Research Paper On Postal Rule

CONTENTS

1. Introduction …………………………………………………………….. 1

2. The Postal rule …………………………………………………………. 2

1. Background ……………………………………………………. 2

2. Exceptions to the Postal…………………………………...… 2

2. Which Rule Should Apply to E-mail Transactions: E-mails – Instantaneous or Not ………………...… 3

3. Possible Solutions ……………………………………………………. 7

4. Conclusion ………………………………………………..……………. 8

Introduction

The issue of when there is a meeting of minds through offer and acceptance for the purpose of creating a legally binding contract is one which has been greatly considered in the offline world. This question arises not so much when the transacting parties communicate face to face or through some means of communication where they relate in real time, in which case the “general rule of acceptance”, which states that acceptance creates binding legal obligations once received by the offeree, will apply[1]. However, in situations where the parties transact through a medium which will involve some delay before either party’s intention is communicated to the other, the delay causes uncertainty as to when the acceptance should be considered to have been made by the offeree. In seeking to resolve the uncertainty, the courts in the offline world have adopted, as an exception to the general rule, the postal rule, which states, essentially, that where parties transact through post, acceptance shall be deemed to have been validly communicated to the offeror upon posting of the acceptance and not upon receipt by the offeror[2]. This rule is applied by the courts, with some exception, to situations where acceptance is to be communicated by delivery of a posted message as per the terms of the underlying agreement.

These issues exist as well in the world of online contract formation, where, through the application of the principle of functional equivalence[3], the same legal principles used in the offline world in determining the appropriate rule to apply in determining the time of acceptance are applied.

In this paper I will examine the rationale for the application of the postal rule in the offline world and whether that rule ought to apply, in particular, to the formation of contracts by email.

2. The Postal Rule

2.1 Background

The postal rule was developed as departure from the general rule governing acceptance, which was that acceptance would be legally binding upon communication to the offeror. The rule was established in the case of Adams v. Lindsell[4] where it was held that, in a situation where an acceptance is to be communicated by post as per the terms of the underlying agreement, the acceptance will be deemed validly communicated at the moment the person accepting the offer places his acceptance in the post.

One rationale behind the rule was to create certainty in transactions involving posted mail where an acceptance could take several days to reach an offeror, by which time the offer could have been withdrawn by an offeror who had in fact stipulated posted mail as a means of acceptance, with resulting legal consequences for the offeree who would believe that legal obligations had been created[5]. I particularly support the rationale behind this rule for the certainty it provides as to when a contract should be deemed concluded in situations of delay in communication, even though it could in some situations be considered to cause unfairness on an offeror who may not have knowledge of the acceptance[6].

2.2 Exceptions to the Postal Rule

Interestingly, the postal rule, which is itself an exception to the general rule, also has exceptions to its application. The postal rule will not be applied where acceptance is communicated, though through some form of posting, if the means of posting is considered to be instantaneous. In the case of Entores v Miles Far East Corp[7], telex communications were considered by the court a

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