Definitions

Mailbox rule

Mailbox rule

The mailbox rule (called the "postal rule" or "postal acceptance rule" in the UK, Australia and New Zealand, or "deposited acceptance rule") is a term of common law contracts which determines the timing of acceptance of an offer when mail is contemplated as the medium of acceptance. The general principle is that a contract is formed when acceptance is actually communicated to the offeror. The mailbox rule is an exception to the general principle. The mailbox rule provides that the contract is formed when a properly prepaid and addressed letter of acceptance is posted. One rationale given for the rule is that the offeror nominates the post office as implied agent and thus receipt of the acceptance by the post office is regarded as that of the offeree. The main effect of the mailbox rule is that the risk of acceptance being delivered late or lost in the post is placed upon the offeror. If the offeror is reluctant to accept this risk, he can always require actual receipt before being legally bound.

Case law

The rule was established by Anthony in the 19th century cases, starting with Adams v. Lindsell (1818) B & Ald 681, which was later confirmed in Dunlop v. Higgins (1848) 1 HL Cas 381, Household Fire Insurance Company v. Grant (1879) 4 Ex D 216 and Henthorn v. Fraser [1892] 2 Ch 27.

The mailbox rule applies only to acceptance. Other contractual letters (such as one revoking the offer) do not take effect until the letter is delivered, as in Stevenson v McLean (1880) 5 QBD 346. The implication of this is that it is possible for a letter of acceptance to be posted after a letter of revocation of the offer has been posted but before it is delivered, and acceptance will be complete at the time that the letter of acceptance was posted—the offeror's revocation would be inoperative.

Examples:

  1. A makes an offer to B on January 1; A then decides to revoke the offer on January 2 and puts a letter in the mail to B revoking the offer; however, B puts a letter accepting the offer in the mail on January 3, and does not receive A's revocation letter until January 4. The letter of revocation can be effective only when received, that is January 4. However, a contract was formed on January 3 when the letter of acceptance was posted. It is too late to revoke the offer.
  2. A makes an offer to B on January 1, and initially B intends to reject the offer on January 2 by putting a letter in the mail to A rejecting the offer. However, the next day B changes his mind and sends a fax to A accepting the offer. In this situation, whichever communication A receives first will govern.
  3. On January 1, A makes an offer to sell a parcel of land to B. B mails her acceptance on January 2. On January 3, however, before A receives B's acceptance, B telephones A and states she wishes to reject the offer. When B's original letter of acceptance arrives on January 4, A records the contract as a sale. B's acceptance of the offer means there is a binding contract--she is obliged to pay for the land or be liable for damages.

Under the mailbox rule, performance is a means of acceptance. If A orders 1000 blue coathangers and B ships them out, that shipment is considered to be a conveyance of acceptance of A's offer to buy the coathangers. Defective performance is also an acceptance, unless accompanied by an explanation. For example, if A orders 1000 blue coathangers, and B mistakenly ships 1000 red coathangers, this is still an acceptance of the contract. However, if B ships the red coathangers with a note that they sent these because they had run out of blue coathangers, this is not an acceptance, but rather an accommodation, which is a form of counter-offer.

An interesting implication of the operation of the mailbox rule is that as acceptance is complete once the letter of acceptance is posted, it makes no difference whether the offeror actually receives the letter. This was demonstrated in Byrne v Van Tienhoven (1880) 5 CPD 344. If a letter of acceptance were to be lost, acceptance has still taken place. An exception to this would be if the offeree knows or has reason to know that the letter of acceptance never reached the offeror. For example, if A brings a letter of acceptance to the local post office and A sees the post office burn down a moment later, there is no acceptance.

The mailbox rule does not apply to instantaneous forms of communications. For example in Entores Ltd v Miles Far East Corporation [1955] 2 QB 327, the Court held that the mailbox rule did not apply to an acceptance by telex as the Court regarded it as an instantaneous form of communication. The general principle that acceptance takes place when communicated applies to instantaneous forms of communication. Courts have similarly held that the mailbox rule does not apply to acceptances by telephone or fax.

The courts are yet to decide whether e-mail should be regarded as an instantaneous form of communication. If the offeree were to convey acceptance by commercially unreasonable means - by cross-country pony express, for example - the acceptance would not be effective until it had actually been received.

A letter is regarded as "posted" only when it is in the possession of the Post Office; this was established in the case of Re London & Northern Bank [1900] 1 Ch 220. A letter of acceptance is not considered "posted" if it is handed to an agent to deliver, such as a courier.

The mailbox rule does not apply to option contracts or irrevocable offers where acceptance is still effective only upon receipt. This is because the offeree no longer needs protection against subsequently mailed revocations of the offer.

Where parties are at distance from one another, and an offer is sent by mail, it is universally held in this country [United States] that the reply accepting the offer may be sent through the same medium, and, if it is so sent, the contract will be complete when the acceptance is mailed,...and beyond the acceptor's control; the theory being that, when one makes an offer through the mail, he authorizes the acceptance to be made through the same medium his agent to receive his acceptance; that the acceptance, when mailed, is then constructively communicated to the offeror.
-Excerpt of an opinion by Judge Kimmelman (718 A.2d 1223)

Civil law jurisdictions

Civil law jurisdictions do not follow the postal rule. The classical civil law position is that acceptance, like any expression of will, can only be effective if it was communicated to the addressee, unless the lack of communication can be attributed to the latter. The Vienna Convention on the International Sale of Goods chooses a compromise between the two approaches: According to article 18(2) of the Convention, an offer is effective when it reaches the offeror. However, article 16(1) of the Convention provides for the most important consequence of the common law "mail-box rule," that is, an offer may not be revoked if the revocation reaches the offeree after it has dispatched an acceptance.

UNCITRAL model law

Many countries have enacted legislation based on the UNCITRAL Model Law of Electronic Commerce. Such legislation is often entitled the Electronic Transactions Act. Among other issues, this legislation deals a default rule for the time that email (electronic communications) is sent and when it is received. However it is mistaken to suggest that it deals with a clarification of the postal acceptance rule for electronic communications. There are two schools of thought.

(1) Ask if the postal acceptance rule applies to emails (electronic communications). If your answer is yes, then the relevant Electronic Transaction Act (ETA) can help. The postal acceptance rule states that there is a contract when posted – so we should apply the "sent" rule under the ETA. If the answer is no; then either apply the "received" rule under the ETA or ignore it and use the contract rule of communication.

(2) Instead, treat the Electronic Transactions Act as an intended substitute and statutory replacement of the postal acceptance rule; in which case the "received" rule should apply. The problem with this second school of thought is that there is nothing in the Model Law of Electronic Commerce, nor the ETAs which suggests that it was intended to replace the postal acceptance rule. We are still waiting for a court to decide.

The UNCITRAL rules on time of sending and receiving are:

(1) Unless otherwise agreed between the originator and the addressee, the dispatch of a data message occurs when it enters an information system outside the control of the originator or of the person who sent the data message on behalf of the originator.

(2) Unless otherwise agreed between the originator and the addressee, the time of receipt of a data message is determined as follows:

(a) if the addressee has designated an information system for the purpose of receiving data messages, receipt occurs:

(i) at the time when the data message enters the designated information system; or

(ii) if the data message is sent to an information system of the addressee that is not the designated information system, at the time when the data message is retrieved by the addressee;

(b) if the addressee has not designated an information system, receipt occurs when the data message enters an information system of the addressee.

See also

Notes

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