The effectiveness in the contract making procedure as

The
attributes of a letter are governed and under the purview of the postal rule.
Generally, in contract law, an offer is said to be accepted when the acceptance
is communicated to the offeror. But in case of letters, an acceptance is said
to take place the moment the letter stating the acceptance is posted by the
offeree (the person to whom the offer is made). The postal rule works on the
following principles viz. :

#
offer made by letter is effective only after it is received by the offeree

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#
acceptance is effective as soon as the letter of acceptance is posted by the
offeree.

#
for revocation to be effective, the intimation about revocation shall be
received by the offeree before the letter of acceptance is posted by the
offeree.

The
postal rule is also termed as the arbitrary rule because it was framed as in
the early 19th century, no proper regulation on acceptance and
formation of contract through letters was present and moreover no other effective
means of communication was available.

Postal
rule states that once the letter of acceptance is posted, postal acceptance
comes into existence2. the Post Office3 is considered as  the agent of the offeror. The postal rule of
acceptance is also known as the rule of convenience4.

 

 

 

 

Reasons for creation of postal rule

This rule was created in the year 1818 during the case
of Adam vs Lindsell5 where, the problem of clear establishment as to when the
communication was made, whether the communication was made, and if there was
any contract formation surfaced and henceforth the court had to establish a
ruling in this regard.

The main reason behind creation of this rule was to
safeguard the offeree from any wrong doing causing revocation of the offer when
the offeree was in the position to the accept the offer and the offer had been
communicated to the offeree.

Famous cases to be cited in this regard are :-

Adam vs Lindsell (1818)

Henthorn vs Fraser (1892)

 

The postal rule led to a lot of effectiveness in the
contract making procedure as :

# It facilitates the principal of “consensus ad idem”
and stresses that the minds of offeror and offeree have greater chance of
coinciding at the time when offeree posts the letter of acceptance than at the
time when letter of acceptance is received by the offeror

# The post office is considered as an agent of the
offeror thus, when the post office receives the letter of acceptance from the
offeree, acceptance is said to be completed.

 

The only drawback being encountered in this rule is
the delay and gap caused in sending or receiving the letter of offer or
acceptance, as the case may be, and both the parties exercise no control over
in the transmission6 process.

 

 

Continued application of postal rule

As the postal rule is ancient, its usage in current
time has become a matter of debate after the advent of new and faster means of
communication. Business in today’s world has expanded beyond regional
boundaries and instances of transactions has also increased numerously.
Internet is currently a major factor aiding the business process. Postal rule
was made effective to solve the disputes arising out of delay in the receipt of
letter of acceptance. It determines whether the communication was made, when
the acceptance was sent and whether the contract was formed.

 

But the postal rule has undergone a lot of changes
since its primal enforcement as to keep up with the time, but still some
elements are lacking as in :

·       
If a letter lost, there
is no method to determine if it was addressed properly7 or not. And whether
it contained the acceptance by the offeree.

·       
The technological
advancement has made postal system almost deplete.

·       
Post office cannot be
legally termed as an agent of offeror and the post man is not authorised to
deliver contractual documentation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impact
of electronic transactions act 1999 (cth) and electronic transactions act
2000(vic) on postal rule

 

The
electronic transactions act 1999 came into force on March 2000. It was
basically created to spread awareness about the availability and ease of
conducting activities via electronic transactions. Same is the applicability
for electronic transactions act 2000

The
main significance of this act is that it gives same status to electronic
transactions as that of paper based transactions, for legal purposes. But apart
from this, the act validates electronic transactions and proposes to infuse
more acceptance to electronic means of communication for conducting business
related activities.

The
commonwealth electronic transactions act states in section 8(1)

“for
the purpose of law a transaction is not invalid because it took place wholly
or partly by means of one or more electronic communications.”

 

The  postal rule does not get much altered by the
act but in terms of email, the Electronic Transactions Act defines that “the
time of receipt of an electronic message is when it enters the addressee’s
information system. Moreover, it does not specify whether the sending or
receipt of the acceptance completes the formation of a contract8.”

But,
it is very important to note that the act was not specifically made keeping in
mind the formation of contracts but it does outline the prepositions of any
contract that is formed through electronic communication.

Some
important cases that outline the effects on contract by email under the purview
of this law are:-

#
Nunin Holdings vs Tullarmarine Estates

#
Asher vs Goldman Sachs & Co

#
Reese Bros Plastics vs Hamon-Sobelco Australia Pvt ltd

 

 

 

Should postal rule apply to email and
other forms of modern communication

 

Postal
rule, created in the year 1818 was made after considering contracts by letters13,
which is a non-instantaneous form of message. At that time, only post office
services served as means of reliable communication. But today, the scenario has
changed completely. Internet has taken over on majority of operations and a big
part of the business in the world is carried out over the internet. This also
leads to a thought process which considers the rapid revolution in the means of
modern communication might make the postal rule redundant. A very famous
example being, “Entores ltd vs Miles far east corporation (1955) 2 QB 327”
whereby the court held that postal rule does not apply to acceptance by telex,
as telex is an instantaneous form of communication. In the same way when the
acceptance takes place over telephone or fax, the postal rule does not apply.

As
the postal rule works on the principal that acceptance is complete when the
offeree posts the letter of acceptance irregardless of the fact that the letter
of acceptance has reached offeror or not, “Byrne vs Van tienhoven (1880) 5 CPD
344”. Even the loss of letter in transit or before it reaches the offeror did
not relieve the offeror from the responsibility of carrying out the contract.
The modern means of communication brought in a great aid to increase transparency
by introducing the availability of receipt system. This system helps the
offeror to know if the acceptance has been forwarded to him, and the offeree
also gets to act in time in case the acceptance is not yet posted to the
offeror because latest means of communication provide the option to check if
acceptance has been sent or not.

 

Another
interesting case being

“Brinkibon
ltd vs Stahag-Stahl und Stahlwarenhandelgesellschaft mbh gmbh”

 

In
“Tallerman & Co Pvt ltd vs Nathan’s Merchandise (1957) 98 CLR 93, 111-112”
, Dixon CJ and Fullagar J stated “the general rule is that a contract is not
completed until acceptance of an offer is actually communicated to the offeror,
and a finding that a contract is completed by the posting of a letter of
acceptance cannot be justified unless it is to be inferred that the offeror
contemplated and intended that his offer might be accepted by the doing of that
act.14”

Uniform
Computer Information Transactions Act 2000 section 204(4) states “if an offer
in an electronic message evokes in electronic message accepting the offer, a
contract is formed when an  electronic
acceptance is received.15”

Email
is one of the most common forms of digital messaging and means of digital
communication  all over the world. But
still, the status of email is quite ambiguous. The scope of ELECTRONIC COMMERCE
REGULATIONS ACT does not extend to email. There is still no common agreement to
decide whether email is instantaneous or non instantaneous form of
communication.

Moreover
no formal authority is yet operational to monitor the email operationability.
Although a lot of arguments have been made upon the categorisation of emails
for the purpose of forming contracts. One such argument states “postal rule
should apply to email as email is neither direct nor reliable16 and the
person sending the email does not know immediately whether the communication
was successful”17. And also once the offeree has sent the mail stating
acceptance, its no more in his control to retrieve the email back. Another
argument being, in email also, the risk of onus is put on the person making
selection of the means of communication. According to Edwards and Waelde,
“email is deemed to be received when sender receives the recipients
acknowledgement of the delivery18.”

There
are arguments for and against the inculcation of email under the postal rule.
But this discussion makes it quite obvious that postal rule, though almost two
centuries old, can still be applied on modern non instantaneous forms of
communication. A recent case in the court of Singapore backs this claim. But
telegraph, telephone and telex are out of the purview of postal rule.

 

 

 

 

 

 

 

 

 

 

Footnotes :

1
 https://en.wikipedia.org/wiki/Contract#Offer_and_acceptance

2  Stephen Graw, 2011, An Introduction to the Law of Contract, 7th Ed., Thomson Reuters.

3  Brinkinbon Ltd vs Stahag und
Stahlwarenhandelsgesellschaft mbh (1983) 2             .      A.C. 34 at 41

4  (1999) 1 EBL 5,6, Issue 5

5  (1818) 1 B & Ald 681

6  P.Fasciano “Internet Electronic Mail : A last
Bastion for the Mailbox Rule”  .      (1996-1997) 25 Hofstra Law Review 1542

7  D.M.Evans ‘The Anglo-American Mailing Rule :
Some problem of Offers      .       and Acceptance in contracts by
correspondence” (1966) 15 International and .      Comparative Law Quarterly 553-575

8  Formation of Contracts by Email – Is it Just the Same
as the Post? by Sharon   .      Christensen (2001) 1(1) QUTLJ 22.

9  1994 1 VR 47 at 83.

10 (1955) 2 QBD 327.

11  1991 1 QB 129.

12  (1988) 5 BPR 11-106.

13  D.Capps “You’ve got mail” (2003) N.L.J 906

14 
L.Koffman (2001) “The Law of Contract”. See also A.W.B Simpson
(1975),   .       91 LQR 247

15  D.Capps “You’ve got
mail” (2003) N.L.J 906

16 
Clearly the delay in e-mail communication will not be as long as the
delay   .         using postal services, but
uncertainity whether a message has arrived could .        be just as great.

17  Edwards,
Waelde (2009) law and the internet, p.105

18  As
above, p.105