Contracts/Mailbox rule

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Contracts Treatise
Table of Contents
Contracts Outline
Introduction and Definitions
Introduction
Definitions
Elements
Contract formation
Parties
Offer
Acceptance
Intention to Bind
Formal requisites
Mailbox rule
Mirror image rule
Invitation to deal
Firm offer
Consideration
Consent
Implication-in-fact
Collateral contract
Modification
Merger
Uniform Commercial Code
Uniform Commercial Code
Course of dealing
Course of performance
UCC-1 financing statement
Uniform Commercial Code adoption
Defenses against formation
Lack of capacity
Duress
Undue influence
Illusory promise
Statute of frauds
Uncertainty
Non est factum
Contract interpretation
Governing law
Construction and Operation
Parol evidence rule
Contract of adhesion
Integration clause
Contra proferentem
Excuses for non-performance
Mistake
Misrepresentation
Frustration of purpose
Impossibility
Impracticability
Illegality
Unclean hands
Unconscionability
Accord and satisfaction
Rights of third parties
Privity of contract
Assignment
Delegation
Novation
Third-party beneficiary
Performance or Breach
Necessity of performance
Sufficiency of performance
Anticipatory repudiation
Cover
Exclusion clause
Efficient breach
Deviation
Fundamental breach
Termination
Termination
Rescission
Termination and rescission
Abrogation and rescission
Subsequent contract
Termination
Forfeiture
Remedies
Specific performance
Liquidated damages
Punitive damages
Quasi-contractual obligations
Estoppel
Quantum meruit
Actions
Actions in General
Parties to Action
Pleading
Evidence
Questions of Law and Fact
Instructions
Trial and Judgment

The mailbox rule, also known as the "postal rule" or "deposited acceptance rule," is an exception to the general rule of contract law in common law countries that acceptance of an offer takes place when communicated. Under the posting rule, that acceptance takes effect when a letter is posted (that is, dropped in a post box or handed to a postal worker).[1] In plain English, the "meeting of the minds" necessary to contract formation occurs at the exact moment word of acceptance is sent via post by the person accepting it, rather than when that acceptance is received by the person who offered the contract.

The rules of contracts by post (postal rules) include the following:

  1. An offer made by post/letter is not effective until received by the offeree.
  2. Acceptance is effective as soon as it is posted.
  3. For revocation to be effective, it must be received by the offeree before they post their letter of acceptance.

One rationale given for the rule is that the offeror nominates the post office as his or her implied agent, and thus receipt of the acceptance by the post office is regarded as receipt by the offeror. 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 expressly require actual receipt as a condition before being legally bound by his offer.

Offer Made by Post[edit | edit source]

As between the sender of a letter and the person to whom it is addressed, the post office is the agent of the sender.[2] Therefore, the delivery of a letter to the post office for transmission is no delivery or communication to the person to whom it is addressed until actually received by him.[3] An offer by mail continues open until the letter is delivered to the offeree, and the offerer must suffer the consequence of any delays or mistakes on the part of the post office. In Adams v Lindsell[4] defendants offered to sell wool to the plaintiffs by letter dated September 2d, 1817. The letter was misdirected, and so did not reach the plaintiffs until September 5th; they accepted by letter posted that evening, but defendants had in the meantime sold the wool to others. Plaintiffs sued for nondelivery of the wool, and it was argued on behalf of defendants that no contract could arise until plaintiffs' answer reached him. But the court said:

That if that were so, no contract could ever be completed by the post. For if the defendants were not bound by their offer, when accepted by the plaintiffs, till the answer was received, then the plaintiffs ought not to be bound till after they had received the notification that the defendants had received their answer and assented to it. And so it might go on ad infinitum. The defendants must be considered in law as making, during every instant of the time their letter was traveling, the same identical offer to the plaintiffs; and then the contract is concluded by the acceptance of it by the latter.

In like manner where a person making an offer by telegraph, the company becomes his agent to carry the offer and he is responsible for any error made in transmitting the mes­sage.[5]

Acceptance Made by Post[edit | edit source]

Where a person makes an offer, and requires or authorizes the offeree either expressly or impliedly to send his answer by post and the answer is duly posted, the contract is complete from the time the letter is mailed, and it is immaterial that afterwards the letter be delayed or altogether fail in reaching its destination, by default of the post office or by accident in transmission.[6] As soon as the letter is delivered to the post office the contract is as complete as if the acceptor had put it into the hands of a messenger sent by the offerer himself as his agent to deliver the offer and receive the accept­ance.[7] The contract is properly held to be complete when the acceptor has mailed the letter of acceptance, because this is an act contemplated and impliedly authorized by the offerer as the mode of manifesting the intention of the acceptor to close with the offer. The acceptor by this act does all that is requisite in the usual course of business--he thereby puts the letter of acceptance beyond his control, and he is not answerable for the casualties of the mail service.[8]

The implied authority to use the post to communicate the acceptance arises (a) where the post is used to make the offer, but nothing is said as to how the acceptance is to be made;[9] (b) 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.[10]

In Henthorn v Fraser,[11] H, who lived at Birkenhead, a town near Liverpool, called at the office of a land society in Liverpool to negotiate for the sale of some houses belonging to him. The secretary there handed him a written offer for his property, which he took away with him. On the next day the secretary posted a withdrawal of the offer. The letter containing the withdrawal was posted between twelve and one o'clock and did not reach Birkenhead until after five p.m. In the meantime H had, at three-fifty p.m., placed in the post office at Birkenhead a letter accepting the offer, which did not actually reach the secretary's office until the next day. It was held that the contract was complete when the letter containing the acceptance was posted at Birkenhead. The ground of this decision was that though H received the offer at Liverpool, he resided in another town; as by its terms it was to remain open for some days, it was plainly intended that he should take it home with him and consider it; and it is clear that the ordinary mode, the mode which both parties under all the circumstances must have contemplated, was that if he accepted he would do so by the mail.[12]

Of course where the actual receipt of the acceptance is made a condition of the offer the rule above does not apply, as where after proposing the terms of an agreement the offerer added, "Telegraph me yes or no. Unless I receive your answer by the 20th I shall conclude no"--here the offer was held dependent on the actual receipt of the letter or telegram of acceptance on or before the time named.[13]

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.

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 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.

Furthermore, 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 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. This is not the case under the Uniform Commercial Code.

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.

Examples[edit | edit source]

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.
    • B is just rejecting the offer, she did not actually revoke her acceptance


Option Contracts[edit | edit source]

In the United States, the majority rule is that the mailbox rule does not apply to option contracts. By default, an option contract is accepted when the offeror receives the acceptance, not when the offeree mails it. However, because the California Civil Code applies the mailbox rule to all contracts, California follows the minority rule, under which the mailbox rule also applies to option contracts.[14]

See also[edit | edit source]

Notes[edit | edit source]

  1. The post office will be the universal service provider, such as the United States Postal Service or the Royal Mail
  2. Frith v. Lawrence, 1 Paige, 434; Mactier v. Frith, 6 Wend. 103, 21 Am. Dec. 262; Averill v. Hedge, 12 Conn. 424.
  3. The post office has been sometimes likened to an agent appointed by the sender of the offer to deliver it and to receive and bring back the acceptance, and it is argued, if I send my clerk or other agent to B with a written offer and B tells him he accepts, the contract is complete, for his communication to the agent is notice to me. But it is clear that the post office is not this kind of an agent. As Mr. Wald very well puts it:

    If a man afflicted with partial deafness were to make a proposal and the reply were to be spoken into his ear trumpet, or if a proposal were made by telephone and the reply were to be given by the same means, no one would think of calling the ear trumpet or telephone the proposer's agent to receive the acceptance. The post, the ear trumpet, and the telephone are respectively the agencies employed to make known the acceptance, but not the agents to receive it. Moreover, acceptances by mail are not made known to the post office officials; the contents of letters are not supposed to come to their knowledge; but if an acceptance does not become effective until it is made known, then when an agent is appointed to receive it, it can have no effect until it is made known to him, so that the fiction of considering the post office such agent only moves the difficulty one step forward without solving it.

    Wald Pollock Contr., p. 36. The same criticism is made by one of the judges in Henthorn v. Frasier, where he says,

    In his judgment Thesiger, L. J., refers to the cases in which the decision in Dunlop v. Higgins has been explained by saying that the post office was treated as the common agent of both parties. That reason is not satisfactory. The post offices are only carriers between them. They are agents to convey the communication, not to receive it. The communication is not made to the post office, but by their agency as carriers. The difference is between saying 'Tell my agent A if you accept' and 'Send your answer to me by A' (i. e. In writing). In the former case A is to be the intelligent recipient of the acceptance, in the latter he is only to convey the communication to the person making the offer, which he may do by a letter, knowing nothing of its contents. The post office are only agents in the latter sense.

    Some judges treat the post office as the agent in the restricted sense, just like a servant sent to receive the letter of acceptance, and (because the regulations of the English post office and of ours, too, at the time these cases were decided, did not permit the letter to be recalled by the writer after it is posted) instructed not to let the letter out of his possession alter once given to him. In the English cases it is always assumed that the letter on being posted is beyond the control of the sender. See Brogden v. R. C., 2 App. Cas. 691, where Blackburn, J., says: "He may change his mind, but cannot recover the letter from the post office." (Dunmore v. Alexander, 9 S. & D. 190; Langdell's Cases on Contracts.)

    Mr. Justice Holmes puts it this way: "The offeree when he drops the letter containing the counter promise into the letter box does an overt act which by general understanding renounces control over the letter, and puts it into a third hand for the benefit of the offerer with liberty to the latter at any moment thereafter to take it." (Common Law, p. 306.)

  4. 1 B & Ad. 681.
  5. Ayer v. Tel. Co., 79 Me. 493, 1 Am. St. Ry. 353; Contra In England, Henkel v. Pope, L. R. 6, Ex. 7.
  6. The sending or accepting an offer by telegraph is governed by the same rules. Tuttle v. Jackson, 36 N. Y. 309; Minn. Oil Co. v. Collier Lead Co., 4 Dill, 431; Weld Co. v. Victory Co., 205 Fed. 770. And, of course, an offer may be accepted through the telephone. Dudley Tyng Co. v. Converse, 180 Mich. 195, 146 N.W. 629; Burton v. U.S., 202 U.S. 344, 26 Sc. T. 688.
  7. 9 Cyc. 295, 13 C. J. 300; Tayloe v. Ins. Co., 9 How. 390; Mactier v. Frith, 6 Wend. 103, 21 Am. Dec. 262; Moore v. Pierson, 6 Iowa 279, 71 Am. Dec. 409; Trevor v. Wood, 36 N.Y. 307, 93 Am. Dec. 511; Kempner v. Cohn, 47 Ark. 519, 58 Am. Rep. 775; Haas v. Myers, 111 Ill. 426, 53 Am. Rep. 674; Trounstine v. Sellers, 35 Kan. 447, 11 Pac. 441; Calhoun v. Atchison, 4 Bush 261, 96 Am. Dec. 299; Postal Tel. Co. v. Louisville Cotton Co., 140 Ky. 506, 131 S. W. 277; Wester v. Casein Co., 206 N.Y. 506, 100 N.E. 488; Perry v. Mt. Hope Iron Co., 15 R.I. 380, 5 Atl. Rep. 632, 2 Am. St. Rep. 902. Contra In Massachusetts, McCullough v. Eagle Ins. Co., 1 Pick. 278. But see Brauer v. Shaw, 168 Mass. 198. This rule will not be extended to make communication by mall to the offeree's agent a sufficient acceptance, though accompanied by a direction to give notice. New v. Ins. Co., 171 Ind. 33, 85 N. E. 703.
  8. The English courts did not at once arrive at the American doctrine. In Adams v Lindsell, 1 B. & Ald. 681, It was ruled that the post office was the agent of the offerer, and that he was liable for its defaults. "In Dunlap v. Higgins, 1 H. L. Cas. 381," says Mr. Anson (Contr. 23.),

    Lord Cottenham held, though it was not neces­sary to the decision or the case, that the posting of a letter of acceptance concluded the contract whatever might afterwards befall the letter. But the Court of Exchequer, in a later case, British Am. Tel. Co. v. Colson, L.R. 6 Ex. 108, tried hard to escape the consequences of the rule, and Kelly, C. B., laid it down that the contract was not binding till the letter of acceptance was received, but that when it was received its operation related back to the moment of its posting. This decision was virtually overruled in Harris' case, L. R. 7 Ch. 587; as to the moment when the contract was complete, but Mellish, L. J., said that, though "complete at the time when the letter accepting the offer is posted, yet it may be subject to a condition subsequent that if the letter does not arrive in due course of post, then the parties may act on the assumption that the offer has not been accepted." But it is now settled, in Household Fire Insurance Company v. Grant, 4 Ex. Div. 216, that the parties are bound, from the moment the letter is put in course of transmission, by a contract, the existence of which is unaffected by the subsequent fate of the letter. The contract does not re­main, up to the moment the acceptance is received in the state of suspended animation contemplated by Kelly, C. B.; nor is it subject to the condition subsequent suggested by Mellish, L. J.

    Street letter boxes are a legal part of the post office system, and a letter deposited in one of these boxes is considered as being delivered or mailed at the post office. Wood v. Callaghan, 61 Mich. 402; 1 Am. St. Rep. 597; Watson v. Russell, 149 N. Y. 388. In England, handing a letter to a town postman is a posting of it. Re London & Northern Bank, 1 Ch. 220 (1900). But in Pearce v. Langfit, 101 Pa. St. 511, it is said:

    It certainly can make no difference whether the letter is handed directly to the carrier or is first deposited in the receiving box and taken from there by the carrier. The postal regulations of the United States require that carriers, while on their rounds, shall receive all letters, prepaid, that may be handed them for mailing.

    The letter must be properly addressed and stamped. Britton v. Phillips, 24 How. Pr. (N.Y.) 111; Blake v. Fire Ins. Co., 67 Tex. 160, 2 S.W. 368, 60 Am. Rep. 15; Potts v. Whitehead, 20 N.J. Eq. 55.

  9. Hamilton v. Lycoming Ins. Co., 5 Pa. St. 339; Abbott v. Shepard, 48 N.H. 14; Hutcheson v. Blakeman, 3 Met. (Ky.) 80; Levy v. Cohen, 4 Ga. 1; Falls v. Gather, 9 Port, 614; Averill l v. Hedge, 12 Conn. 436; Wheat v. Cross, 31 Md. 99, 1 Am. Rep. 88; Potts v. Whitehead, 20 N.J. (Eq.) 55. "If this is satisfactory let us know by return mall," authorizes the offeree to accept by return mail. Allen v. Woolf River Co., 169 Wis. 253, 172 N.W. 158.
  10. Henthorn v Fraser, post.
  11. 2 Ch. 27 (1892); Bruner v. Moore, 1 Ch. Div. 804 (1904).
  12. But where an offer is made of advertisement, there is no completed contract until the letter reaches the offeree. Haldane v. U.S., 69 Fed. 819, 16 C.C.A. 447.
  13. Lewls v. Browning, 130 Mass. 173; Haas v. Myers, 111 Ill. 42.
  14. Palo Alto Town & Country Village, Inc. v. BBTC Company, 11 Cal. 3d 494, 113 Cal. Rptr. 705, 521 P.2d 1097 (1974).

References[edit | edit source]

  • E Peel, Treitel: The Law of Contract (12 edn Thomson, London 2007) 26-32