Contract Law Questions - What is the Postal Rule?

The contract law questions every student asks - answered.

The postal rule is a special exception to the general rule that contract acceptance must be communicated to the offeror before a contract is formed. It is a classic topic in contract law and regularly appears in university examinations and SQE1 assessments.

The General Rule

Normally, a contract is formed when the acceptance is received by the offeror.

💡Example: Alice offers to sell her car to Ben. Ben emails accepting the offer. The contract is formed when Alice receives the acceptance.

This makes intuitive sense. If the offeror does not know about the acceptance, it is difficult to say that there has been a complete agreement.

The Exception: The Postal Rule

If the offeror expressly or impliedly agrees to acceptance being sent by post, then the contract is formed when and where the acceptance is posted by the offeree.

In other words, the contract is formed the moment the acceptance letter is placed in the post box. This means that a contract can exist even though the offeror has not yet received the acceptance and may be completely unaware of it.

💡Example: Alice offer to sell her car to Ben and asks for acceptance by post. Ben sends a letter accepting the offer. The contract is formed when Ben posts the letter.

The Leading Case: Adams v Lindsell (1818)

Facts

The defendants wrote to the claimants offering to sell wool and requested a reply by post.

Due to a delay in delivery, the offer reached the claimants later than expected. The claimants mailed their acceptance immediately, but before it arrived, the defendants assumed the offer had been rejected and sold the wool elsewhere.

Decision

The court held that a contract had been formed when the acceptance was posted. Therefore, the defendants were in breach of contract.

Why?

The court reasoned that if acceptance only took effect upon receipt, parties could never be certain when a contract had been formed. Acceptance and acknowledgement could continue endlessly. The postal rule therefore provides commercial certainty.

What If the Letter Is Lost?

This is where the postal rule becomes particularly significant. Under the postal rule:

✅ The contract is still formed.

Provided the acceptance was properly addressed and posted, the risk of loss generally falls on the offeror rather than the offeree.

When Does the Postal Rule Not Apply?

The Offer Requires Receipt

An offeror can disapply the postal rule by stating that they will not be bound until notice is actually received.

💡Example: "Your acceptance will only be effective when received".

In that situation, acceptance must be received before a contract is formed. Posting the letter is not enough.

Letter is Incorrectly Posted

The postal rule only protects an acceptance that is properly posted. If the offeree:

• Uses the wrong address;

• Fails to put the letter into the postal system properly; or

• Posts it incorrectly

the rule will not apply

Instantaneous Communications

The postal rule does not generally apply to:

• Telephone calls

• Telex

• Fax

• Email

• Most online communications

For these methods, acceptance usually takes effect when it is received. This distinction reflects the fact that modern communications are much faster than traditional post.

The Postal Rule - In Summary

Key Takeaways

• The postal rule is an exception to the normal rule that acceptance must be communicated.

• Acceptance takes effect when the acceptance letter is posted.

• The rule was established in Adams v Lindsell (1818).

• The contract may be formed even if the letter is delayed or lost.

• The rule only applies where post is an appropriate method of acceptance.

• The offeror can exclude the rule by requiring actual receipt.

• The rule generally does not apply to instantaneous communications such as email or telephone.