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Postal Rule Essay

1820 words - 8 pages

Cork Online Law Review 2007 13

O’Brien, Analysis of the Postal Rule

ANALYSIS OF THE POSTAL RULE The Postal Rule Revisited Ronan O’Brien In The Law of Contract,1 Treitel refers to the postal rule as being an arbitrary (based on random choice or personal whim)2 rule. As there are differing views on where acceptance by post should be deemed complete, serious problems can arise for the parties to the contract when a breakdown of postal communication occurs. Three possible solutions to this problem exist. The acceptance is complete either when the letter of acceptance is placed in the letterbox; when it is delivered to the offeror’s address; or when the letter of acceptance is brought to ...view middle of the document...

7 One of the major sources of criticism of the rule is that it favours the offeree. German law holds that the contract is completed on arrival at the offeror’s address, even though this system may be harder to prove, it follows the doctrine of communication of acceptance more stringently. The English case of Household Fire Insurance v. Grant8 is a prime example of the possible injustice which may result in the application of the postal rule. In this case, on receipt of an offer from Grant to take up an insurance policy, the company                                                         
Treitel G.H., The Law of Contract, 10th ed., (Thomson sweet and Maxwell, 1999.) Online Compact Oxford English Dictionary (date accessed: 25 November 2006) 3 M. P. Furmston. Cheshire, Fifoot & Furmston’s Law of Contract (14th ed., Butterworths Ltd, Dublin, 2001) p. 57 4 (1818) 1 B. & Ald. 681. 5 Robert Clark, Contract Law in Ireland (5th ed., Thomson Round Hall, 2004) p. 21 6 supra at n. 3 7 M. P. Furmston. Cheshire, Fifoot & Furmston’s Law of Contract (14th ed., Butterworths Ltd, Dublin, 2001) p. 58. 8 (1879) L.R. 4 Ex. 216.
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Cork Online Law Review 2007 13

O’Brien, Analysis of the Postal Rule

posted back their acceptance. The letter never arrived. Grant was wholly unaware of the acceptance. It was held that a contract existed, and that he was liable to pay premiums. This example shows how, through application of the postal rule, a party may be bound by a contract without actual knowledge of its existence. If the rule stated that the contract would not be formed until receipt by the offeror, injustices like this could be avoided. According to Furmston it would also have been acceptable as a ruling in the Adams v. Lindsell case as “the defendants’ offer would not be revoked by their sale to third parties on 8th September.”9 This statement underpins the fact that the ruling was an arbitrary one, which was needed to make certain the law regarding acceptance by post at the time. The doctrine that communication of acceptance must be complete for a contract to be deemed binding could be said to be one of the greatest competitors of the postal rule in terms of forming a binding contract. Due to the predominance of modern forms of communication, for example fax, registered post (where receipt of acceptance is normally issued to the customer) and e–mail, the usage of the postal system in modern day business is waning. The above forms of communication, most of which are electronic telecommunication, are the most prevalent competition for the long established postal system. One of the earliest references of case law regarding electronic communications is Entores Ltd v. Miles Far East Corporation.10 This English case deals with an offer which was sent via the plaintiff’s telex machine to the defendants in Amsterdam. The acceptance was communicated back to London, by telex. The case was concerned with where the contract had come into existence. The...

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