Macdonald, 'Dispatching the dispatch rule? The postal rule, e-mail, revocation and implied terms' (2013) 19(2) Web JCLI

Dispatching the dispatch rule? The postal rule, e-mail, revocation and implied terms.

Elizabeth Macdonald

Professor of Law
Swansea University.

© 2013 Elizabeth Macdonald
First published in the Web Journal of Current Legal Issues
Citation: Macdonald, ‘Dispatching the dispatch rule? The postal rule, e-mail, revocation and implied terms.’ (2013) 19(2) Web JCLI

Summary

It is a matter of controversy, whether the postal rule should be applied to e-mail and similarly modern methods of communication. This article looks at the underlying bases of the rule and recognises that it has always been a matter of the weighing of benefits and drawbacks. A balance favouring a dispatch rule is very unlikely to exist with such newer methods of communication, and may well no longer even justify the postal rule in relation to the post itself. However, it is argued that the advantages of the rule should not simply be abandoned. It is contended that we should break away from the simple dichotomy of a dispatch or receipt rule, to seek a means of maintaining its positive impact, whilst avoiding the harmful side effects. It is further contended that could be achieved by use of the device of terms / contracts implied in law, which would also reveal the true nature of the rule, as concerned with the regulation of pre-contractual behaviour.

Contents

1. Introduction

2. The Telex cases

3. The revocation issue.

4. Risk of a lost or delayed acceptance.

5. Economic efficiency

6. Overview

7. Dealing with the revocation issue without the postal rule

8. The Implied Term / Contract

9. Conclusion

Bibliography

1. Introduction

The postal rule is an exception to the “general rule ... that a contract is formed when acceptance of an offer is communicated by the offeree to the offeror” (Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34, at p 41). It stems from Adams v Lindsell (1818) 1 B & Ald 681, and under it a contract is formed when a letter of acceptance is posted. It applies when it is reasonable to use the post (Henthorn v Fraser [1892] 2 Ch 27), and is subject to the offeror not ousting its application (Holwell Securities Ltd v Hughes [1974] 1 WLR 155). It means that an offer can no longer be revoked once the acceptance has been posted (Re Imperial Land Co of Marseilles (Harris’ case) (1872) LR 7 Ch  587), and it is generally irrelevant that it never arrives, or arrives late (Household Fire and Accident Insurance Co v Grant [1874-80] All ER Rep 919), although, the rule will not apply if loss or delay is due to the fault of the offeree, who has, for example misaddressed it (L J Korbetis v Transgrain Shipping BV [2005] EWHC (QB) 1345 at [15]).

 In its making effective of an acceptance on posting, the postal rule is counterintuitive (Fasciano 1997, 975), and is a “radical departure from the fundamental principles of contract law” (Hill 2001, 14). In the recent Australian case of Wardis v Agriculture and Rural Finance Pty Ltd [2012] NSWCA 107 Campbell JA made some obiter comments on the postal rule. He took the line that at[133] 

“It is hard to find a convincing explanation for the posting of an acceptance sometimes being a sufficient acceptance of an offer, beyond the urgent practical necessity of having some rule to decide by what act and at what time people who are negotiating for a contract, but are not in each other’s presence become bound.”

This is in keeping with the view that the rule merely deals with a “co-ordination problem”, so that, like the rule as to which side of the road we drive on, it is there because a rule is needed, rather than the rule (Smith 2004, 192). It is hardly surprising that Campbell JA went on to express the opinion that the “future existence of the postal acceptance rule ... might be in doubt” at [134].

A view of the postal / dispatch rule as arbitrary in nature, could lead to the easy dismissal, without any further thought, of any idea of extending it to e-mail, or other such modern forms of communication, and even the abandonment of the rule itself. This might be strengthened by the fact that what is to the fore in relation to determining which rule should apply is whether the method of communication is “instantaneous” (Beale 2012, 2-050), and, as used, that is a problematic test. The reference to “instantaneousness” derives from the telex cases, of Entores Ltd v Miles Far East Corporation [1955] 2 QB 327 and Brinkibon v Stahag Stahl und Stahlwarenhandels GmbH [1983] 2 AC 34, and referring to the former, the view was taken in David Baxter Edward Thomas and Peter Sandford Gander v BPE Solicitors (a firm) [2010] EWHC 306 (Ch) at [86] that the postal rule was not applicable to e-mail as it was “instantaneous”. There is, however, no agreement as to any such classification of e-mail (Chwee Kin Keong and Others v Digilandmall.com Pte Ltd [2004] 2 SLR 594; [2004] SGHC 71; and contrast eg Hill 2001, 158-159, and Murray 2000, 25), and that is unsurprising. As we shall see, in the telex cases, it was clearly not being used as a factual test. Reference to a test, which cannot, as such, actually be used, could give the impression that the courts are simply choosing not to extend the postal rule, and might easily abandon it altogether.

However, the question of the extension of the postal rule to e-mail, and other such modern forms of communication, and its retention in relation to the post, needs far more consideration. As we shall see the rule does not simply exist because a rule was needed, rather than the rule. The postal rule has long served purposes beyond that, and the benefits of a dispatch rule should not simply be lost, without further thought, through their insufficient recognition and consideration. The underlying bases of the postal rule need to be looked at. Economic efficiency, and the effect of the postal rule in relation to lost or delayed acceptances will need to be addressed, and particular consideration will need to be given to the role of the rule in relation to the problem of a revocation arriving with the offeree in between the time of the dispatch and receipt of the acceptance (the ‘revocation issue’). A dispatch rule is beneficial in dealing with the revocation issue, and also in putting the risk of loss or delay of the acceptance on the offeror, when it is the fault of the offeror. The problem is that, using the rule to obtain its advantages, occasions harmful side effects. It will be seen that a weighing of detriment and benefit is in question, and it is extremely doubtful that any such exercise comes down in favour of the postal / dispatch rule in the light of modern communications, either in relation to such forms of communication as e-mail, or even its continuance in relation to the post itself. That does not, however, mean that we should simply throw out the idea of a dispatch rule, and lose its benefits. We should ask whether we can keep those, whilst avoiding the side effects. It will be contended here that the advantages would now be better obtained by an entirely new approach, utilising terms / contracts implied in law, which would not produce the harmful side-effects, and which would allow a very different perception of what the role of the postal rule has been, and what the significance of the retention, and extension, of its positive impact would be.

Although it is the post and e-mail which are focussed upon, the analysis would apply to all methods of communication.

2. The Telex cases

A number of justifications for the postal rule have been put forward in the past which have long been recognised to be fatally flawed and dismissed accordingly. These include the meeting of minds,(1) the idea of the post office as an agent,(2) the notion that the offeror chose the method of communication and anyway could have stated that the postal rule was not to apply,(3) that it is necessary to avoid an endless chain of correspondence,(4) and that it is the better rule evidentially.(5) These justifications have been so clearly dismissed in the past that they are not, again, considered in the text here, where the starting point will be the line taken in the two classic cases, from the courts of England and Wales, in relation to whether the postal rule should be applied to a more modern form of communication, and from which a ‘test’ of “instantaneousness” in English Law stems: the telex cases of Entores v Miles Far Eastern Corp [1955] 2 QB 327 and Brinkibon v Stahag Stahl, [1983] 2 AC 34, where the courts decided that the postal / dispatch rule should not be applied to determine the time of effectiveness of telexed acceptances.(6)

In Entores Ltd v Miles Far Eastern Corp, without providing reasons, Denning LJ concluded that “the rule about instantaneous communications between the parties is different from the rule about the post”, and the contact was only made when the acceptance arrived (at 333). Birkett LJ took the line, again without explanation, that (at 335),

“in the case of Telex communications (which do not differ in principle from the cases where the parties negotiating a contract were actually in the presence of each other) there can be no binding contract until the offeror receives notice of the acceptance from the offeree”.

So here there are indications that what matters is the “instantaneousness” of communications, and communications which “do not differ in principle” from those which are inter praesentes. As telex clearly was not actually “instantaneous”, as Denning LJ himself recognised (at 332), and there was no indication of what made a telex the same “in principle” as communication inter praesentes, when plainly it differed from it in many ways, in themselves, these points were not very helpful.

In Brinkibon Lord Wilberforce said that the situation was clear where contracts are formed, orally, or in writing, inter praesentes: the general rule requiring communication of acceptance applied. He extended this to communication by telephone or radio, stating that, even if there was not “mutual presence”, the “same result should follow”, with communication which was “instantaneous” (at 41). However, he clearly did not think that any test of “instantaneousness” was to be applied as a matter of fact (see also Lord Fraser at 43). He asked (at 41-42):

“with a general rule covering instantaneous communication inter praesentes, or at a distance, with an exception applying to non-instantaneous communication at a distance, how should communications by telex be categorised?”  

He answered the question by recognising that in “Entores Ltd. v. Miles Far East Corp the Court of Appeal classified them with instantaneous communications” (at 41). This was not a matter of establishing that factually telex satisfied any such test, but of deciding to treat telex as in the same category as communications which did. It is hardly surprising that it has proved difficult to determine the classification of e-mail as instantaneous or not.(7)

However, the judgment of Parker LJ, in Entores, is more helpful, as it does indicate a concern with the bases of the postal rule. Although making comments similar to those of the other judges (at 337), he also identified reasons for the postal rule. He referred to both the “mischievous consequences” which, In Re Imperial Land Co of Marseilles (Harris’s case) (1872) LR 7 Ch 587, 594 Mellish LJ had pointed out “would follow”, if the postal rule had not been adopted in relation to the post, and also to the (at 337)

“judgment of Thesiger L.J. in Household Fire Insurance Co. v. Grant [[1874-80] All ER Rep 919] in which he points out that where the parties are at a distance the balance of convenience dictates that the contract shall be deemed complete when the acceptance is handed to the Post Office.”

These matters were similarly referred by Lord Wilberforce in Brinkibon (at 41). Mellish LJ’s disquiet arose from the revocation issue, and Thesiger LJ’s allusion to the “balance of convenience”, whilst obviously not referring to economic efficiency as such, was a balancing exercise which is very much in keeping with that which has occurred in relation to the question of economic efficiency and the postal rule. As has been indicated, the revocation issue, and economic efficiency, need to be addressed in relation to the underlying bases of the postal rule.

However, there is one further aspect of the postal rule which will need to be considered. Its effect is to put the risk of a non-fault based loss or delay of the acceptance on the offeror, and also, of course, where it is fault of the offeror. Risk of loss or delay is only placed on the offeree, through non-application of the postal rule, where it is due to the fault of the offeree. In Entores and Brinkibon the courts recognised that in not applying a dispatch rule to telex, they were also changing the risk allocation, and were certainly not concerned about doing so in relation to the non-fault based loss or delay (eg Denning LJ in Entores, at 333, and Lord Fraser in Brinkibon at 43). The non-fault based risk allocation could have been seen as a function of the postal rule, and it must also be addressed further.

However, before we can turn to consideration of the bases of the rule, as the references to “instantaneousness” at least give some indication that the time taken by a form of communication is relevant, the difference between the speed of travel of a communication and the time between dispatch and receipt should be acknowledged (Coote 1971). In Brinkibon, for example, Lord Wilberforce recognised that matters such as arrival outside of office hours might need to be looked at in future cases (at 42), and, more broadly, “accessibility” would now seem to be the key to the receipt of electronic communications generally (Art 11, E-Commerce Directive, Article 10(2), UN Convention on the Use of Electronic Communications in International Contracts). The time between dispatch and receipt of an acceptance cannot simply be equated with speed of travel of a communication. Art I.-1:109 of the Draft Common Frame of Reference adopts “accessibility” in relation to the time of receipt of an electronic message, and the Scottish Law Commission stated that

“in a context where the concept of office hours is relevant, a communication that reaches the addressee’s system outside of those hours will become accessible for the purposes of the DCFR ... when the next period of business hours opens” (Scot Law Com 2012, 2.17)

Other examples could be given in relation to firewalls and spam filters, for example, which may even give rise to questions of non-receipt (Article 10(2), UN Convention on the Use of Electronic Communications in International Contracts, Explanatory Notes, para 84). Space does not permit their discussion, but what is needed here is the recognition that the time between dispatch and receipt cannot simply be equated with how quickly a message travels. There could be instantaneous travel, without instantaneity between dispatch and receipt.

3. The revocation issue.

The revocation issue should now be addressed as a basis of the postal rule, and offers are generally revocable at common law, even if it has been stated that they will remain open for a set time. The need for consideration is seen to stand in the way of irrevocability (Routledge v Grant (1828) 130 ER 920), and revocability is significant in relation to the postal rule. As has been indicated, the particular difficulty which is occasioned by revocation, and is dealt with by the postal rule, is that of a revocation which arrives with the offeree after an acceptance has been dispatched, but before the acceptance is received by the offeror, and this is what concerned Mellish LJ in In Re Imperial Land Co of Marseilles (Harris’s case) (1872) LR 7 Ch 587. He said that he had been (at 594)

“forcibly struck with the extraordinary and very mischievous consequences which would follow if it were held that an offer might be revoked at any time until the letter accepting it had been actually received”.

He gave several examples of this mischief, including (at 594):

“Suppose that a dealer in Liverpool writes to a dealer in New York and offers to buy so many quarters of corn or so many bales of cotton at a certain price, and the dealer in New York, finding that he can make a favourable bargain, writes an answer accepting the offer. Then, according to the argument that has been presented to us to-day, during the whole time that the letter accepting the offer is on the Atlantic, the dealer who is to receive it in Liverpool, if he finds that the market has fallen, may send a message by telegraph and revoke his offer. Nor is there any difference between an offer to receive shares and an offer to buy or sell goods. And yet, if the argument is sound, then for nearly ten days the buyer might wait and speculate whether the shares were rising or falling, and if found they were falling he might revoke his offer.”

Mellish LJ had identified the ‘revocation issue’ as a matter of serious concern.(8)

The significance of the potential for revocation in this context is emphasised by its treatment under other systems (Nussbaum 1936, 922, Macneil 1964, 953). The need to limit revocability is at the forefront of the comments on s63 of the US Restatement (2d) Contracts, which adopts the mailbox rule, which also stems from Adams v Lindsell, and largely equates with the postal rule, making a mailed acceptance effective on mailing. Under German Law an offer is generally irrevocable unless otherwise stated (Ss 146-149 BGB), and it is commented that under German Law the postal rule is not adopted, “largely because the irrevocability of offers (made possible ... by the absence of the doctrine of consideration) means that the offeree is sufficiently protected during a reasonable period after an offer has reached him” (Markesinis et al 2006, 74). Under French Law, there is protection against revocation, through irrevocability, or damages for delictual fault on it occurring (Bell et al 2008, 303). MacQueen and Thompson comment, in relation to the use of the postal rule in Scotland, that it would not be needed to protect against revocation, if the German or French approach was adopted (MacQueen and Thompson 2007, 2.38).  

The revocation issue is dealt with under the United Nations Convention on International Sale of Goods (CISG, Art 16(2)), and the Draft Common Frame of Reference (DCFR, Art II-4:202). Under both, although the acceptance will not be effective until received by the offeror, an offer cannot be revoked once the offeree has dispatched an acceptance. Similarly, the Scottish Law Commission has proposed that Scots law should not continue to use the postal rule, but that a revocation should not be effective if it reaches the offeree after dispatch of an acceptance (Scots Law Com 2012, 3.21).

The revocation issue provides significant justification for the postal rule: the “inexorable logic of the consideration dogma has prevented similar protection” to that adoped by other systems and, without the postal rule, the offeree “would be left naked to the whims of the offeror” (Macneil 1964, 953). At least to the extent of a need to deal with the revocation issue, there is an explanation of the postal rule. That does not, however, answer the question of whether a dispatch rule should be extended to an e-mailed acceptance. Even though e-mail is not literally instantaneous, and can, on occasion, take longer than normal to arrive, the speed with which it generally travels means that the opportunities for the revocation issue to arise are considerably diminished from those which occurred when post was used, and that is so even when account is taken of the difference between speed of travel and the time between dispatch and receipt. These issues must be returned to below, and an overall view taken on the postal rule, and its extension to e-mail, after consideration of whether there are further explanations, which justify its impact beyond the revocation issue.  

4. Risk of a lost or delayed acceptance.

As we have seen, the risk of an acceptance being lost, or delayed, without the fault of either party, falls on the offeror under the postal rule. If there is fault involved in such loss or delay occurring, then the risk should lie with the party at fault (Entores, Denning LJ at 333; L J Korbetis v Transgrain Shipping BV [2005] EWHC (QB) 1345 at [15]). Obviously application of the postal rule also achieves that where the fault is the offeror’s, and where it is the offeree’s (eg through misaddressing the acceptance), it is brought about simply by not applying the postal rule. (L J Korbetis v Transgrain Shipping BV [2005] EWHC (QB) 1345 at [15]). 

It is the allocation of that non-fault risk to the offeror, which should, primarily, be considered here, and, as has been indicated, it could be seen as a function of the rule. Indeed, references to whether communication by telex was like the situation where the parties were in “each other’s presence” in Entores, and Brinkibon, have been seen as identifying the need for there to be no risk of loss or delay of the acceptance if a dispatch (postal) rule is not to be applied to a form of communication (Murray 2000, 25): where the parties are face-to-face, there is no realistic risk of a lost or delayed acceptance.  However, the courts clearly realised that telexes could be lost or delayed, and that in not extending the postal rule to telexes, they would not be maintaining that rule’s risk allocation, and were content with that (Denning LJ in Entores, at 333, and Lord Fraser in Brinkibon at 43), except, unsurprisingly, where the loss or delay was due to the fault of the offeror (Denning LJ in Entores, at 333, Brinkibon Lord Wilberforce at 42). Despite the long established risk allocation under the postal rule, that is not extraordinary.

In British & American Telegraph Co Ltd v Colson (1871) LR 6 Exch 108, 112 Kelly CB saw an acceptance effective on posting as working “great and obvious injustice in a variety of mercantile transactions of constant occurrence”, and it was to this risk that he was referring. He gave examples, including (at 112):

“A merchant in London writes to another merchant at Bristol offering to sell him a quantity of merchandise at the price of 1000l., and the Bristol merchant by return of post accepts the offer and agrees to become the purchaser; but the letter miscarries and is never received. Would the Bristol merchant be entitled a week afterwards to bring an action for the non-delivery of the goods, when the London merchant, from having received no answer to his letter, has sold them to another person?”

Kelly CB thought it “absolutely impossible that such can be the law of this country” (at 112). Bramwell B similarly provided examples of this effect of the postal rule, and he viewed it as “wholly unjust and unreasonable” to make liable “the person who had never received the letter” of acceptance (at 118).(9)

The postal rule was revived, in relation to a lost acceptance, in Household Fire and Carriage Accident Insurance Co v Grant [1874-80] All ER Rep 919, but that should be seen in context. Gardner has pointed out that, at the time, there was general concern as to the new found ability of shareholders to hide from a company’s creditors behind limited liability and, more particularly, and significantly here, about those who had sought shares in a company which then rapidly proved to be worthless (as was happening on an appreciable number of occasions at the time), to evade what liability they would have had, by denying receipt of the letters accepting their offers to become shareholders. If the letters were effective on posting, this avenue of escape was denied to them (Gardner 1992, 185).

In Scotland, although the basic postal rule was adopted, it may not be carried to its logical conclusion, in relation to a lost acceptance. In Mason v Benhar Coal Co (1882) 9 R 883, Lord Shand stated, obiter, that if delivery of the acceptance was not established, he would “not hold that the contract was completed by mere posting” (at 890), and we have seen that the recommendations of the Scottish Law Commission would not maintain the postal rule, merely a means of dealing with the revocation issue (Scots Law Com 2012, 3.21). Similarly, although again there was no need to pursue the point, the Irish Supreme court, in Kelly v Cruise Catering Ltd [1994] 2 ILRM 394, thought it “no doubt correct” that “it might be unjust to hold a party to a contract when he had never received the acceptance”. Of course these concerns are about a lost acceptance, but whether an acceptance is lost or delayed, there may be serious problems.(10)

In the US, despite the mailbox rule being stated as being inapplicable where the method of communication is “substantially instantaneous and two-way” (s64, Restatement (2d) Contracts), which might suggest a concern not only with the revocation issue, but also that there should be no risk of loss or delay if the mailbox rule is not to apply, comment b, on s63 Restatement (2d) Contracts, does not indicate any great conviction that the mailbox rule’s placing of that risk on the offeror is appropriate.  Comment b states

“In the interests of simplicity and clarity, the rule has been extended to cases where an acceptance is lost or delayed in the course of transmission. The convenience of the rule is less clear in such cases than in cases of attempted revocation of the offer”.

There is a recognition of the need to deal with the revocation issue, but the same cannot be said of the appropriateness of the impact of the mailbox rule in relation to a lost, or delayed, acceptance. In addition, under  s63(b), the mailbox rule does not apply to acceptance of options, and the consideration provided for the option will have dealt with the revocation issue, and indeed revocation in general, but it leaves the risk of loss or delay of the acceptance on the offeree.

The judges in Entores and Brinkibon were quite right not to be concerned that not applying the postal rule to telexes would leave the offeree to deal with non-fault based, loss, or delay, of the acceptance. The impact of the postal rule in relation to non-fault based lost, or delayed, acceptances is not a function of the rule, but an undesirable side effect. This will be further emphasised in considering the postal rule from the perspective of economic efficiency, and the question of who is best placed to deal with the risk of loss or delay.  

5. Economic efficiency

Posner takes the view that the postal rule is economically efficient as it

“enables the offeree to begin performance (or preparatory measures) but does not delay the offeror’s performance, which in any event cannot begin until the offeror received the acceptance, for until then he wouldn’t know whether there was a contract” (Posner 2007, 103). 

One response to this might be that it depends upon the individual transaction as to the commencement of which of the parties’ performances is important, and it is undoubtedly the case that it may well be the start of the offeror’s which is significant. However, this would be to miss the point that Posner is making a statement at a more general level, and, under the postal rule, both parties can perform as quickly as possible. As far as it goes, the argument is clear: the postal rule is economically efficient because it allows performance to commence as soon as possible.

However, the postal rule may be seen as economically inefficient because it results in the risks of loss, or delay, not being placed on the party best able to minimise them:

“If anything, one would have thought it was more efficient to make each type of letter effective only on delivery. After all, it is the sender, rather than the addressee, who is in control of a letter's transmission. This would mean reversing the rule regarding acceptances. If the rule were against the offeree (that is, required delivery to the offeror), he could respond by using the recorded delivery service, sending multiple communications, etc. As things stand however it is the offeror the law encourages to guard against accidents in the post, yet ... he is much less well placed to do so.” (Gardner 1992, 177).

In not applying the postal rule to telex, Lord Fraser noted that it was “convenient that the acceptor, being in the better position, should have the responsibility of ensuring that his message is received” (at 43). It is the offeree who can send an acceptance in a way which involves least risk of it being delayed, or going astray and, as it is offeree who knows that the acceptance has been dispatched, it is he, or she, who is best situated to check on its arrival, and there are now multiple, cheap, fast means of doing so.(11) The offeror cannot realistically keep asking the offeree whether an acceptance has been sent. The offeror would not want to seem overeager to contract, or to worry too much to be a good contracting partner. Loss, or delay, will cause problems, putting the non-fault risk of either occurring, on the offeree, would minimise them.

When the issue of economic efficiency and the postal rule is considered, the entire impact of the rule cannot be seen as economically efficient; a weighing, or balancing, exercise is in question. In Household Fire Insurance v Grant [1874-80] All ER Rep 919, in recognising that the risk of the loss or delay of the acceptance could not “fall equally upon the shoulders of both parties”, Thesiger LJ emphasised the significance of performance being able to commence as soon as possible, and that without the postal rule (at 924),

“considerable delay in commercial transactions, in which dispatch is, as a rule, of the greatest consequence, would be occasioned, for the acceptor would never be entirely safe in acting upon his acceptance until he had received notice that his letter of acceptance had reached its destination.”

In Corbin on Contracts the line was taken that the postal rule “has the merit of closing the deal more quickly and enabling performance more promptly”, but that it “must be remembered that in the vast majority of cases the acceptance is neither lost nor delayed, and promptness of action is of importance in all of them” (Corbin & Perillo 1993, S3.24.). It would seem that the postal rule is regarded as economically efficient on the basis that the benefit of performance commencing as soon as possible, outweighs the drawback of the rule’s allocation of the non-fault based risk of loss or delay.

However, as has been indicated, the perceived benefit of performance being able to commence as soon as possible under the postal rule, comes from the idea that the rule makes it safe for the offeree to perform as soon as the acceptance is dispatched. In fact, the efficacy of, or need for, the rule to generate performance at that point has been doubted. Macneil makes the point that “many people” do not “voluntarily ‘buy’ law suits” (Macneil 1964, 968), and equally, performance might commence on dispatch of acceptance without such a rule.

“Businesses and individuals take informed risks based on uncertainties all the time; for example, the risk of relying on an as-yet uncertain communication may be willingly assumed so long as the expected benefit is positive relative to alternative courses of action” (Rawls 2009, at 215).

The assumption that the safety, provided for the offeree by the postal rule, produces, or is needed to produce, performance as soon as possible, is open to question.

However, even if that assumption is accepted, the balance point of economic efficiency can be strongly contended to be different in relation to more modern, and much faster, means of communication. There are now multiple fast, cheap, means by which the offeree can accept, and can check receipt of acceptance. They not only markedly reduce the potential for an intervening revocation, they also very significantly diminish the time before performance by both  parties can safely commence. Allocating the non-fault risk of loss, or delay, of the acceptance, to the inappropriate party – the offeror – should no longer be viewed as a price which has to be paid for the benefit of performance commencing swiftly. To the contrary, unless a very strong approach is taken to the reasonableness of using the post, which would simply render the postal rule meaningless, even maintaining the postal rule just in relation to the post, may be seen to be inefficient. Its allocation of the non-fault based risk of loss or delay to the offeror, would provide a reason for the offeree to post an acceptance, rather than use a much faster means of communication (Rawls 2009, 228), and a posted acceptance could substantially delay the offeror’s ability to commence performance.

6. Overview

We have seen that it was not a basis of the postal rule that it puts the, non-fault, risk of the loss, or delay, of an acceptance on the offeror. That was not a function of the rule. It was an undesirable side effect of it, and it should certainly not be seen as a reason to extend, or even maintain the rule. It is in fact a reason to apply a receipt rule. Further, it would seem that if the postal rule ever was economically efficient, it should not be so viewed now. However, the postal rule does put the risk of loss or delay due to the fault of the offeror, on the offeror, and, more importantly, it deals with the revocation issue. An undesirable allocation of the risk of the acceptance’s loss or delay, through the fault of the offeror, to offeree, would occur, and the revocation issue would not be dealt with, if the postal rule is simply not extended, or even dismissed. The potential for the revocation issue to arise is considerably less with faster means of communication, but it is not removed. Maintenance, or extension, of the dispatch rule is a matter of weighing benefits and drawbacks against each other, not merely in economic terms, but also in relation to “mischievious” or “unjust” outcomes. Such an exercise is difficult to conduct, but it seems extremely unlikely that it comes down in favour of extending the postal rule, and the telex cases could be seen as indicating that the courts reached that conclusion.

However, it can be contended that the telex cases did not simply envisage abandoning the benefits of a dispatch rule, but left the situations where it would impact positively to be returned to when the need arose. In Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels-Gesellscaft mbH [1982] 2 AC 34, Lord Wilberforce stated (at 42):

“The senders and recipients may not be the principals to the contemplated contract. They may be servants or agents with limited authority. The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or upon the assumption, that they will be read at a later time. There may be some error or default at the recipient's end which prevents receipt at the time contemplated and believed in by the sender. The message may have been sent and/or received through machines operated by third persons. And many other variations may occur. No universal rule can cover all such cases …”

These examples are largely concerned with the gap between dispatch and receipt, which creates the potential for the revocation issue. In addition, the situation where there “may be some error or default at the recipient's end which prevents receipt at the time contemplated and believed in by the sender”, relates to loss or delay through the fault of the offeror. In short, Lord Wilberforce was concerned that the extension of the postal rule should not simply be denied in those situations where a dispatch rule would have benefits. Plainly, he envisaged that a different rule, or rules, might be needed to deal with those circumstances.

The question arises as to the possibility of an alternative means of providing the benefits of the postal / dispatch rule, without its drawbacks. It is the revocation issue which will be specifically addressed, but as will be clear, the same approach could be used to produce the allocation to the offeror of the risk of loss or delay occasioned by the fault of the offeror.

7. Dealing with the revocation issue without the postal rule

One way of dealing with the revocation issue, without the postal rule would be through legislation taking the same approach as the DCFR and CISG, so that the acceptance would only be effective on receipt, but a revocation could not be effective once an acceptance had been dispatched. However, absent such legislation, what must be considered is whether the revocation issue could be dealt with at common law, without the postal rule.(12)

A revocation problem arises in relation to the commencement of the actions required under a unilateral offer. In Errington v Errington v Woods [1952] 1 KB 290, where a father had made a down payment, purchased a house on a mortgage, and told his son and daughter in law that they could live in it, and that he would convey it to them, if they paid off the mortgage, Denning LJ took the line that (at 295):

“The father’s promise ... could not be revoked by him once the couple entered on performance of the act, but it would cease to bind him if they left it incomplete and unperformed”.

This has been identified as an “implied obligation” (Daulia v Four Millbank Nominees [1978] 2 All ER 557, 561, 566).

Consideration should be given to dealing with the revocation issue by means of an implied term. What must be looked at is the implication of a term in law. Replacing the postal rule with an implied term will need a degree of specificity of the term, and reliability of the implication, which means that there could be no reality in seeking to give it existence as a term implied in fact, which is generated by the intention of the parties. A term implied in law does not face those problems, and the role of such terms makes it an apposite approach.

A term implied in law does not stem from the parties’ intentions, and is not confined to the particular contract. It is implied into a “type” of contract “unless the parties have expressly excluded” it (Liverpool City Council v Irwin [1977] AC 239, 257).  It is a “legal incident” of a “type” of contract (at 255), and the “type” of contract, and the content of the term, can be precisely delineated to deal with the problem which needs to be addressed.(13) Although, there will be some refinement of this, as particular points are explained, basically what is being suggested here, is that where there is a ‘main offer’ which could reasonably be accepted by a means of communication which could give rise to an opportunity for revocation in between dispatch and receipt of the acceptance, a term would be implied in a ‘subsidiary’ unilateral offer that if, in relation to the ‘main offer’, the offeree reasonably dispatches an acceptance of the ‘main offer’ using a means of communication which gives rise to such an opportunity, the offeror will not revoke the ‘main offer’ once acceptance of that offer has been dispatched. The dispatch of the acceptance of the ‘main offer’ would be fulfilment of what is required under the ‘subsidiary’ unilateral offer, creating a ‘subsidiary’ unilateral contract, and effectuating the implied term. Such an implied term would have the necessary specificity, and reliability of implication, to replace the role of the postal rule in relation to the revocation issue. The particular implication will be returned to below.

However, first we should consider the determination of an implication in law. There are terms which it is well established are to be so implied into certain “types” of contract (Liverpool City Council v Irwin [1977] AC 239, 257). It is the implication, in law, of a previously unrecognised term which causes difficulties. It has been emphasised that the term should be “necessary” (Liverpool City Council v Irwin, Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1985] 2 All ER 947), and that is understandable: the courts would not want to be seen to be too readily making an implication which is not based on the parties’ intentions. It is, however, clear that this reference to necessity is not to be equated with the traditional, Moorcock, test, for implication in fact, as to whether the term is “necessary” to give the contract “business efficacy” (The Moorcock (1889) 14 PD 64). In Scally v Southern Health and Social Services Board [1991] 4 All ER 563, Lord Bridge said (at 571)

"A clear distinction is drawn ... between the search for an implied term necessary to give business efficacy to a particular contract, and the search, based on wider considerations for a term which the law will imply as a necessary incident of a definable category of contractual relationship”.

The distinction is important: it is the “wider considerations” which must be emphasised, rather than “necessity”.

In Crossley v Faithful & Gould [2004] EWCA Civ 293, [2004] 4 All ER 447, referring to Peden (2001), Dyson LJ gave clearer recognition to what is occurring when a term is implied in law. He stated (at [36]):

“It seems to me that rather than focus on the narrow concept of necessity, it is better to recognise that to some extent at least, the existence and scope of standardised implied terms raise questions of reasonableness, fairness and the balancing of competing policy considerations.”

“There is much to be said for that approach” (Societe Generale v Geys [2012] UKSC 63 [2013] 1 AC 523, [55]). A term implied in law is based on an ‘ought’: it is a matter of what should be present in the “type” of contract, rather than what the parties can be found to have intended. If that ‘ought’ means that a term should be present, then the term is necessary to effectuate the ‘ought’. It is a “necessary incident” of the category of contract. Necessity is, indeed, not what should be focussed on. What is important is the difficult question of determining the ‘ought’, which will vary from one “type” of contract to another, and in relation to the problem for that “type” of contract. It is not surprising that the generation of the ‘ought’ is expressed in vague terms such as “fairness, reasonableness, and competing policy considerations”, or “justice and Social policy” (The Star Texas [1993] 2 Lloyd’s Rep 445, 526). Further, it can be emphasised that there is usually “some justice on each side” of a case where a term implied in law is in question (Rakoff 1995, 198), so that what is generally of concern is, indeed, the “balancing of competing policy considerations” (Peden 2001, 467). It is plain that implying a previously unrecognised term in law will rarely be simple.   

However, when what is under consideration is a term implied in law taking on the role of the postal rule in relation to the revocation issue, the situation is, in one way, relatively straightforward. To an extent, nothing new would be taking place. When it is asked, “has the law already defined the obligation” and “the extent of it?” (Shell UK Ltd v Lostock Garage Ltd [1976] 1 WLR 1187, Denning LJ, 1196), the answer is, basically, yes. Of course, there is a change in the approach to achieving the ‘ought’ but, in itself, that need not be viewed as problematic. “In many cases ... the same process can with equal plausibility be described either as the implication of a term in law or as the imposition of a legal duty” (Peel 2011, 6-044). In whatever way the ‘ought’ is implemented here, there is no novel policy at work. There is a longstanding acceptance of the need to deal with the revocation issue. If we can do so by use of a term implied in law we would be following an ‘ought’ of considerable duration, and no longer defeating the competing impetus to place the non-fault based risk of loss, or delay, on the more appropriate party: the offeree. Of course, times change, and “we do not want always to be bound to follow existing conventions” (Rakoff 1995, 201), but the line taken in CISG, and the DCFR, and the proposal to follow it in Scotland, indicate that a rule dealing with the revocation issue has not outlived its natural span.

However, clearly there are aspects of the implication contended for here which are not straightforward. In using an implied term to substitute for the postal rule we would be doing more than implying a term in law: we would also be implying the contract containing it. We would be implying a ‘subsidiary offer’ of a unilateral contract, alongside a “type” of ‘main offer’, with the ‘subsidiary contract’ being effectuated by dispatch of the acceptance of the ‘main offer’. However, the implication in the type of situation encountered in Errington v Errington v Woods clearly involves more than an implied term, and “the courts in Australia and England have shown much ingenuity in employing the concept of a collateral contract”, in what would otherwise be the pre-contractual context, such as finding a “contract to accept the highest bid under a competitive tender” as in Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986] 1 AC 207 (Furmston & Tolhurst 2010, 393). There “is no reason why a contract should not be implied ... even though one party claims that negotiations were discontinued prior to complete agreement.” In Blackpool and Fylde Aero Club v Blackpool Borough Council [[1990] 1 WLR 1159] in a situation in which “the council had laid down careful and detailed rules for the submission of tenders to ensure anonymity and fair play”, a “contract was implied that the local authority would consider timely tenders even though the tenders were merely in response to invitations to negotiate” (Furmston & Tolhurst 2010, 394). Harvela, and the Blackpool case, may have been stated to be decided by means of terms implied in fact, but it was very strained to lay them at the door of the parties’ intentions, and clearly there was an ‘ought’ operating. The pre-contractual context is one in which the courts are particularly cautious about intervening, but the long existence of the postal rule should alleviate such concerns in relation to dealing with the revocation issue.   

However, although the creation of a subsidiary contract in a pre-contractual situation may not be new, and the idea of an implied term / contract to replace the postal rule’s role in relation to the revocation issue, may be seen to be very much in keeping with the concept of an implication in law as a means of embodying a standard of behaviour (and a long accepted one here), this approach shines a spotlight upon what the postal rule was doing, and what the implied term / contract would be doing. The implied term /contract could not be seen, as the postal rule has been, as simply dealing with when a contract is made, albeit in a way which is “a radical departure from the fundamental principles of contract law” (Hill 2001, 14). The implied term / contract is plainly about behaviour during the contracting process. This would mean that the unreality of a rule creating a bilateral contract upon mere dispatch of an acceptance need no longer be accepted, but it becomes clear that what is in question is the reaching of a point in the contracting process which means that a revocation is inappropriate. It will take the arrival of the acceptance to make the ‘main’ contract, but revocation has ceased to be a satisfactory reason for that ‘main’ contract not coming into being. The insight this brings to its role will give pause. That might be dismissed easily, simply because of the longevity of the postal rule, but debate seems more likely, particularly when it is pointed out that the underlying rationale for the implication of contracts, in the cases above, has been seen to be “good faith” (Furmston & Tolhurst 2010, 393).   

In Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] 2 QB 433, Bingham LJ said (at 439):

“In many civil law systems, and perhaps in most legal systems outside the common law world, the law of obligations recognises and enforces an overriding principle that in making and carrying out contracts parties should act in good faith. ... English law has, characteristically, committed itself to no such overriding principle but has developed piecemeal solutions in response to demonstrated problems of unfairness.”

The change from the postal rule, to a term /contract implied in law, would seem to more clearly place what is occurring amongst these “piecemeal solutions”. It has not generally been so perceived in the past,(14) but the implied term / contract approach makes its role more obvious, and the idea of any movement towards a doctrine of good faith in English law has raised objections, and particularly strong ones in relation to the pre-contractual context. In Walford v Miles [1992] 2 AC 128 at 138, Lord Atkin said:

“[T]he concept of a duty to carry on negotiations in good faith is inherently repugnant to the adverserial position of the parties when involved in negotiations. Each party to the negotiations is entitled to pursue his (or her) own interest, so long as he avoids making misrepresentations. To advance that interest he must be entitled, if he thinks it appropriate, to threaten to withdraw from further negotiations or to withdraw in fact, in the hope that the opposite party may seek to reopen the negotiations by offering him improved terms.”

Of course, what is envisaged here is a very limited intrusion on freedom of contract. The offeror has, in a very real sense, passed beyond mere negotiation. He, or she, has made an offer, and the only question is whether he, or she, is able to take advantage of the time between the dispatch and receipt of an acceptance to escape from what would have been a contract had there been no such time gap. Moreover, it can again be emphasised that it is not a new impairment of freedom of contract: clear recognition of the postal rule, and the implied term / contract, as one of the “piecemeal solutions” could simply be seen as a matter of taxonomy.

However, there is potential for an impact which goes beyond classification: “good faith may provide a unifying concept for a number of distinct rules dealt with under different headings, and contribute to a greater consistency in the law by exerting pressure upon rules which are incompatible with the idea of good faith” (Friedmann 1995, 399-400; McKendrick 2012, 509). It is this possibility of “pressure” for change, and addition to the momentum for the development in English Law of a doctrine of good faith which will be the major concern. In particular, it may raise the spectre of “visceral justice” (Bridge 1999, 140), where “judges react impressionistically to the merits of a situation and dispose of cases accordingly”, but “visceral justice” does not present a credible picture of what is likely to occur (Brownsword 2006, 130-134). Further, the greatest pressure for development of a general principle of good faith in English Law comes from our closer involvement with European Law, and the law of other European countries, where such principles are prevalent, and also from increasing reference to good faith in other common law jurisdictions (McKendrick 2010, 512). In continuing not to recognise a doctrine of good faith, English Law has been seen as “swimming against a tide” of both European law and that of other common law jurisdictions (Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 [2013] 1 All ER (Comm) 1321, [124]). Compared with this, any impetus towards a doctrine of good faith in English law, which would stem from recognising the postal rule, and its replacement implied term / contract, as reflecting good faith, would be insignificant.

In addition, despite their long recognition of a doctrine of good faith, those European countries clearly “have no common concept of” it (Director General of Fair Trading v First National Bank [2001] UKHL 52, [2001] AC 481 [17]). They do not provide a drive towards particular requirements, and if English law does move towards a principle of good faith, it will develop in its own way: cautiously, and reflecting its emphasis upon certainty and freedom of contract.

Good faith was to the fore in the recent cases of Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 [2013] 1 All ER (Comm) 1321 and Compass Group UK and Ireland Ltd v Mid Essex Hospital Services [2013] EWCA Civ 200. In the former, Leggat J did strive to limit the impact, beyond the particular case, of the finding of an implied term concerned with good faith, by seeking to identify it as a term implied in fact, rather than law,(15) and in the latter, the court had to construe an express term referring to good faith, and took a narrow approach, in doing so. However, although, in Compass, Jackson LJ commenced his discussion of good faith “by reminding [him]self that there is no general doctrine of ‘good faith’ in English contract law”, he also took the line that “a duty of good faith is implied by law as an incident of certain categories of contract” (at [105]), and so had Legatt J in Yam Seng (at [131]. See Malik v Bank of Credit and Commerce International SA [1998] AC 20, Brodie 1998, 101). Terms implied in law are being recognised as a means of dealing with good faith problems, and the revocation issue is narrow, and has long been met by the postal rule. Implying a term in law to replace its impact in relation to the revocation issue would not be incautious, and should not conjure any visions of the floodgates being opened to the levels of uncertainty, and infringement of freedom of contract, fears of which can be evoked by references to good faith.

8. The Implied Term / Contract

Always keeping in mind that a term will not be implied in law in the face of an express contrary term, some further consideration should be given to the specifics of the implied term / contract. As has been indicated, what is in question is a ‘main offer’ which is of the “type” which can reasonably be accepted by a means of communication which would provide an opportunity for revocation in between dispatch and receipt of the acceptance. When the ‘main offer’ is of that “type”, there would be the implication of a term / ‘subsidiary unilateral offer’ that if, in relation to the ‘main offer’, the offeree reasonably dispatches an acceptance of the ‘main offer’ by a means of communication which gives rise to such an opportunity, the offeror will not revoke the ‘main offer’ once acceptance of it has been dispatched. Appropriate dispatch then generates the implied ‘subsidiary contract’, empowering the implied term.  Obviously, in setting out the circumstances of the implication, and the content of the term  / ‘subsidiary unilateral offer’ / ‘subsidiary contract’, a rather clumsy formula has been used. It is awkward to refer to ‘a means of communicating acceptance which would provide an opportunity for a revocation to intervene between the dispatch and receipt of the acceptance’. Plainly, it would be more succinct to state the requirement by referring to whether the method of communication was non-instantaneous, which is when there is scope for such an event. Unfortunately, the word “instantaneous” has acquired too much baggage, since the telex cases, for it to be used without potential for old arguments to inappropriately, and fruitlessly, re-occur.

The question arises as to what constitutes ‘a means of communicating acceptance which would provide an opportunity for a revocation to intervene between the dispatch and receipt of the acceptance’, and the benefit of the clumsy formulation is clear. Plainly, face-to-face communication does not fall within it,(16) and e-mail does. There is no room for a great debate on whether e-mail is covered, as there has been in relation to whether it is “instantaneous”. At first telephonic communication might be thought to be excluded, but a moment’s reflection will indicate that is not the case, if a phone call could result in a message on a recording device. The same points could be made in relation to communications carried out by Instant Messaging, where there may be simultaneous two-way communication or a message can be left to be received later (Mik 2009, 93).

However, in identifying whether the offer is of a “type”, in relation to which the term  / ‘subsidiary offer’ may be implied, the question is not merely whether a method of communication could be used which would provide an opportunity for a revocation to intervene. The ‘main offer’ must be such that it would be ‘reasonable’ to use such a form of communication. Thus, for example, a particular ‘main offer’ might be such that the need for speed, or certainty of actual communication, is such that it would only be reasonable to accept by a telephone used as a simultaneous communication device: when it is used to hold a conversation, and not to leave a message. That would not be a “type” of ‘main offer’(17) which could generate the implied term  / ‘subsidiary offer’. Other ‘main offers’ might reasonably be accepted by e-mail, but not by means of the generally much slower physical letter, and in such situations, an implied term / contract might be generated by an acceptance sent by e-mail, but not by one sent by post.   

There should, however, be a further reflection of the restriction on the postal rule that it only applied where it was reasonable to use the post.(18) As has been indicated, the implied term / ‘subsidiary unilateral offer’ would be that if, in relation to the ‘main offer’, the offeree reasonably dispatched an acceptance of the ‘main offer’ by a means of communication which gives rise to such an opportunity, the offeror would not revoke the ‘main offer’ once acceptance has been dispatched. Thus, when the offer was made, it might have been reasonable to use e-mail to accept, but by the time the acceptance takes place, it would only be reasonable to do so by a telephone conversation, or by Instant Messaging if it was first established that simultaneous communication was taking place. A sudden, unexpected, significant, change in market conditions, might have such an impact, and there would be no implied term / contract in that a situation.

Finally, however, it should be recognised that all that the implied term / contract does is create an obligation not to revoke. Except in the unlikely event of specific enforcement, it will not make the revocation ineffective. If the offeror insists on revocation, it will be a matter of an action on the implied contract, not the ‘main’ one, which is in question. Of course, as long as the acceptance was received before the offer expired through the effluxion of time, the result will be much the same: damages will cover the loss of the main contract.(19)

A similar approach, by means of a term / contract implied in law, would also deal with the problem of the acceptance which is lost or delayed through the fault of the offeror. When a ‘main offer’ is made, which could reasonably be accepted by a means of communication which is such that there is potential for an acceptance to be lost or delayed through the fault of the offeror, there would be an implied term / ‘subsidiary unilateral offer’, that when the acceptance is reasonably dispatched by such means, the offeror contracts that he, or she, will not rely upon such loss or delay, arising from his, or her, fault, to deny receipt of acceptance of the ‘main’ contract. Space does not permit further discussion of this second implied term / contract here, but its basis, and use, should be clear from the above.

9. Conclusion

The postal rule began life creating a fair result in the particular situation which arose in Adams v Lindsell, where finding the acceptance effective on posting meant that the offeror could not deny the existence of a contract on the basis of the late arrival of the acceptance, for which he had been responsible through misaddressing the offer. When the problematic nature of the postal rule’s allocation of the non-fault based risk of loss of the acceptance led to an attempted turning away from the rule, it was re-asserted to arrive at a fair result in a particular type of case, which was a product of a social phenomenon of the time. A picture could be painted of the postal rule as one based on ‘hard cases’.

However, the rule should not simply be discarded as one derived from ‘hard cases’, and which had no substantial basis beyond the need for a rule. It should be recognised that it dealt with real problems. Now, when we have multiple fast means of communicating, its benefits seem to be outweighed by its drawbacks, but although we might not regard it as worthwhile to extend, or even maintain the rule with those disadvantages, we should ask whether we can find a means of just preserving its positive impact. Terms / contracts implied in law could be used to do so. Of course, the change from the postal rule to such a device would make it plain that what is happening is the regulation of pre-contractual behaviour, and could lead to its general recognition as one of English Law’s “piecemeal solutions” to problems of good faith. It might, in fact, be said that the conceptual complexities of the device of terms / contracts implied in law would best be avoided, and that we should simply make the leap to providing protection against the revocation issue, and loss or delay of acceptance through the offeror’s fault, on the basis of pre-contractual good faith, without the intervening device: that would, however, seem to be an approach which we are not ready for. Further, whilst just being able to act on the basis of good faith might look simpler, it would require the same sort of detailed analysis as that indicated above in relation to the implied term / contract, if we are not to settle for a kind of unacceptable “visceral justice”. In any event, for now, although there is a wariness in relation to good faith, the long existence of the postal rule should mean that the continuance of its benefits, by means of a recognised framework, as suggested here, should prevent it being seen as too incautious a line to take in itself, and any impetus therefrom, towards a doctrine of good faith cannot be of any disquieting force in comparison with that of the “tide” from Europe and elsewhere.

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(1) The traditional idea of meeting of minds, or consensus ad idem, may be seen as providing a basis for Adams v Lindsell (1818) 1 B & Ald 680. If the contract was made when the acceptance was dispatched then, in that case, it was at a time when both intended the contract, and there would have then been a meeting of minds, in the sense of both of them intending a contract at that point. There is, however, the problem that that had not been manifested to the offeror, and, in any event, in later cases it was recognised that acceptance is effective on posting even where the offeror has changed his, or her, mind prior to that time (Henthorn v Fraser [1892] 2 Ch 31), “so that there is not even such residual consensus” (Gardner 1992, 171).

(2) In Household Fire and Carriage Accident Insurance Co Ltd v Grant [1874-80] All ER Rep 919, 922 the postal rule was seen as based on the idea of the post office as agent for the parties, so that handing over the acceptance to this ‘agent’ was communication to the offeror. The very unsatisfactory nature of this reasoning was pointed out in Henthorn v Fraser [1892] 2 Ch 27, Kay LJ, 35-36: the post office is only a carrier, it does not deal with the content of the communication (see eg Samek 1961, 39, Evans 1966, 559 ). Any justification of the postal rule on the basis that the post office is an agent has been long “discredited” (Furmston & Tolhurst 2010, 4.102)

(3) It is said, in justification of the postal rule, that the offeror chose, or contemplated, the use of the post as a method of communication (Henthorn v Fraser (1892) 2 Ch 27, 33). The postal rule might then be seen as based on waiver, but again this does not provide sufficient explanation, as the same line should then have been taken in relation to communication by telex (Samek, 1961, p 40). The point is also made that the offeror can specify that the postal rule is not to apply (Holwell Securities Ltd v Hughes [1974] 1 WLR 155; Household Fire and Carriage Accident Insurance Co Ltd v Grant [1874-80] All ER Rep 919). This latter point, however, does not actually provide any argument for the postal rule as such, but is rather a means of presenting it as not needing to cause unfairness (Evans, 1966, 559, Gardner, 1992, 174). Even in relation to that limited object, a moment’s reflection will indicate its inadequacy. Leaving aside the basic difficulty that the postal rule is counterintuitive, and the offeror may assume that there will not be a contract until the acceptance has been received (Fasciano 1997, 980, Eisler 1990-91, 558), the party who is the offeror may not have any power in relation to the terms of the offer. In fact, the terms may well be the offeree’s standard terms, as would normally be the case when, for example, a consumer seeks to make a contract through the post in response to an advertisement. The advertisement will generally be an invitation to treat (eg eg Partridge v Crittenden [1968] 2 All ER 421; Grainger & Son v Gough [1896] AC 325), the consumer will be the offeror, and the business, which has dictated the standard terms, will be the offeree.

(4) In Adams v Lindsell (1818) 1 B& Ald 680the justification was put forward that the postal rule was needed to avoid an endless chain of correspondence: “[If] the defendants were not bound by their offer when accepted by the plaintiffs till the answer was received, then the plaintiffs ought not to be bound till after they had received the notification that the defendants had received their answer and assented to it. And so it might go on ad infinitum.” This can be simply dealt with. It is just a matter of a line needing to be drawn.  It “would be perfectly possible to hold that the acceptance took effect when it came to the notice of the offeror, whether the offeree knew of this or not” (Peel 2011, 2.031).

(5) For swift and clear dismissal of the idea that the postal rule is the better rule from the evidentiary perspective see eg Macneil (Macneil 1964, 965) and Winfield (Winfield, 1939, 509-510).

(6) This was, in a sense, a secondary issue, in that the question of when the contract was made only arose to determine where the contracts had been made, and that was being asked in order to established whether the courts of England and Wales had jurisdiction. The situation is that where the contract is made is not a helpful point of reference in relation to jurisdiction when contracts are made at a distance. In Brinkibon, Lord Wilberforce pointed out the inappropriateness of using a dispatch, or receipt. rule in relation to the issue of jurisdiction where contracts are made at a distance. He said ([1983] 2 AC 34, 40): “In the case of successive telephone conversations it may indeed be most artificial to ask where the contract was made: if one asked the parties, they might say they did not know – or care... Unfortunately it remains in Order 11 as a test for the purpose of jurisdiction, and courts have to do their best with it” (see also Macneil 1964, 950). More recently, in Apple Corps Ltd v Apple Computer Inc [2004] EWHC 768 [2004] 2 CLC 720, Mann J suggested that, for the purposes of jurisdiction, a contract made by one party speaking to another on the telephone, should be viewed as made in both locations (see [36]-[37]). Determining jurisdiction is simply not an appropriate role for the postal rule, or a receipt rule, to perform, and the primary question in such cases, and how well, or otherwise, the postal rule performed that role, is not relevant to whether it should be maintained, extended, or abandoned, and so does not require further consideration here.

(7) Nevertheless, it is easy to understand how “instantaneousness” came to be viewed as the test of the application of the postal rule. Lord Wilberforce’s approach in particular, indicates that it is a matter of considering whether the relevant method of communication is like the post or like the situation when the parties are face-to-face. That line could be seen as a matter of functional equivalence, which is an approach which has come to the fore in considering the adaptation of old rules to the e-commerce context (Reed 2010). However, if one looks no further into it than the speed of communication, it is a very superficial approach in itself, and would be a very superficial approach to functional equivalence, in relation to which, generally, it has been pointed out that a legal rule is a “balancing of interests”(Schellekens 2006, 68), and what needs to be looked at is not simply an obvious physical difference in the functioning of old and the new methods of communication, but the function of the relevant rule as a means of dealing with underlying issues, producing a balancing of the interests involved (Reed 2010). The speed of the transmission of a message is clearly a major difference between the post and methods of communication such as telex or e-mail, but without considering the underlying rationales of the postal rule, it is impossible to discern if it is the significant difference here, or even how it should be looked at when clearly there was not a simple factual test of instantaneity being applied in the telex cases.

(8) The question has been raised as to whether the postal rule should be allowed to create the opposite problem of the potential for speculation by the offeree, whilst the acceptance is in transit. The question is whether the offeree could effectively cancel their acceptance by a faster means of communication which arrived before the acceptance. Obviously, the logic of the postal rule would say that should not be possible, but the counter argument is that the offeror cannot be harmed by this: he, or she, cannot have acted upon an acceptance which was unknown (see eg Macneil 1964, pp 957-962; Evans, 1966 pp 562-566). See further n 18.

(9) Although Kelly CB and Bramwell B, were anxious to reject the postal rule because of its impact in relation to lost acceptances, they nevertheless did not dismiss the need for protection of the offeree from revocation. They envisaged the possibility that, although an acceptance would only be effective once received, its effect would then be backdated to the point of dispatch (at 116, 121). See further n 12.

(10) Obviously a delayed acceptance is of no significance where the delay is not beyond the point where the offer would have expired through effluxion of time, and there has been no attempted revocation.

(11) When e-mail is in question, the offeree may receive automated notices of arrival, or failed delivery. Even if the receipt of a notice of arrival, or non-receipt of a failure of delivery, cannot always be relied upon (Mik 2009, 85-87), it is still the offeree who is best placed to check on, and ensure, arrival.

(12) A means of dealing with the revocation issue, without using the postal rule, was suggested in British & American Telegraph Co Ltd v Colson (1871) LR Exch 108. It was envisaged that although the acceptance would not be effective until it was received, once it was received, its impact would be backdated to the point of dispatch. However, this was dismissed in subsequent cases. Thesiger LJ took the line in Household Fire and Carriage Accident Insurance Co Ltd v Grant [1874-80] All ER Rep 919, 923, (quoting Mellish LJ in Re Imperial Land Co of Marseilles, Harris’ Case (1872) 7 Ch App 587, 596) that:

“If the contract, after the letter has arrived in time, is to be treated as having been made from the time the letter is posted, the reason is that the contract was actually made at the time when the letter was posted.”

There is a difficulty in finding a basis for ‘backdating’. It is not a fruitful route to pursue.  

(13) In relation to the specificity of the “type” of contract see Scally v Southern Health and Social Services Board [1992] 1 AC 294. In relation to the specificity of the content of the term, see the contrast made by Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239, in relation to implying a term in fact, based on The Moorcock test for a term implied in fact, and the implication of a term in law. He said (at 255): “Lister v. Romford Ice and Cold Storage Co. Ltd [1957] AC 555 ... was a case between master and servant and of a search for an ‘implied term.’ Viscount Simonds, at p. 579, makes a clear distinction between a search for an implied term such as might be necessary to give ‘business efficacy’ to the particular contract and a search, based on wider considerations, for such a term as the nature of the contract might call for, or as a legal incident of this kind of contract. If the search were for the former, he says, ‘… I should lose myself in the attempt to formulate it with the necessary precision.’ (p. 576.) We see an echo of this in the present case, when the majority in the Court of Appeal, considering a ‘business efficacy term’ - i.e., a ‘Moorcock’ term (The Moorcock (1889) 14 P.D. 64) - found themselves faced with five alternative terms and therefore rejected all of them.”

(14) Cohen did include it in a list of examples of the common law’s “piecemeal solutions” (Cohen 1995, 30).

(15) There is bound to be an overlap with terms implied in law, and terms implied in fact: the parties will often intend to act fairly, reasonably, and justly, with each other. However, the situation would seem to have been ripe for an implication in law. Leggat J was clearly identifying a “type” of distributorship agreement in which the parties needed to communicate with each other and co-operate effectively, and he referred to “shared values and norms of behaviour. Some of [which] are norms that command general social acceptance; others may be more specific to the trade”.  

(16) A face-to-face situation might be imagined in which the offeror cuts in on the offeree before the offeree has finished their statement. If the offeree has said enough for acceptance to have been dispatched, it has also been communicated. If they have not said enough, then acceptance has not been dispatched. Questions might arise as to extending the dispatch / postal rule approach to revocation to the situation where the offeree has started to state their acceptance, when the offeror knew, or should have known, that was the case, and nevertheless cut in with a revocation. However, if such knowledge, or constructive knowledge is present, the conclusion should simply be that communication of the acceptance had been received, and any attempted revocation would be too late. Scenarios might also be imagined, such as the shouted acceptance which is unheard because of the noise of the river in between the parties, or the aircraft flying overhead (see Denning in Entores), but they are not what are of concern here. It is the revocation issue, not lost acceptances which are being looked at. Only if it was decided that the loss was the offeror’s fault, and there was a term implied in law that the offeror would not then deny receipt of acceptance in such circumstances, would the revocation become an issue, and the lost acceptance should not then be treated as lost, with the offeror either keeping to that implied term, or it being relevant to the working out of a damages claim in relation to the revocation.     

(17) The use of the term ‘main offer’ could be questioned where there will be no ‘subsidiary offer’, but it is maintained in that situation to avoid any confusion.

(18) The problem of the postal rule enabling speculation by the offeree, who could withdraw an acceptance before it arrived, was referred to in n 8. It might be dealt with by a further refinement of the implied term, so that it was also conditional on the offeree not using the method of communication to enable him, or her, to continue to speculate on the market. This would be in keeping with the implied term being a matter of good faith.

(19) The implied term could be refined so that it did not extend to the situation where the revocation only arrived before the acceptance because of the fault of the offeree.