Mailbox Rule Discussing Development & Application of Mailbox Rule I. Introduction In the Common Law system, “the Mailbox Rule is an alternate term for the Postal Rule; when mailed, an acceptance of an offer to contract is valid from the moment it is deposited into a mailbox; on dispatch. ” The Mailbox rule is an exception to the general rule that a contract is created when acceptance is directly communicated to the offeror. The mailbox rule provides that the contract is formed when the letter of acceptance is placed in the mailbox. This rule was established by the case of Adams v. Lindsell (1818) B& Ald 68.
In this case, Judge Law said that if that were true, it would be impossible to complete any contract through the post; if the defendants were not bound by their offer until the answer was received, then the plaintiffs would not be bound until they had received word that the defendants had received their acceptance, and this could go on indefinitely. Instead it must be considered that the offerers were making the offer to the plaintiffs during every moment that the letter was in the post . Later, the Mailbox rule was confirmed in Dunlop v Higgins (1848) 1 HL Cas 381 and Henthorn v Fraser .
In addition, the Mailbox rule applies only to acceptance. In Household Fire Insurance Company v Grant (1879), the court ruled that the Mailbox rule only applies to acceptance. Later, the case of Stevenson v McLean (1880) 5 QBD 346 confirmed other contractual letters (such as the revoking offer) don’t take effect until the letter is delivered . As regards to this rule, we also need to pay attention to the fact that a letter is regarded as “posted” only when it is in the possession of the Post Office, which was established in the case of Re London & Northern Bank  1 Ch 220.
The letter must be put into the post box or the hands of someone authorized to collect not deliver mail, which means a letter of acceptance is not considered “posted” if it is handed to an agent to deliver, such as a courier . The Mailbox Rule is based on the theory that when an offer is sent by mail, the acceptance may also be allowed to be sent through the same medium, and because the offeree cannot control the mail when the acceptance is put into the mailbox, the contract will be formed when the acceptance is mailed. II. Drawbacks of Mailbox Rule 1. The Mailbox rule gives a heavier burden to the offeror.
In modern business, the most significant advantage of the Mailbox rule is that this rule promotes the conclusion of the deal to be reached rapidly. However, based on the Mailbox rule, the offeror has to be restricted by the acceptance in the situation when they do not receive the acceptance. That means when the mail of acceptance is delayed or lost, the risk is shifted to the offeror, which was established by the case of Household Fire Insurance v Grant (1879) . That is too harsh to safeguard the interests of the offeror. 2. The Mailbox rule deprives the right of the offeree to withdraw the acceptance.
As regards to the effectiveness of acceptance, there are two principles in modern law systems. In the Civil Law system, the effectiveness of acceptance follows to the Receipt rule , which allows the offeree to withdraw the acceptance only if the withdrawal of notification prior to the acceptance of the offer reached the offeror because the acceptance is effective only when it reaches the offeror. In the Common Law system, the effectiveness of acceptance conforms to the Mailbox rule. Under the Mailbox rule, the offeree has no right to withdraw the acceptance because the contract is created when the acceptance is mailed.
In an information age, market transactions are changing constantly. The acceptance cannot be withdrawn subject to the will of the offeree; also the Mailbox rule is disadvantageous for the offeree to make decisions according to the changeable market. In fact, to some extent, the Mailbox rule cause the instability of contracts and increases the disputes about the contracts. 3. The Mailbox rule increases the risk for an inability to fulfill contracts. Based on the Common Law system, an offer cannot be withdrawn but can be revoked by the offeror.
In the Restatement (second) of Contracts, § 42 “an offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract. ” That means an offer would be void when revoked information reaches the offeree. And there is a gap between the revoked information is mailed and when it is received. Therefore, during this gap, if an acceptance was mailed, according to the Mailbox rule, a contract is created. Obviously, under this situation, the Mailbox rule could cause a party to be unable to fulfill a contract.
More unfairly, this rule would even punish the offeror with good faith because the offeror has no ability to fulfill the contract, which causes them to violate the contract’s obligation. 4. The Mailbox rule conflicts with international contract law. The U. S. is a member of the United Nations Convention on Contracts for the International Sale of Goods (CISG), which adopts the Receipt rule. Acceptance under the CISG is effective when it reaches the offeror and a party may withdraw or modify a second communication that overtakes the first .
For example, article 22 of CISG says “An acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective. ” CISG is a worldwide international treaty, which has been adopted by 74 States as of 20 January 2010 according to the report of the United Nations Commission on International Trade Law (UNCITRAL) . The globalization of trade is the developing trend of modern business. The Mailbox rule conflicts with the regulations of CISG, which more or less could cause barriers for American companies during international trade. III.
Balance and Supplementary of Mailbox Rule Facing the drawbacks of the Mailbox rule, there are some supplementary and balance. 1. The offeror can avoid the application of the Mailbox rule through setting provisions in the offer. The Holwell Securities v. Hughes (1974) established an exception for the Mailbox rule. Lawton L. J. asserts that “in the law relating to options, the grantee must comply strictly with the conditions stipulated for exercise by the offeror. Following this reasoning, the postal acceptance rule cannot apply when there are express terms in the offer specifying that acceptance must reach the offeror” .
That means the offer can require that its acceptance reaches the offeror. This exception of the Mailbox rule not only makes the offeror avoid the risk of the acceptance’s loss during delivery but also, to some extent, reduces the risk ratio of revoking the offer because this exception postpones the effectiveness of acceptance. 2. Balancing the drawback that the offeree has no right of withdrawal. Under the Mailbox rule, there is no withdrawing right. However, if a communication is sent rejecting the offer, and a later communication is sent accepting the contract, then the first one to be received by the offeror will prevail.
Under this situation the acceptance only takes effect on receipt [8, 9]. If the offeree sends acceptance firstly, usually the Mailbox rule is applied. But there is still an exception, “the comment c and Illustration 7 to Restatement (2nd) §63 providing that the offeree may be stopped to enforce the contract against an offeror who reasonably relies on the earlier-received rejection”. 3. The Mailbox rule does not apply to an option contract. An option contract is defined as “a promise which meets the requirements for the formation of a contract and limits the promsor’s power to revoke an offer. In fact an option contract has high risk. Laws intend to protect the offeree from an offeror’s revoking the contract. That requires the offeror and the offeree to have actual communication, which reduces the risk of contract and increases the stability of the contract. Therefore, in Restatement (Second) of Contracts §63 (b), “an acceptance under an option contract is not operative until received by the offeror. ” IV. Conclusion and Recommendations Experiencing a long period of development, the Mailbox rule has been improved gradually.
However, although the Mailbox rule has been improved expressly, how to correctly apply this rule is still a problem for parties of the contract because the Mailbox rule has become more complex than it was before and still has some drawbacks (there is no complete perfect law), such as if sending the acceptance before the rejection, the offeree cannot revoke the disadvantage acceptance. Certainly, requiring every party to exactly operate this rule is impossible. While if the parties follow basic several rules below, the risk of the Mailbox rule could be reduced expressly. 1.
The establishment of modern contract law is based on the principle of party autonomy. The parties of a contract should fully use this rule, complying with Jus cogens. The offeror can set the Receipt rule in offers reasonably. The judge and court will respect the will of the parties as much as they can because parties’ will is the base of the contract. 2. The purposes of parties should be to promote the accomplishment of trade. The intention of modern contract law is to promote and protect the trade not limit and destroy the trade. Therefore, the judgment should benefit operating a trade. 3.
The offerors and offerees should hold good faith during the processes of offer and acceptance under considering the circumstances with caution. Protecting the interests of parties with good faith is the basic principle of law. The court would consider the subjective intention. Generally, the developing trend of contract law is to respect the will of parties and encourage trade. Only if the parties express their trading will with a cautious attitude and good faith, will the drawbacks of Mailbox rule not be a barrier for creating a contract. Reference . Adams v. Lindsell (1818) http://www. west. et/~smith/Adams_v_Lindsell. htm . Netorked Knowledge – Contract Law Casenotes (Stevenson Jaques & Co. v McLean (1880) 5 QBD 346 Queen’s Bench Division) http://netk. net. au/Contract/Stevenson. asp . Re London & Northern Bank  http://aquariumsupplies. co. za/bank6/re-london-and-northern-bank-1900. html . Court of Appeal, Household Fire Insurance v. Grant (1879) 4 Ex D 216 http://www. docstoc. com/docs/18606838/household-fire-insurance-v-grant-(1879)-4- ex-d-216/ . Teach an Old UCC Dog New Tricks http://www. abanet. org/buslaw/blt/2008-09-10/nicholas. shtml . CISG: Table of Contracting States ttp://www. cisg. law. pace. edu/cisg/countries/cntries. html . Holwell Securities v. Hughes http://instruct. uwo. ca/law/410-003/holwell. html . Contract (fourth edition), by Brian A. Blum, page76 http://books. google. com/books? id=Sdzvbez9Gx0C&pg=PA77&lpg=PA77&dq=mailbox+rule++rejection++offer&source=bl&ots=lthl8WwigZ&sig=ZzgITuOKKbntQboiqAGdhMygIXE&hl=en&ei=b0bRS_OCLI2CNpDWpIMO&sa=X&oi=book_result&ct=result&resnum=6&ved=0CBUQ6AEwBTge#v=onepage&q=mailbox%20rule%20%20rejection%20%20offer&f=false . Contract Law – Reject of Offer http://www. lawofcontract. co. uk/formation/rejection-of-offer. php