N.L.J 906

[12] L. Koffman (2001) ‘’The Law of Contract’’ 4th edition

[13] As above

[14] (1966) 15 ICLQ 553  at 559

[15] (1818) 1 B & Ald 681

[16] L. Koffman (2001) ‘’The Law of Contract’” , See also A.W.B Simpson (1975), 91 LQR 247

[17] S. Gardner (1992) 12 O.J.L.S. 2, 170-194, p. 171

[18] J. Poole, (2010) ‘’Contract Law’’, p.67  ̊

[19] (1878-79) L.R. 4 Ex. D. 216, at 223

[20] J. Poole (2010) “Contract Law”, 57-59

[21] Quenerduaine v Cole (1883), 32 W.R. 185

[22] “Leake’s Law of Contracts” (1931) at 24

[23] (1878-79) L.R. 4 Ex. D. 216, at 223

[24] Stocken v Collin (1841) 151 E.R. 870; Dunlop v Higgins (1841) 7 M. & W. 515

[25] Mechem, “Agency” (2nd ed., 1914)

[26] (1966) 15 ICLQ 553  at 559

[27] As above

[28] As above

[29] As above

[30] (1871) LR 6 (Exch) 108

[31] Harris’ Case (1871-72) L.R. 7 (Ch. App.) 587

[32] (1818) 1 B & Ald 681 at 683

[33] I. Lloyd, D. Mellor(2003) “Telecommunications Law” at p.3;

[34] Edwards, Waelde (2009) “Law and the Internet”, at p.89

[35] As above, p.105

[36] As above, p.105

[37] A.D. Murray (2000) “Entering into Contracts Electronically: The Real W.W.W..”, in Edwards and Waelde (eds), “Law and the Internet: A Framework for Electronic Commerce”

[38] Clearly, the delay in e-mail communication will not be as long as the delay using postal services, but uncertainty whether a message has arrived could be just as great.

[39] Edwards, Waelde (2009) Law and the Internet, p.105

[40] D. Capps (2004) I.C.C.L.R. at 209

[41] (2005) L, Edwards (ed), “The New Legal Framework for E-Commerce in Europe”

[42] Edwards, Waelde (2009) “Law and the Internet”, p.105

[43] D. Capps “You’ve got mail” (2003) N.L.J 906

[44] P. Todd, “E-Commerce Law” (2005) para 9.2.1

[45] D. Capps “You’ve got mail” (2003) N.L.J 906

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