Formation of Contract through Postal Rules

The given case study involves Harry requesting information about the price of a ring from Sally. Sally responds with an offer to sell the ring at $100,000, which is open for three days. Harry accepts the offer through post on the next day. According to postal rules, the posting of the acceptance letter is deemed as acceptance by Sally. The mode of sending acceptance was not specified by Sally, so if Harry had responded through email instead of post, it would have been invalid and no contract would have formed. This document provides a detailed analysis of the formation of the contract using postal rules.

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Assessment Task
Case Analysis
24-Mar-18
(Student Details: )

Assessment Task
Issue 1
Whether a contract had been formed between Harry and Sally based on the mails which
were sent, or not?
Case Laws
Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344
Harvey v Facey [1893] AC 552
Household Fire Insurance v Grant [1879] 4 Ex D 216
Rule 1
A contract is a promise, which has legal validity. It is made between two or more parties,
where one party makes promise of doing something and the other party makes promise of paying
the consideration value. The formation of contact involves certain elements to be present. These
elements include an offer, an acceptance, a consideration, an intention, legality, clarity and
consent (Gibson & Fraser, 2014).
The first element in the formation of contract is offer which denotes that one party has
offered certain terms to the other party. The offer is open till it is accepted, or for the time
stipulated. It is important to distinguish offer from mere supply of information (Abbott,
Pendlebury & Wardman, 2007). In Harvey v Facey [1893] AC 552, the plaintiff had asked the
defendant regarding whether they would sell the bumper hall pen and to post the lowest cash
price. The defendant replied with the lowest cash price. And the plaintiff agreed to buy the pen at
this price. The reply of price was deemed here as the supply of information.
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Assessment Task
Once an offer is made, the same has to be accepted by that person to which such offer
was made. The acceptance to this offer has to be given in a clear and unequivocal manner.
Another important point related to acceptance is that it needs to be properly communicated to
offering party. In other words, the acceptance would be deemed as being given when the offering
party receives it (Latimer, 2012).
However, there is a primary exclusion of this rule and this is found in the postal rules of
acceptance. Under these postal rules of acceptance, date of acceptance is deemed as that date on
which the acceptance letter had been posted by the accepting party (Marson & Ferris, 2015).
This is because Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344 provides that the
postal office is the agent of such an offering party and the acceptance of agent had to be deemed
as acceptance of such an offering party. The actual date of delivery of acceptance letter is of no
consideration in such cases and the delay in delivery would not invalidate the acceptance based
on Household Fire Insurance v Grant [1879] 4 Ex D 216.
Application 1
In the given case study, the first communication by Harry to Sally would be deemed as
request for information, as he simply asked about the price of the ring. On this, the reply given
by Sally would have been deemed as a supply of information based on Harvey v Facey, had the
same not been coupled with an offer of selling the ring immediately. This is because here a clear
offer was made by Sally for selling the ring at $100,000.
All these communication were taking place through mail so the postal rules apply here.
The offer was open for three days only. The acceptance to this offer was given by Harry on the
very next day through post. Based on because Byrne & Co v Leon Van Tien Hoven & Co, the
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Assessment Task
posting of letter would be deemed as acceptance of Sally and the delay in delivery of letter
would not matter as per Household Fire Insurance v Grant.
Conclusion 1
Thus, owing to existence of valid offer and acceptance, assuming the other elements of
contract are also present, a contract was formed between Sally and Harry. Accordingly, Harry
can enforce the contract.
Issue 2
Whether the condition would be any different had the reply of Harry had been sent
through an email, or not?
Rule 2
When such happens that the offering party is silent on the mode of sending acceptance,
the resumption is that the acceptance is to be deemed to be in same mode as the one used in the
offer (Paterson, Robertson & Duke, 2012).
Application 2
As no mode had been specified by Sally in this case, the valid mode of sending
acceptance would be deemed as post only. Thus, where the acceptance is given by Harry through
email, it would be invalid, resulting in a lack of contract.
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Conclusion 2
Thus, where Harry had given his acceptance through email, it would have been invalid,
resulting in a contract not been formed. Accordingly, Harry could not have enforced the contract.
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Assessment Task
References
Abbott, K., Pendlebury, N., & Wardman, K. (2007). Business law (8th ed.). London: Thompson
Learning.
Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344
Gibson, A., & Fraser, D. (2014). Business Law 2014 (8th ed.). Melbourne, Pearson Education
Australia.
Harvey v Facey [1893] AC 552
Household Fire Insurance v Grant [1879] 4 Ex D 216
Latimer, P. (2012). Australian Business Law 2012 (31st ed.). Sydney, NSW: CCH Australia
Limited.
Marson, J., & Ferris, K. (2015). Business Law (4th ed.). Oxford: Oxford University Press.
Paterson, J.M., Robertson, A., & Duke, A. (2012). Principles of Contract Law (4th ed.). Rozelle,
NSW: Thomson Reuters (Professional) Australia.
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