One of the exceptions to the rule on acceptance and communication derives from the postal rule.
The postal rule applies to non-instantaneous modes of communication. These include the post and telegram (Cowan v O’Connor (1888). The rule is that acceptance takes place when the offeree sends their acceptance, not when it is received by the offeror. The rule is an exception to the rule on communication because it means that acceptance can be made without it being communicated to the offeree.
The rule was developed in Adams v Lindsell (1818)
Watch this video to learn more about the postal rule and find out the facts of Adams v Lindsell (1818).
What is acceptance?
Acceptance is an unconditional agreement to an offer. The ordinary rule related to acceptance and communication is that acceptance is effective when it is communicated to the offeror.
What is the postal rule?
The postal rule states that if acceptance is made by non-instantaneous methods, it becomes effective when sent by the offeree, not when communicated to the offeror.
Does the postal rule apply when acceptance is made by telex or email?
The postal rule is not applicable to instantaneous methods of communication.
In Entores Ltd v Miles Far East Corporation (1955) the offer and acceptance were made by telex. The Court of Appeal held that because telex permits almost instantaneous communication, the postal rule did not apply. Acceptance was said to take effect when it was communicated to the offeror.
The House of Lords followed this principle in Brinkibon v Stahag Stahl (1983).
In Thomas v BPE Solicitors (2010), an obiter statement that the postal rule does not apply to acceptance by email was made.
When is acceptance effective if given outside of working hours?
In Brinkibon v Stahag Stahl (1983) the court concluded that if acceptance is made by telex, but outside of working hours, it is not instantaneous. This principle was followed in Thomas v BPE Solicitors (2010).
How does the court determine if the acceptance was made outside of working hours?
In some cases, it is unclear when working hours start and end. In Brinkibon the court held that in such cases they would assess with relevance to the parties; the standard business practices, intention of the parties and where the risk would most fairly lie. This application was followed in Thomas v BPE Solictiors (2010).
To learn more of the facts of these cases, and understand the decisions reached, watch this video.
Once a legally binding offer is made by party A and accepted by party B, a legally binding agreement is formed. Providing all the other elements necessary for contract formation are present, a contract is formed. There are specific rules related to acceptance. If acceptance does not meet these rules, there is no agreement; consequently, no contract is formed.
What is acceptance?
Acceptance is an unconditional agreement to all the terms of an offer. This unconditional agreement, or acceptance can be made orally, in writing or by conduct.
Acceptance and Communication
Acceptance usually takes effect when it is communicated to the offeror.
To find out more about the rules on acceptance and communication, watch this video.
What is the difference between an invitation to treat and an offer? What is a bilateral contract, and what is a unilateral contract?
What is an agreement?
Once a legally binding offer is made by party A and accepted by party B, a legally binding agreement is formed. Providing all the other elements necessary for contract formation are present, a contract is formed.
What is a legally binding offer?
An offer is an expression from the offeror to do, or give something to, or for another party, the offeree. If this ‘expression from the offeror’ is not clear and specific, the law does not recognise it as a legally binding offer. Therefore, party B cannot technically ‘accept’ this non-binding expression.
What makes the ‘expression’ from party A a legally binding offer?
If the ‘expression’ is clear and specific with an intention to be bound by it, the courts will deem it a legally binding offer.
In Gibson v Manchester City Council (1979), the courts decided that the council’s statement that they ‘may be prepared to sell’ the house to Mr Gibson was not an offer, but an invitation to treat.
What is an invitation to treat?
An invitation to treat invites another party to enter negotiations. In Gibson v Manchester City Council (1979), the court said the statement was a step in negotiations for a contract. The purpose of the letter was to invite Mr Gibson to make an offer. The letter was not an offer from the council to Mr Gibson.
To find out more about the facts of Gibson v Manchester City Council (1979) and the reasoning behind the decision, watch this video.
In addition to cases which involve negotiations, there are specific instances in which the courts will state that the expression in question is not an offer, but an invitation to treat. They include cases which involve goods on display in shop windows Fisher v Bell (1960) and goods sold on a self-service basis Pharmaceutical Society v Boots Cash Chemist (Southern) Ltd ((1953).
The courts also usually view advertisements for bilateral contracts as invitations to treat (Partridge v Crittenden (1968). However, advertisements for unilateral contracts are usually viewed as offers. Carlill v Carbolic Smoke Ball Co (1893).
To find out the differences between unilateral and bilateral contracts and bilateral contracts and why the courts usually state that offers in unilateral contracts are offers and that offers in bilateral contracts are invitations to treat, watch this video.
What is a contract?
A contract is a legally binding agreement between parties. This legally binding agreement can be written or unwritten. We make agreements every day, but not all agreements are legally binding. It is important for you, the law student, to be able to identify and differentiate between legally binding agreements and non-legally binding agreements.
What do we mean by legally binding?
Legally binding means the courts will provide a remedy if there is a breach of the contract.
What is the role of the English courts in Contract law?
We live in a market capitalist society. Therefore, the courts do not tell us what to put in contracts, but when an innocent party loses money as a result of a breach of a contract, they may ask the court to intervene.
In contract law the court’s main concern is putting the innocent party in the financial position he would have been in had the contract been performed properly. The courts may decide that the innocent party is entitled to a remedy. The remedies available in contract are damages, injunction and specific performance.
However, before the courts can determine if the innocent party is entitled to any of the remedies listed above, they need to be certain that the agreement reached between the parties was a legally binding one.
What makes an agreement legally binding?
To determine that an agreement is legally binding, the courts will look for the following elements, offer, acceptance, consideration, intention to create legal relations and capacity.
Each of these elements has different rules that you will need to learn and apply to problem questions.
Watch this video for more explanation on how to form a contract.