Business and Company Law (BLO5540) Assignment

Running head: BUSINESS AND COMPANY LAW
Business and company law
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BUSINESS AND COMPANY LAW
Question 1
The postal rule of acceptance is considered as one of the most significant area of concern
in contract law. The rules pertaining to acceptance by post have undergone significant changes
since its emergence in 1818. In contract law, the postal rule has been incorporated for the sole
purpose of resolving any issues or conflicts that may arise in terms of communications an
acceptance rules as stipulated under the law of contract. A contract is rendered as valid if it
comprises the essential elements like offer and acceptance of such offer. The essential elements
of a contract are considered fundamental to set out the contractual rights and obligations of the
parties to the contract and to make it enforceable in the court of law. The fact that acceptance
under the postal rule is perceived as an exception to the common provisions relating to offer and
acceptance has been given much importance. Under the contract law, a contract can be
terminated by revoking the contract prior to the acceptance of the same. However, the revocation
of the contract must be communicated to the person making such offer1.
Several issues have arisen with respect to the eligibility of a revocation of an offer. This
has led to numerous issues, giving rise to a question whether the person, making offer as revoked
it prior to or after the acceptance of the offer. The sole objective of the introduction of the postal
rule is to clarify the confusion that primarily arose due to communication between the offeror
and offeree with respect to offer and acceptance. The emergence of the postal rule is marked by
the case of Adam v Lindsbell2. This case required the court to determine when a contract is said
to be formed between the parties to a contract. The court held that as soon as the offeree posts a
letter of acceptance, contract is said to have been formed between the offeror and the offeree.
1 Thomson Reuters. Harris, J. Hargovan, A. Adams, M. Australian Corporate Law LexisNexis Butterworths 5th
edition, 2015.
2 Adam v Lindsbell [1818] B & Ald 681.

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BUSINESS AND COMPANY LAW
The court further held that both the parties to the contract must have intention to form
the contract by post. The time limit required to deliver is long and inconsistent thus, making it
difficult to determine the accurate time when the party accepts the offer. The emergence of the
postal rule resulted from the issue that the court faced while determining whether a contract was
formed between the parties to the contract.
The postal rule has been applied in the case Henthorn v Fraser3 as well. The legal
provision of postal rule stipulates that an offer is said to e accepted when the letter of acceptance
is out of the control of the person making such acceptance; in the event such acceptance is sent
by post. However, the postal rule is rendered valid only if the offeree correctly addresses the
letter of acceptance. Moreover, the acceptance of letter is considered valid even if such letter
does not reach the offeror as the acceptance of the offer is said to be made at the time the letter of
acceptance is posted by the offeree.
Additionally, the parties to the contract must agree on the fact that the communication of
acceptance shall be made through post. This is because instant communication of acceptance is
valid only when the parties to the contract undergo face-to-face interactions and when such face-
to-face interaction is not possible, there is no possibility for instantaneous acceptance to take
place. Therefore, it would be unfair to expect that the parties had knowledge about the chances of
refusal of the offer after the offeree has posted a letter of acceptance. In Brinkibon Ltd v Stahag
Stahl GmbH4, the provision of the postal rule has been applied for determining whether there is
a formation of contract between the contractual parties.
3 Henthorn v Fraser [1892] 2 Ch 27.
4 Brinkibon Ltd v Stahag Stahl GmbH [1983] 2 AC 34.