Adams v Lindsell, Entores Ltd v Miles Far East Corporation - Essay Example

Business Law Essay Postal acceptance In general, acceptance comes into force, when the offeree communicates it to the offeror. However, there are certain exceptions to this rule. For instance, it does not apply to situations, wherein the offeree communicates acceptance through the post. In such cases, the postal rule applies. This was the ruling in several cases, including Adams v Lindsell. A number of reasons have been cited for the development of the postal rule. It has been stressed by some scholars that this rule comes into force when a trusted third party is involved in the communication1 However; there have been quite a few theorists who have pointed out that postal communications, involve significant delay. In instantaneous communication methods, the postal rule does not apply. In the Entores case a telex message sent by the offeree from the Netherlands, with regard to the acceptance of the offer made by the offeror situated in the UK, had been received by the latter. The House of Lords opined that the acceptance was effective from the time of its receipt by the offeror2. This is a marked departure from the postal rule, wherein the offer is deemed to have been accepted, on the posting of the letter of acceptance by the offeree. In the case of Entores Ltd v Miles Far East Corporation, the court held that there was a difference between acceptance that had been communicated, via an instantaneous communication method, and acceptance that had been communicated by means of postal communication. In postal communication, the acceptance is effective from the time that such acceptance had been posted. There is no requirement for such communication to have been received by the offeror3. This was reiterated in the case of Adams v Lindsell4. The postal rule does not apply to cases, in which acceptance is communicated through instantaneous means of communication, such as telephone, email, telegraph or facsimile. In Henthorn v Fraser, the court ruled that in instances wherein acceptance had to be indicated, via the post; the agreement was to be deemed to have been formed, when the letter of acceptance had been posted by the offeree. The time or receipt of such acceptance, by the offeror, had no relevance to the formation of the agreement5. However, this rule is applicable, only if the parties had agreed to convey acceptance, in this manner. This was the gist of the ruling in Adams v Lindsell6. In the postal communication of acceptance, communication may be delayed, due to a number of reasons. There could be a delay in the receipt of the letter of acceptance by the offeror. The addressee will receive the acceptance, only after the passage of a significant amount of time, from the instant of the posting of the acceptance, by the offeree. Moreover, there could be some difficulties involved in the delivery of the letter by the postal department, and there could be the possibility of the letter being lost in transit7. The vast developments in communication technology, has provided a number of methods for communicating information. This has had its impact on the communication of acceptance. Obviously, the postal rule, with its insistence that an agreement is complete on the posting of the letter of acceptance by the offeree, is inequitable and illogical8. Some of the modern means of conveying acceptance are electronic mail, facsimile, and telephone. In these methods of communication, the agreement is not held to be complete, until it is received by the offeror. No communication is considered to be complete, unless it is received and comprehended by the rightful recipient9. This has brought reason and fair play to bear upon agreements. The ruling relating to the postal rule was established in Adams v Lindsell. In this case a quantity of wool was offered for sale, and it was stipulated that the acceptance was to be by means of the post. On account of misdirection by the offeree, the letter of acceptance reached the offeror, after considerable delay. The inordinate delay in replying to their offer prompted the offeror to sell the wool to some other party10. The court held that requiring the letter of acceptance to reach the offeror, before considering the agreement to be formed, was unrealistic and inefficient. The offeror is at a major disadvantage, on account of the postal rule. For instance, the offeror is rendered bound to a contract, even though he has no knowledge, as to whether the offeree had expressed agreement to his offer11. The damage caused by the postal rule was limited to a considerable extent, by specifying that it would only apply to acceptances. In respect of offers, counter offers and revocations, proper communication had to be made, even if such communication had been sent by post. In addition, this rule was made applicable to instances, where it was reasonable to communicate acceptance by post12. All these factors result in a number of legal problems, relating to the formation of the contract. Although, the courts have been supporting the principle that a letter becomes effective, only on its receipt; there has been a departure from this notion, in cases entailing letters of acceptance. This was emphasised in the Adams and Household Fire Insurance cases, wherein the courts had ruled that posting the letter of acceptance is sufficient to make it effective13. Instantaneous communication In order to form a valid contract through instantaneous communication, the acceptance of the offer by the offeree must have been received by the offeror. In telephonic conversations, the acceptance must have been heard by the offeror. Only then it can be stated that the communication of acceptance had been completed14. The postal rule has been restricted to communication methods that resemble the post. It has been ensured that it does not apply to instantaneous modes of communication. However, it had always been possible to circumvent the postal rule, if the offeror were so inclined. All that was required, under such circumstances, was that the offeror had to merely specify that acceptance was to be communicated in some specific manner. Fundamentally, the rationale to be applied is that any communication of acceptance should be at least as swift as the means by which the offer was made. This emerged from the decision in Quenerduaine v Cole15. In Bressan v Squires, the court held that the postal rule would be inapplicable, if the parties had not intended to communicate acceptance by post. As such, the postal rule ceases to be applicable, if the offeror either stipulates or implies that he has to receive communication of acceptance by the offeree, if the agreement is to be formed16. The offeree can communicate acceptance, via a telex message, which constitutes an instantaneous method of communication. In such cases, the contract is deemed to have been concluded at the place, where the communication had been received by the offeror. In Brinkibon v Stahag Stahl und Stahlwarenhandels GmbH, communication of acceptance was sent by a telex message from London to Vienna. Their Lordships ruled that the contract was formed at the place of receipt of the acceptance, namely Vienna17. Domb v Isoz involved a sale of land by a solicitor, acting on behalf of his client. The issue raised in this case, was whether the solicitor enjoyed an implied authority to conclude a contract by means of a telephonic agreement. The Court of Appeal held confirmation over the telephone was to be construed as the conclusion of the contract18. As such, in this case, the court held that if the acceptance is communicated by means of a telephonic message, it is completed only when the offeror hears it19. In order to determine, whether a communication had been effectively conveyed; the courts have resorted to various strategies, in respect of the notion of communication. These initiatives have resulted in a number of technical rules. A major development, on account of these changes, has been the fact that in some situations, the courts have totally discarded the rule that acceptance has to be communicated to the offeror, if it is to be binding20. To generalise, any acceptance that is conveyed by some instantaneous method of communication is to be deemed to be binding, on its receipt. However, in the context of an acceptance that is conveyed by some non – instantaneous method, the acceptance, in general, is held to be effective when it is sent21.It has been the practice with the courts to interpret the connotation of received, in such a manner that it enabled them to arrive at the conclusion of their choice. Thus to surmise, the postal rule had established that an agreement was concluded the moment the letter of acceptance had been posted by the offeror. This rule was best suited to an era when the postal service constituted the principal means of communication. With the advent of modern communication technologies, the situation has changed, and communication is deemed to be complete, only when the offeror receives a communication from the offeree regarding the acceptance of his offer. This is fair and logical. Bibliography Adams v Lindsell EWHC KB J59 (King’s Bench, 1818) Bressan v Squires (1974) 2 NSWLR 460 Brinkibon Ltd v Stahag Stahl (1983) 2 AC 34 Christou, R, Boilerplate, Sweet & Maxwell, 2005 Domb v Isoz (1980) Ch. 548 Entores Ltd v Miles Far East Corporation 2 KB 327 (1955) Henthorn v Fraser (1892) 2 Ch 27 Household Fire & Carriage Accident Insurance Co V Grant (1879) 4 Ex. D. 216 Quenerduaine v Cole, (1883) 32 WR 185 Stone, Richard, The Modern Law of Contract, Routledge Cavendish, 2005 Taylor, Richard and Taylor, Damian, Contract Law Directors Directions Series, Oxford University Press, 2007 Werner, Jens, ‘Local Rules in a Global Net: Online Business Transactions and the Applicability of Traditional English Contract Law Rules’, International Journal of Communications Law and Policy, 2000, volume 6, issue 1 Read More