Business & Contract Law: Case Study on the Postal Rule Application

This case study analyzes a legal dispute between Peter and John regarding a contract for wine sales. John instructed Peter to send a written order and cheque, but before receiving Peter's acceptance, John contracted with another customer. The central issue revolves around the postal rule, which dictates that acceptance is valid when the offeree posts the acceptance, not when the offeror receives it. The analysis refers to landmark cases like Adams v. Lindsell, Dunlop v. Higgins, and Household Fire Insurance Co. v. Grant, to support the argument that Peter's acceptance was valid upon posting, making John liable for breach of contract. The study also considers exceptions to the postal rule, such as when the offeree makes a mistake in addressing the acceptance, but concludes that these exceptions do not apply to Peter's situation. Ultimately, the case study concludes that Peter is likely to win the case, as the court prioritizes the moment of posting for acceptance to ensure business efficacy and ease of proof, emphasizing that John should have waited a reasonable time before contracting with another party.

Business & Contract Legal Studies
BUSINESS & CONTRACT LEGAL STUDIES
Author Name(s)
Class (Course)
Professor (Tutor)
School (University)
The City and State
The Date

Business & Contract Legal Studies 1
Introduction
This case involves Peter and John. Peter was directed by John to conclude the contract for
a sale of wine by sending John a written order together with a cheque to John for the purchase.
However, John did not wait for Peter’s response before concluding a contract with another
customer. Both parties dispute the existence of a contract.
Issue
The main issue for Peter and John case is the application of the postal rule in situations
where an offer is accepted by posting the acceptance while the offeror contracts with someone
else since he was not aware of the acceptance.
Rule
The rules of acceptance of an offer require communication of the offeree to the offeror
(Miller and Hollowell, 2010, p.123). However, the postal rule provides an exception to this
“general rule. According to (Macdonald, 2013), the basic rules that apply under English law in
regarding acceptance by post states that acceptance becomes valid the moment the offeree posts
his acceptance as opposed to when the offeror receives or opens it. These rules were first made in
ruling of (Adams v. Lindsell, [1818]). These principles grant the offeree the right to enforce the
contract even in situations where letters are delayed or lost provided that it was not the offeree’s
faults (O’Sullivan and Hilliard, 2016, p.31). The principles exonerate the offerees from any
liability that may arise after they have posted their acceptance. On the part of the offeror, the law
requires them to wait for a reasonable time moving on to contract with other people.
Application
When it comes to acceptance of an offer, the law allows the offeree to use the postal
services provided that the rules set by the offeror do not displace this method of acceptance.

Business & Contract Legal Studies 2
Other times these rules apply are when the offeror expressly instructs the offeree to post their
acceptance as found in the case between Peter and John. In (Adams v. Lindsell, [1818]), the
defendant was offering to sell wool. He asked the claimant to communicate his acceptance
through the poster. However, there were some delays in the postal services, and hence the
defendants decided to trade with another customer. The defendant believed that the claimant was
in no way going to be interested in the deal. The claimant brought suit requesting to enforce the
contract. On hearing the case, the court found that the claimant had sent the letter the same day
he was given the offer. The court reasoned that the contract was enforceable.
On analysis, the court found that it could not deny the claimant the right to enforce the
contract since acceptance was sent the same day the offeror communicated the offer. It was the
responsibility of the offeror to give the post office sometime to deliver the letter. Another
justification for this reasoning was that it could have been inherently unfair to allow Lindsell
dishonor the contract in which he had misaddressed his offer (Stevenson, 2010). As can be seen,
the facts in John and Peter situation matches this scenario. John was the one who started the
negotiation and provided the instructions for lodging an order which was possible through the
poster. Peter was in full compliance with John’s rules. Again, a difference of one day could not
be counted as a huge difference. Sending acceptance the following day was within the reasonable
business time.
Another rationale provided by the court is that the ruling was necessary for business
efficacy. The court reasoned that if the claimant had not sent the acceptance through the post, the
contract would have remained ad infinitum with each side waiting for the confirmation (Stone
and Devenney, 2015, p.63). If the same concept is weighed in Peter’s case, it is worth concluding

Business & Contract Legal Studies 3
that Peter’s postal acceptance was necessary to close the contract’s communications for the
promotion of the business efficacy.
The ruling in (Dunlop v. Higgins, [1848]) also adopted the previous ruling of Adam’s
case. In the Dunlop case, the claimant had offered to sell his pig-Iron to the defendant, Higgins.
The defendant received the letter of the offer and replied with the acceptance on the same day,
but the acceptance was delayed in the post office. The defendant, however, declined to honor the
agreement citing an increase in the price. Adopting the decision in Adam’s case, the court the
court found that the offeree had no responsibility for the delays caused by the transit. Therefore,
there was a binding contract from the moment the offeree posted his acceptance. In essence, the
same concept fits Peter’s case. John was supposed to give the post office sometime.
The ruling of (Household Fire Insurance Co. v. Grant, [1879]) took a further approach in
adopting the decision on Adam’s case though the situation was completely different. Mr. Grant,
the defendant had applied for shares in the claimant’s company, the Household Fire Insurance.
The claimant awarded the defendant the shares, and a notification was sent to the defendant.
Unfortunately, the letter of notice did not reach the defendant hence Mr. Grant did not pay for the
shares. The defendant denied that there was acceptance since he never received the notice.
Again, the court held that acceptance is deemed communicated when the offeree posts the letter.
It is under the responsibility of the offeror to wait for the mishandlings or delays by the Post
Office. In the justification of this ruling, work (McKendrick, 2017) explains various rationales
for the adoption of this rule. The first one is that by asking the offeree to post his/her acceptance,
the offeror holds the post office acting as its agent. This reasoning was the same held by judge
Thesiger LJ when he stated that a valid contract requires both parties to have a meeting of minds
and a mutual communication serves the best element for bringing them together. The judge held

Business & Contract Legal Studies 4
the post office was the agent that was providing the mutual communication. Though this case is
dealt with a lost letter, the part that applies to Peter and John’s case is the comments made by
Judge. In addition to the comments above, Thesiger LJ added that since the offeror is always
waiting for the offeree’s response, it is a general conception that the offeror could have inquired
on the status of the acceptance before moving on (Chen-Wishart, 2007, p.89). Therefore, John
should have at least enquired about Peter’s last decision before moving on to sell to another
customer.
Also in (Henthorn v. Fraser, [1892]), the court held that the postal rule does not apply in
all situations, only apply where reasonable. The claimant offered an offer to the defendant which
was to be accepted within 14 days. Later the claimant contracted with someone else and sent a
letter of revocation to the defendant. By then the defendant had already received the offer and
sent his acceptance. The court held that the revocation was not effective since the acceptance had
already been sent. The court reasoned that even if an acceptance is valid from the time the
offeree sends the letter, it is not reasonable to apply the same rule to revocation of an offer. In
this situation, the court looked at whether it was reasonable to post the letter (Andrews, 2015,
p.53). The court looked at the distance between the two parties. Also, according to (Peel, 2015,
2–031), the ruling emphasized on the need to keep in mind the time post office takes while
advising the other party to communicate its acceptance through posting a letter. The case would
still apply to Peter and John since both parties do not live close to each other. John was supposed
to reason that posting a letter could not take such a short period.
On the other hand, there are a few situations when it would seem illogical to hold the
offeror responsible even when he does not know of the acceptance. In most cases, a claim arising
from such situations is beneficial to the offeror as they offer some lines of defense. One of such

Business & Contract Legal Studies 5
circumstances was handled by the court of Scotland while ruling in (Mason v. Benhar Coal Co.,
[1882]). However, these were only the situations when the offeree is in mistakes or when he
wrongly addresses the offeror. The judge viewed that even if the ruling of (Household Fire
Insurance Co. v. Grant, [1879]) was right that the offeror should be held responsible even when
the acceptance letter fails to reach him or delays, not when the delays are attributed to the
offeree.
A similar ruling was also held in (LJ Korbetis v Transgrain Shipping BV, [2005]). In this
case, LJ Korbetis, (complaint) sent Transgrain Shipping BV (defendant) a fax accepting one of
the selected arbitrators. The complainant requested a confirmation message from the defendant
which he repeatedly sent to the wrong address. Later the claimant found he had been sending to
the wrong address. He sent to the correct address, but the defendant rejected the confirmation
since it was too late. As an argument, the complainant said that the acceptance was valid from
the time it was sent but the court denied this argument. The reasoning was that though the postal
rules work like that, here the situation was different since the complainant was sending the
confirmation to the wrong address. As can be seen, this could have been a probable defense for
John, but it would not work since Peter had not caused the delays.
Conclusion
Peter will win the case over John. That is, the court will allow Peter to enforce the
contract. The main reason behind the ruling is that acceptance happens as soon as when the
offeree posts the letter as opposed to when the letter reaches the offeror. Other reasons that the
court will consider are that John should have considered the letter's duration in the post office.
Another reason is that contracts are concluded once acceptance happens to prevent ad infinitum.
Also, the post office acted as the agent of John. Finally, by stating that acceptance happened

Business & Contract Legal Studies 6
when the letter was posted, it allows the court to minimize the difficulties of getting the proof.
That is, it is possible to proof when a letter is posted (by post office receipts) than proving its
failure to reach the destination. The latter is relative to person, time and location which is very
hard to prove.

Business & Contract Legal Studies 7
References
Adams v. Lindsell [1818] B & Ald 1.
Andrews, N., 2015. Contract Law. Cambridge University Press.
Chen-Wishart, M., 2007. Contract Law. OUP Oxford.
Dunlop v. Higgins [1848] HLC 1.
Henthorn v. Fraser [1892] Ch. 2 1892.
Household Fire Insurance Co. v. Grant [1879] Ex. D. 4.
LJ Korbetis v Transgrain Shipping BV [2005] EWHC 1345.
Macdonald, E., 2013. Dispatching the dispatch rule? The postal rule, e-mail, revocation and
implied terms. European Journal of Current Legal Issues, [online] 19(2). Available at:
<http://webjcli.org/article/view/239> [Accessed 25 Jul. 2018].
Mason v. Benhar Coal Co. [1882] R 9.
McKendrick, E., 2017. Contract Law. Macmillan Education UK.
Miller, R.L. and Hollowell, W.E., 2010. Cengage Advantage Books: Business Law: Text and
Exercises. Cengage Learning.
O’Sullivan, J. and Hilliard, J., 2016. The Law of Contract. Oxford University Press.
Peel, E., 2015. Treitel on The Law of Contract. 14th edition edition ed. London: Sweet &
Maxwell.
Stevenson, P.J., 2010. Going Postal: An Examination of the Postal Rule and its Modern-Day
Relevance.
Stone, R. and Devenney, J., 2015. The Modern Law of Contract. Routledge.