The Rationale behind the Postal Rule - Assignment Example

Insert full names Instructor’s name Insert Course name 9th April 2012 Introduction Contractual agreement has always been viewed in terms of offer and acceptance. The universal principle to contract law has always been parties may get into an agreement in whichever way they deem fit and they are subject to certain terms as they choose. As far as legal requirements vital to their formation are binding contracts may be formed. Moreover a binding agreement may be manifested in terms of writing or in verbal form. One of the controversial issues in the law of contract formation has always been the issue of distance contracts. Matters regarding to the types of rules that should be used to govern this type of contracts have always been a topic of debate. One of these rules includes the age old Postal acceptance rule also known as the “postal rule” or the “Mailbox rule”. This paper seeks to examine the justification of the postal acceptance rule and its place in the modern world with the emergence of electronic means of communication Background Postal acceptance rule dates back in 1818 when it was established in a court case of [ada18] In this case the code had to reach a verdict on the moment of contract formation by post. Apparently the courts found out that the parties communicating acceptance through post office were never certain at the exact time the acceptance had been sent. Since postal communication is subject to delay, the involved parties could never be simultaneously aware of the acceptance of the communication, that is, the communication was non instantaneous. As a result this created a series of problems that in turn led to the formation of the postal acceptance rule that still is in so much use today The postal acceptance rule The postal acceptance rule as accepted in the law legal systems stipulates that contractual offer will be accepted at the time the letter is sent and not when it is proven received. Also known as the “Mailbox” Rule it is a concept of the contract law. The postal rule was developed to facilitate contracting at a distance. Initially, bargaining at a distance often posed a great challenge to bargaining parties especially through the postal services. This was mainly because via the mail parties could not know simultaneously whether they had reached an agreement. As a result a general rule indicating the time of an acceptance had to be established. Consequently the postal acceptance rule was developed .The postal rule function to create an exception to the general rule, which stipulates that an acceptance will only be effective upon receipt The postal rule better understood when described using a functional example. For instance an offeror sends an offer to a second party known as the offeree via post office. According to the rule of engagement the offeror can decide to revoke or cancel the offer any time before acceptance. This in turn gives the initiator of the deal an upper hand on the bargaining table. This means that the offeree is at a greater loss since once he /she receives the offere he does not know whether the offer still stands or the offeror had already revoked it. Moreover he/she doesn’t know when he is contractually bond since he cannot establish the exact time of receipt of his acceptance. To clear this imbalance the postal rule was develop in order to make the process of contract formation more reasonable for the offeree. When the rule is applied the offerees acceptance is catered for as easily as the letter is mailed, that is the acceptance was effective as soon as it was dispatched The Rationale behind the Postal rule The main logic behind the postal rule approach which now is considered an applicable with the emergence of modern means of communication is that, the Postal acceptance rule worked on the basis of regarding the post office as an agent of either or both parties forming the agreement. This rule was initially coined with an attempt to provide the offeree some degree of assurance when accepting an offer by post. However if the rule relating to the postal rule was to be applied on an acceptance sent by post, then the offeree would never be assured of an existence of a binding contract not until the offeror communicated back upon receipt of the letter of acceptance. Two major assumptions are usually put into play when it comes to postal acceptance rule. For one the is a small risk involved in the process, that is ,due to some difficulties , there would be a delay in receiving of the letter This therefore means that someone will have to take a risk for a given period of time while not knowing whether contract has been brokered or not. On this matter the courts have concluded that the offeror is the one to take the risk because he/she is the one making the offer and they are the ones to state the timeframe when actual notice is to be delivered to them The other assumption is that the communication would be non instantaneous, that is, there would be a delay in delivery of the mail or letter with respect to where it will be sent. Thesiger L, J summarizes the rationale of postal rue as follows “if the post office be such common agent, then it seems to me to follow that, as soon as the letter of acceptance is delivered to the post office, the contract is made as complete and final and absolutely binding as if the acceptor had put his letter into the hands of a messenger sent by the offeror himself as his agent to deliver the offer and receive the acceptance.” Justification of the postal acceptance rule The postal rule is usually considered an obstacle towards fairness in contract law as it is biased to the offeree. However a number of justifications have been put across to justify the retention of the postal rule in Australia and other parts of the world One of the most common justifications for the retention of this controversial rule in the law legal systems is that of the business convenience. Certainty is usually of vital importance when it comes to contractual relations. This means that if an acceptance is considered complete upon posting then the offeror can effectively play his part on the surety that a binding contact has been formed on postage. Moreover upon postage of the letter of acceptance it is usually assumed that he offeree has entirely done his best in communicating acceptance and thus should not be blamed of any event that may later arise to affect the complication of the contract However this justification has been criticized due to a number of reasons. For instance it has been a subject of criticism due to the fact that it not only favours the interest of the offeree but it does so in an unfair manner. Thesiger L.J in the case [Hou79] brings out a rather persuasive case highlighting some of the viewpoints in favour of the postal rule on this basis Another famous justification for the retention of the Postal rule is the justification on the basis of agency. The court argued that the post office only acted as an agent of the offeror and offeree and that the contract was binding or complete upon delivery to the post office. However this justification has been contested by various schools of thoughts. Simon Gardner in his book contest the justification of urgency by arguing that the offeror’s agreement to settle for post as the means of communicational acceptance does not bring out the aspect of agency. According to him the possibility of regarding the post office as an agent is unreal as it does not cater for prepaid letters. Moreover if the post office was to be regarded as an agent to carrying the letter then there will be no agency to receive it in order to conclude a contract on its behalf, a fact that has to play across in order to justify the rule The idea that the sender “loses control” over communication soon after posting, forms another basis of justification that has been used for the validity of the postal acceptance rule. It is believed that when an individual posts a letter he /she has no control over it once in the mail box as they cannot retrieve it neither are they in a position know if it got lost along the way. As a result the offeror must be given the assumption as having made the offer throughout the whole period his/her offer is in the post. This therefore implicates that the agreement between the parties is binding as soon as the acceptant ace goes into the mail box. This is clearly evident in the e case of [Hen92] Postal acceptance rule and revocation offer The postal acceptance rule does not honour the revocation of the offer by the offeror. This means that the rules applies notwithstanding that one party has decided to withdraw the offer prior to posting a letter of withdrawal. This means that the withdrawal can only be effective if it is communicated to the offeree before he/she has accepted the offer. This has been clearly covered in the case of [Bry80] The Postal rule and Modern communication methods The postal acceptance rule was developed for non-instantaneous means of communication back in the 19th century Moreover it was established by arbitrary choice as postal service was the only means of communication especially for distant contracting. However with change and increase in technology postal rule has been left in the back shelves with the introduction of instantaneous means of communication through e-mails, telefax, instant messaging (IM) among others. Despite this there have been talks to incorporate the postal acceptance rule in modern means of communication. Principles justifying the use of postal rule in modern means of communication have already been developed and the Courts have been called to consider whether the rule can be applied in other means of communication at a distance. Currently the only means of modern communication that had been confirmed to work well with Postal acceptance rule has been the telegram communication The court has remained adamant in applying the acceptance rule in other modern means of communication such as the telex, telephone among other due to the fact that they are instantaneous forms of communication. The idea of being instantaneous is specifically reflected in the case of [Ent] where the court refused to apply the postal rule on communication by telex arguing that such communications are practically instantaneous Additionally there have been talks to extending the postal acceptance rule in emails. Emails like traditional mode of communication suffer from delay from time to time. The architecture involved in sending and receiving of mails may suffer substantial delays at any one time. One of the many reasons that may lead to incorporation of postal rule on electronic mails may be the lack of existence of any legal establishment with respect to determining the conclusion of acceptance electronic mails. Another reason for applying postal rules in email might be to do away with business uncertainty especially with respect to the timing of contracts of electronic mail. if the general rule is applied an uncertainty will be created in what will be the exact time of considering the email formed. for example if client A sends his mail on Friday afternoon and client B who is the recipient already had left his office by noon only to report back in the office Monday morning the what time can be considered as the time of acceptance or receipt? Will it be Monday morning when he resumes work or can it be any time client B opens his email account to access his mails, even if when he is out of office? The postal rule aims at eliminating this types of uncertainties and creates a precise time regarding electronic mail contract conclusion Email is also considered a non-instantaneous mode of communication and as a result it is subject to delay. In fact contracting by mail has always considered as the digital equivalence of the postal system[Gar92] Delays in sending and receiving of mails may arise from network failures, typing of incorrect email address of the intended recipient ,technical failures, hacking by third parties such as identity thieves among others. Just like in postal system it is usually suggested that risk of non-delivery of email should lie with the sender of offeror. However, these possibilities have not been exhaustive enough to persuade courts to apply the postal rule on electronic mails Conclusion In conclusion it is imperative to note that the nature of the postal rule calls for separation of parties by time and distance. When considering how the laws of contract have changed over time it is always important never to take for granted the developments of the former law systems such as the postal acceptance rule .This is because it is such developments that will provide a platform for improvement of business laws and coming up with more reliable contracting principles such as the inter praesentes negotiations. Works Cited ada18: , (adam v lindsell), Hou79: , (Household Fire and Carriage Accident v Grant), Hen92: , (Henthorn v Fraser), Bry80: , (Bryne & co v Leon Van Tiehoven & co), Ent: , (Entores Ltd v MIles Far East Corp), Gar92: , (Gardner), Read More