Postal Acceptance Rule
Contract is formed at the time and place an acceptance is communicated to the offeror. An acceptance must correspond to the offer. There is no particular method of acceptance prescribed by law. The appropriate method of acceptance will depend on the fact of each situation. The offerees may find themselves faced with two types of situation. First the offer may dictate a method of acceptance. It may indicate that acceptance should be sent by return fax by a certain date. The second broad category is where there is no indication in the offer of an appropriate method of acceptance. The general rule followed by offeree is that acceptance may be given by the same or an equally expedient method as adopted for the making of the offer. Hence it follows that until the acceptance is received by the offeror the offer may be revoked.
In the late 19th century an exception to the general agreement for communication of an acceptance arose in order to avoid the extraordinary and mischievous consequences that would follow if it might be held that the offer might be revoked at any time until the letter accepting it had actually been received. This is the postal acceptance rule.
The rule as accepted in Australia is "Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted"
(Source: Gibson, A. & Fraser, D. 2003, Business Law, Pearson Education Australia Pty Ltd, Frenchs Forest, NSW.)
The rule can easily be excluded by the parties to a contract. The postal acceptance rule can be displaced if the parties either expressly or by implication from the terms of their contract require that acceptance be received by the offeror. The case by which the rule can be excluded is exemplified by the case of Bressan v Squires. In this case, clause 1 of an option agreement provided that " This option may be exercised by you by notice in writing addressed to me at any time on or before 20th December 1972. The plantiff posted a notice of exercise of the option addressed to the defendant on 19 December 1972, which the defendant received on 21 December 1972 (1 day after the prescribed time period). The plantiff sued the defendant claiming that he had validly exercised the option to purchase the defendants property. The issue before the court was whether the notice had been validly given within time, which necessarily involved consideration of the applicability of the postal acceptance rule. Chief Justice Bowen held that in the circumstances of the case and upon true construction of the option agreement, clause 1 of the agreement required actual notice to be given to the defendant on or before 20th December 1972 to effect a valid exercise of the option. Accordingly, the material date to be considered was the date of receipt by the defendant of the notice of exercise and not the date of posting by the plantiff. Since the defendant did not receive the notice until 21 December 1972, it was held that the option had not been validly exercised by the plantiff. (Source: Kathryn O' Shea and Kylie Skeahan (1997) "Acceptance of offers by E-mail - How Far should the postal Acceptance Rule Extend? " QUT Law Journal, Vol 13, pp 247-262)
Contract is formed at the time and place an acceptance is communicated to the offeror. An acceptance must correspond to the offer. There is no particular method of acceptance prescribed by law. The appropriate method of acceptance will depend on the fact of each situation. The offerees may find themselves faced with two types of situation. First the offer may dictate a method of acceptance. It may indicate that acceptance should be sent by return fax by a certain date. The second broad category is where there is no indication in the offer of an appropriate method of acceptance. The general rule followed by offeree is that acceptance may be given by the same or an equally expedient method as adopted for the making of the offer. Hence it follows that until the acceptance is received by the offeror the offer may be revoked.
In the late 19th century an exception to the general agreement for communication of an acceptance arose in order to avoid the extraordinary and mischievous consequences that would follow if it might be held that the offer might be revoked at any time until the letter accepting it had actually been received. This is the postal acceptance rule.
The rule as accepted in Australia is "Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted"
(Source: Gibson, A. & Fraser, D. 2003, Business Law, Pearson Education Australia Pty Ltd, Frenchs Forest, NSW.)
The rule can easily be excluded by the parties to a contract. The postal acceptance rule can be displaced if the parties either expressly or by implication from the terms of their contract require that acceptance be received by the offeror. The case by which the rule can be excluded is exemplified by the case of Bressan v Squires. In this case, clause 1 of an option agreement provided that " This option may be exercised by you by notice in writing addressed to me at any time on or before 20th December 1972. The plantiff posted a notice of exercise of the option addressed to the defendant on 19 December 1972, which the defendant received on 21 December 1972 (1 day after the prescribed time period). The plantiff sued the defendant claiming that he had validly exercised the option to purchase the defendants property. The issue before the court was whether the notice had been validly given within time, which necessarily involved consideration of the applicability of the postal acceptance rule. Chief Justice Bowen held that in the circumstances of the case and upon true construction of the option agreement, clause 1 of the agreement required actual notice to be given to the defendant on or before 20th December 1972 to effect a valid exercise of the option. Accordingly, the material date to be considered was the date of receipt by the defendant of the notice of exercise and not the date of posting by the plantiff. Since the defendant did not receive the notice until 21 December 1972, it was held that the option had not been validly exercised by the plantiff. (Source: Kathryn O' Shea and Kylie Skeahan (1997) "Acceptance of offers by E-mail - How Far should the postal Acceptance Rule Extend? " QUT Law Journal, Vol 13, pp 247-262)
