Postal Rule in Modern Communication

This assignment examines the relevance of the postal rule in contract law within the context of contemporary communication technologies, particularly email. It delves into historical cases that have shaped the understanding of the postal rule, analyzes its potential applicability to email contracts, and discusses arguments both supporting and refuting its extension to modern communication methods. The assignment ultimately seeks to shed light on the legal complexities surrounding contract formation in a digital age.

Running Head: BUSINESS AND COMPANY LAW
Business and company law
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Answer One: History of Postal Rule of acceptance and its application
It can be said that the postal rule of acceptance is one of the most controversial areas of
contract law1. The postal rule of communication was developed in 1818 and its provisions have
changed a lot over time. It is to be mentioned that the postal rule was developed solve the
conflicts arising and doubts arising in communication and acceptance. Offer and acceptance are
the fundamental provisions in contract formation. Offer and acceptance determine the duties of
the parties and are the fundamental building block of a contract2. It is to be mentioned that the
Postal rule of acceptance was developed as an exception to the general rules of offer and
acceptance. It is to be mentioned that in general an offer can be revoked prior to its acceptance.
However conflicts have often arisen about the time of the revocation of offer. It has often
created a lot of confusion regarding whether the offer was accepted before or after it was
revoked. Thus, to avoid this confusion the Postal rule was invented to solve the issue of
communication of the offer between the offeror and offeree. The postal rule was created in the
case Adam v Lindsell3. In this case the court was presented with the challenge of deciding the
time of the contract formation. The court held in the aforementioned case that the contract was
formed over the period of delivery of mail. Both parties of the aforementioned case had
communicated by mail intending to form a contract. However, it can be stated that the mailing
time lasts for days therefore the exact time of acceptance could not be decided. The problems
faced by the court in deciding the exact time period of contract formation led to creation of the
postal rule.
1 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
2 Smits, Jan M., ed. Contract law: a comparative introduction. Edward Elgar Publishing, 2017.
3 [1818] B & Ald 681

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The postal rule was reapplied in the case Henthorn v Fraser4. The postal rule states that
an offer will be considered to be accepted once the communication of the acceptance of the offer
has been posted. However the postal rule is applicable in circumstances where the parties have
contemplated contract formation using post as the medium of communication as used ordinarily
by mankind. It can be stated that in face to face interactions both parties can communicate
instantaneously. However, in case of distant contracting instant communication of acceptance is
not possible.
Thus, in such situations parties to the contract cannot be expected to be possibly aware of
the refusal of offer after acceptance of the offer has been posted. In such cases of distant
contracting the postal rule is applicable. It can be stated that the postal rule has been re affirmed
in the notable cases Household Fire Insurance v Grant5 and in the relatively recent case
Brinkibon Ltd v Stahag Stahl GmbH6. In the latter case it was held by the court that posting a
letter of acceptance at the post office constitutes acceptance that is binding upon the parties to the
contract.
The court held that offeror and offeree must have understood and agreed to bear the risks
associated with postal system while choosing the same as the means of communicating the offer.
However as time has progressed the courts have been faced with the challenge of applying the
postal rule in instantaneous communication. With advent of instantaneous methods of
communication, the dispatch of receipt of a message constitutes valid communication. The
receipt has made the aforementioned postal rule obsolete. The issue of the receipt of a message
can only constitute valid communication of acceptance. In the notable case Entores Ltd v Miles
4 [1892] 2 Ch 27
5 [1879] 4 Ex D 216
6 [1983] 2 AC 34

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Far East Corporation7 various instances of when acceptance is communicated was illustrated
by Lord Denning. It was stated by him a contract can only be expected to be formed once the
news of acceptance is received by the offeror as opposed to the postal rule. In case of
instantaneous communication the responsibility of communicating the acceptance of the offer
lies with offeree. However, it is assumed in case of instantaneous communication that the news
of acceptance communicated to offeror during business hours is expected to be received.
However as held in the remarkable case Brinkibon Ltd v Stahag Stahl8 the responsibility lies
with the offeror if he chooses to unman his machine through which the news of acceptance is
communicated.
Answer Two: Impacts of Electronic transactions Act 1999(Cth) and Electronic transactions
Act 2000(Vic) on the postal rule
Upon the recommendation of United Nations Commission on International Trade Law's
Model Law on Electronic Commerce the Electronic Transaction Act9 was created in the year
2000. It can be stated that the aforementioned Act was created as a strategic policy of the
government of Australia to develop economic information. The Electronic Commerce Expert
Group was established by the government of Australia to report the conflicts and issues relating
to ecommerce. According to the report of the aforementioned expert group it can be said that the
country of offeror initiating the offer will govern the contract to be formed if acceptance of such
offer occurs at the offeror’s place of business.
7 [1955] EWCA Civ 3
8 [1983] 2 AC 34
9 1999(Cth)

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The Electronic Transactions Act10 was formed in response of the aforementioned report.
According to the aforementioned act it can be said that communication of acceptance of offer is
said to take place if the person to whom the information of news of acceptance is given agrees
consents to such information by the means of electronic communication. It is also to be
mentioned that the time when the receipt of such electronic communication is issued is the time
when electronic communication is expected to enter into the information system. This
aforementioned statement puts emphasis on the current application of the postal rule in contracts
entered into by email. The current postal rule applied in email contract states that acceptance is
not constituted until the offeror gets into the system11. It can be stated that this legislation does
not apply to facsimile and telex machines. It can be mentioned that the two of the
aforementioned acts provide insight about application of the postal rule to instantaneous modes
of communication.
According to subsection 14(3) of the Electronic Transactions Act 1999(Cth) the time of
receipt of an electric communication is noted once it reaches the information system as
designated by the sender of the email. However it is to be mentioned that the aforementioned Act
does not provide any clarification about what should ideally constitute the designation of the
information system. It is not clarified whether opening of the email or merely receiving it in their
server constitutes valid time of receipt12. Where there is no system designated, the time of receipt
of information by the receiver would be considered to be the time when he notices it as stated in
section 14 of the aforementioned act.
10 2000(Vic)
11 Thomson Reuters. Harris, J. Hargovan, A. Adams, M. Australian Corporate Law LexisNexis Butterworths 5th
edition, 2015.
12 Graw, Parker, Whitford, Sangkuhl and Do, Understanding Business Law 7th ed LexisNexis Butterworths, 2015

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However, the explanatory memorandum as given in the Electronic Transactions Act 2000
(Vic), states that communication must be read by the receiver of the information before it is
considered to be received. However, choosing to ignore or not read a message already received
in the receiver’s mailbox will be considered to be received. Thus it can be said that the
aforementioned acts continue to guide the application of the postal rule in online business and
email contracts.
Answer Three: Application of postal rule on email and other forms of modern
communication
It is to be said that with the recent development in Information Technology, the problem
of distance in communication has been greatly reduced. People nowadays can communicate with
each other freely and in unhindered manner through various methods. However, the most
popular and widely used method of formal communication is email. It can be said that with the
advent of the new development in the Information Technology and wide usage of emails the
application of the postal rule to email contracts has become a challenge to the courts13. It is to be
mentioned that email communication is different from website contracting. Acceptance in
website contracting is constituted in the actual time of sending and accepting the offer. However
in case of communication by emails, there is no legislation which clearly determines acceptance
and revocation of offer. It is to be stated that while transmitting information through emails, a
message is considered to be delivered when the offeror gets online and reads the message.
The offeree in such a case may or may not receive a notification regarding the delivery of
the message. Servers and computers of the receiver may take several minutes to receive the
13 Seddon, N; Bigwood, R; Ellinghaus, M, Cheshire & Fifoot Law of Contract, 2012 10th Australian Edition
LexisNexis. Sweeney, O’Reilly & Coleman, 2013, Law in Commerce, 5th Ed., LexisNexis

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message or to respond. It is to be mentioned that timing issues in case of electronic
communication vary between website contracting, which is generally considered to be a method
of instantaneous communication and contracting through emails14. There are many problems
which are encountered while communicating through emails. There are many instances when the
emails of the senders do not get delivered or get delayed in the process of delivery. It can be
mentioned that delivery of emails solely does not constitute valid communication of acceptance
as the recipient can be unaware of receiving such email. There is no guarantee that the receiver
will access the email upon its successful delivery and read it.
The summation of these problems can be expected to be solved by the extension of the
postal rule to apply in electronic communication. However, in case of Nunin Holdings v
Tullarmarine Estate15, it was held by the court that the postal acceptance rule would not apply
to communication of information by email. The decision was reached by the court on the basis
that email is a virtual and instantaneous mode of communication and therefore the postal rule
should not be applied to it as it does not apply to other modes of instantaneous communication.
The court stated that it has to follow the precedents from cases Entores Ltd v Miles Far East
Corp 16, Asher v Goldman Sachs & Co 17and Reese Bros Plastics v Hamon-Sobelco Australia
Pty Ltd18 as decided earlier which dealt with instantaneous modes of communication. Therefore
it can be said that as postal rule does apply to communication by email, acceptance would be
constituted once the email has been received rather sent.
14 Lipton P, Herzberg A and Welsh, M, Understanding Company Law, 18th edition 2016
15 [1994] 1 VR 74
16 (1955) 2 QBD 327
17 [1991] 1 QB 129
18 (1988) 5 BPR 11-106

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It is to be mentioned that contracts entered into on the internet are similar to the face to
face transactions. Any advertisement for sale of any good or commodity on the internet is
considered to be an invitation to treat. Whenever, the customer places the order from such
invitation to treat and provides the seller with the credentials of payment modes it constitutes an
offer. If the website displays confirmation of such order and issues a virtual receipt valid
acceptance is constituted and the issuance of the virtual receipt constitutes valid communication
of acceptance as held in the case Pharmaceutical Society of Great Britain v Boots Cash
Chemists Ltd19. It can be said that the receipt rule therefore applies in internet contracting and
not the postal rule.
However, it has been argued by some that the email is not a direct instantaneous method
of communication as there is no direct link between the devices of the parties. Email messages
are independent and there is no simultaneous end-to-end traffic path between the sender and the
receiver. Therefore the postal rule should apply to email contracts.
Thus to conclude, it can be said that postal rule is not completely outdated and still can be
applied to modern forms of non instantaneous methods f communication. However, it is not
approved by the court and it is not applied to methods of instantaneous communication.
However, it can be said that there are no legislative measures which provide clarification of
application of postal rule in different scenarios and emails and modern communication stay
unaffected by the postal rule.
19 [1953] EWCA Civ 6

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Bibliography
Adam v Lindsell [1818] B & Ald 681
Asher v Goldman Sachs & Co [1991] 1 QB 129 and Reese Bros Plastics
Brinkibon Ltd v Stahag Stahl
Brinkibon Ltd v Stahag Stahl GmbH [1983] 2 AC 34
Brinkibon Ltd v Stahag Stahl GmbH [1983] 2 AC 34
Entores Ltd v Miles Far East Corp (1955) 2 QBD 327
Entores Ltd v Miles Far East Corporation [1955] EWCA Civ 3
Graw, Parker, Whitford, Sangkuhl and Do, Understanding Business Law 7th ed LexisNexis
Butterworths, 2015
Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11-106
Henthorn v Fraser [1892] 2 Ch 27
Household Fire Insurance v Grant [1879] 4 Ex D 216
Lipton P, Herzberg A and Welsh, M, Understanding Company Law, 18th edition 2016
McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK),
2014.
Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74
Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd [1953] EWCA Civ 6

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Seddon, N; Bigwood, R; Ellinghaus, M, Cheshire & Fifoot Law of Contract, 2012 10th
Australian Edition LexisNexis. Sweeney, O’Reilly & Coleman, 2013, Law in Commerce, 5th
Ed., LexisNexis.
Smits, Jan M., ed. Contract law: a comparative introduction. Edward Elgar Publishing, 2017.
Thomson Reuters. Harris, J. Hargovan, A. Adams, M. Australian Corporate Law LexisNexis
Butterworths 5th edition, 2015.
Vermeesch,R B, Lindgren, K E, Business Law of Australia Butterworths, 12th Edition, 2011