Postal Acceptance Rule
Modern Contracts need a few formalities and a contract can be entered into under deed, in writing and the old requirement of it having been completed after seal has been affixed on it has also been done away with. There are few laws which require that the contract should be in the written form only. For example s 52 of the Law of Property Act requires that any contract granting a lease for a period of more than three years should be made by a written deed only. Similarly contracts allowing transfer of certain types of shares should be in writing (Ward and Stewart, 2003). In the same way Consumer Credit also envisages rigorous formalities to regulate credit agreements. The express terms of the contract, which could be oral or in writing are the obligations which the parties to contract have entered into1. There are certain terms which are also imposed on parties even though they are not mentioned in the contract itself. These obligations are imposed on the parties due to custom or due to certain legislations like The Sale of Goods (Implied Terms) Act 1973, Sale of Goods Act 1979, The Sale and Supply of Goods to Consumers Regulations, 2002 and The Supply of Goods and Services Act 1982. Such terms are known as ‘Implied Terms’.
The General Rule regarding Acceptance:
Acceptance has been termed as the golden moment when the contract comes into existence2. It is generally believed that offer and acceptance must be given at a same time and any departure from this rule could make the acceptance ineffective. Similarly any conditional acceptance is also only a counter offer and not an acceptance3. However acceptance can also be inferred from the conduct of the parties.
- R v Clarke (1927) 40 CLR 227 Australian High Court
- Henthorn v. Fraser [1892] 2 Ch 77
- Byrne v Van Tienhoven (1880) 5 CPD 344
The general rule in case of instantaneous communication is that a contract is formed when the acceptance of offer is communicated and the same is received by the offerer4. Instantaneous communication here means telephonic conversation, Telex messages or face-to-face communication. All these are considered various types of instantaneous communication (Carey, 2002).
The Postal Acceptance Rule:
An exception to the general rule is provided under the postal acceptance rule. It provides that acceptance takes place when the same is committed to the offerer. It states that we are under the given circumstances, it can be implied that it must be within the contemplation of the parties and according to the common usage, postal services could be used as a way of communicating the acceptance, acceptance is deemed as completed the instant it is posted.
The rule comes into operations only in cases where post is the acceptable way of communication between the parties to the contract. For example in cases where offer was also made by post or in cases it is stipulated in the offer itself that acceptance by post can also be sent (Aos et al., 2006). The purpose of postal acceptance rule is to promote contextual certainty. The rule does applies to the forms of communication that are similar to mail but does not extend to other forms of instantaneous communication even if such communication have some similarities with the communication by post5. The rule can also be displaced if the court comes to the conclusion that it could not have been within the contemplation of the parties to the contract that post could be an accepted way of communication for expressing acceptance6. The displacement of postal rule depends on the intention of the offerer. If it was the expressed or implied intention of the offerer that the notification regarding acceptance should reach him different entering the contract, the postal acceptance rule can be displaced by the courts.
4. Entores Ltd v Miles Far East Corporation [1955] 2 QB 327
5. Farmers’ Mercantile Union Mills v Coade (1921) High Court of Australia
6. Hudson Holdings Ltd v Rudder and French (1973) 128 CLR 387 High Court of Australia
Revocation of acceptance before its receipt by the offerer:
As the postal acceptance rule stipulates that acceptance is deemed to have reached the offerer as soon as the letter is posted, it is not possible to revoke the acceptance once the letter has been posted. Any subsequent withdrawal of acceptance will deemed it to be ineffective. Even if the revocation of acceptance is sent to the offerer by other means through which such innovation can reach before the letter of acceptance, the acceptance cannot be revoked (Farrall, 2002).
The Parol Evidence rule provides that evidence can be induced to prove the existence of moral warranties even in case of written contracts7. The rule depends on the principle that evidence which is extrinsic to the document can also be admitted in various situations. While the extensive evidence cannot be produced which adds, varies or contradicts the written terms of the contract, such evidence can still be produced to show that parties had entered into two contracts, one of which was written and the other was oral (Gendreau et al, 2002). For example where the written contract has failed to refer to the earlier oral promises, such oral promises can be enforced and evidence can be given regarding these oral promises8.
According to the Parol evidence rule when a contract is reduced to writing and when from the writing it appears to be complete it can be presumed that such writing contains all the terms and conditions of the contract and any evidence regarding any contemporaneous or previous agreement can not be allowed to be adduced which has the effect of adding, subtracting or varying the terms and conditions of the written agreement. It is commonly seen that agreements are not always completely reduced to writing by the parties.
7. Adams v Lindsell (1818) 106 ER 250
8. Empirnall Holdings v Machon Paull (1988) 14 NSWLR 523 Court of Appeal Supreme Ct NSW
This is particularly seen in cases where pre printed and standard forms of contract are used by the parties. In such cases any changes in the standard form contract are generally not written down but are perhaps agreed to on the basis of a hand shake. In such cases there are two aspects of this rule. These are related with
(i) Contents of the contract: The aspect related with the content of a contract states that if it was the intention of the parties that contract has to be in writing completely, the rule of Parol evidence can not resorted to give evidence which has the effect of adding, contradicting or varying the terms of the written contract. The rule also excludes the evidence regarding the extrinsic terms of the contract only in cases where it was agreed upon by the parties that the document will be a complete record of the whole contract hence this rule can not applied where the agreement is partly in written form and other part has been concluded orally. An example of such a contract could be the variation in pre printed form of contract. There are however certain exceptions to this rule. These are :
(a) Evidence of collateral contract: The effect of preventing the production of extrinsic evidence is that the main contract can not be applied to the collateral one hence oral evidence regarding such a contract can be presented in the court. The rule will however continue to be in operation in case of the main contract (Birgden, 2004).
(b) Producing evidence that written contract is not in force yet: The rule mentioned above operates only in case where the contract is in force at present and the contractual agreement is reflected by the written document of the contract.
(c) Producing evidence that written document had been varied or discharged: The rule restrict the introduction of extrinsic evidence related with the fact that parties have varied the contract before reducing it to writing but the rule does not prevent the introduction of evidence. That the parties have had later on agreed to the variation or discharge of the contract. Unless the contract was of such a nature that it had to be in writing in order to become enforceable, there is no need for such variation of discharge of the contract to be in writing. Thus oral or any other form of evidence can be produced in the Court who shows that there was a subsequent variation or discharge of the written agreement (Ward and Stewart, 2003).
(d) Producing evidence that is necessary for rectification: Though the general rule generally prevents the introduction of evidence which can add subtract or vary the terms and conditions of the agreement, the rule does not exclude any evidence if it is required to rectify the written contract. The purpose of such rectification is to correct an error. For example the parties may have recorded a sum which is different from the sum agreed upon by them for the purchase of a property (Taxman, 2002).
(ii) The second aspect of deals with the interpretation of contract: This aspect of the rule involves the use of this rule to resolve the real meaning of a contract and applying this meaning to the circumstances present at the time of entering into the contract. Any extrinsic evidence related with subjective intentions of parties, subsequent conduct and antecedent negotiation cannot be produced in the Court (Bogue, 2002). However extrinsic evidence regarding the setting of the contract or factual matrix can be produced in the Court. When a Court starts the process of interpreting a written agreement, it has to place itself in the same factual matrix in which the parties to the contract would have been at the time of entering into the contract9. Similarly while deciding the intentions of the parties at the time of entering into the contract, the Court take into the consideration the words recorded in the agreement as well as all the evidence regarding the surrounding circumstances of the contract (Hollin, 2002).
9. Sindel v Georgiou – “correspondence” (1984) 154 CLR 661 High Court of Australia – Appeal from Sup Ct NSW
The evidence regarding surrounding circumstances should be of such a nature that it should be within the knowledge of all the parties to the contract. There are certain exceptions to the rule of interpretation of contract. These are:
(a) Ambiguity: Extrinsic evidence can be produced in order to resolve any ambiguity that might had arisen from the written agreement. Such an ambiguity not only extends to patent ambiguities but it also extends to the latent ambiguities. These patent ambiguities include the cases where from the language of the contract there are more than one possible meanings or the meaning of the contract is difficult to understand. In case of the latent ambiguity the meaning of the terms and conditions of the contract is apparently clear but by showing extrinsic facts, it becomes unclear and ambiguous (Meyers et al, 2005).
(b) Identification of subject matter: Extrinsic evidence is admissible when it is produced to resolve any ambiguity regarding the subject matter of the agreement. Usually such an ambiguity is the result of a latent ambiguity therefore extrinsic evidence can be produced to resolve the doubt to which has been created by extrinsic knowledge (Kouzes and Posner, 2007).
(c) Identification of parties: Extrinsic evidence can be produced to resolve any ambiguity related with the identity of the parties to contract. Such ambiguity could also be related with the relationship of the parties to contract or regarding the capacity of these parties under which they have entered the agreement.
(d) Identifying real consideration: Extrinsic evidence can be given with a purpose of proving the real consideration in a contract in the following cases : (i) where no consideration or only a nominal consideration has been expressed in the agreement (ii) where the expressed consideration in the agreement is stated ambiguously or in very general terms or (iii) substantial consideration is stated in the contract but additional consideration also exists provided this additional consideration is in-consistent with the terms of the agreement. In case the additional consideration is different in nature, it can not be termed as inconsistent unless the written agreement mentions that the consideration stated in that document is the only consideration for that contract.
(e) Custom or usage: Where the language of the agreement provides a particular meaning on the basis of custom or usage in a particular region, industry or trade evidence regarding the meaning of that document is admissible even if no patent ambiguity is found in the document.
(f) Rectification: Extrinsic evidence can be produced when it aims at showing that the intention of the parties has not been recorded accurately in the written document. The document can be rectified accordingly so that the actual agreement is reflected from the written document.
The main purpose of the detail that is found in all commercial agreements and is also a major purpose of contract law is to allocate the risks between the parties to contract10. The Court determines the way in which such risks were allocated between the parties to contract from the language of the contract. Anything which can increase the uncertainty regarding the way words chosen by the parties have performed their task could create a new risk11. At the same time is also important to accurately reflect the real intention of the parties to contract.
Postal acceptance rule is the rule of convenience that provides that in case offer has been accepted by post, the contract comes in existence the moment acceptance has been posted. But here it should be kept in mind that postal acceptance rule applies only in cases where the parties have impliedly or explicitly contemplated post as a valid means of acceptance. Similarly it has to be noted that the postal acceptance rule does not covers contracts related with land. Likewise the rule also excludes cases in which letters are addressed incorrectly and modes of instantaneous communication.
10. Turner Kempson & Co v Camm – suggestions, not stipulations? (1922)Sup Ct Vict – Full Ct.
11. R.A. Brierley Investments Ltd (1966) 120 CLR 224 High Court of Australia
References:
Aos, S., Miller, M., & Drake, E. Evidenced-based adult corrections programs: What works and what does not. Washington State Institute for Public Policy Bulletin, January, 2006.
Birgden, A. Therapeutic jurisprudence and responsivity: Finding the will and the way in offender rehabilitation. Psychology, Crime & Law, 2004
Bogue, B. An evolutionary model for examining community corrections; Report to CT Judicial Branch Court Support Services Division, November, 2002
Carey, M. Social learning, social capital and correctional theories: Seeking an integrated model. Paper presented at International Community Corrections Association conference, November, 2002
Farrall, S. Rethinking What Works with Offenders. Cullompton, Devon: Willan, 2002.
Gendreau P., French S.A., and A. Taylor; What Works (What Doesn’t Work) Revised 2002 Invited Submission to the International Community Corrections Association Monograph Series Project, 2002.
Hollin, C.R. Risk-needs assessment and allocation to offender programs; In J. McGuire’s (ed.) Offender Rehabilitation and Treatment: Effective Programmes and Policies to Reduce Re-offending (pp.309-332). Chichester, England: John Wiley and Sons, 2002.
Kouzes, J. and Posner, B., The Leadership Challenge, Fourth Edition, San Francisco: Jossey-Bass, 2007.
Meyers, R.J., Villanueva, M., & Smith, J.E; The community reinforcement approach: History and new directions. Journal of Cognitive Psychotherapy, 19, 247-260. Behavioral programs for offenders: A meta-analysis of factors associated with effective treatment. Journal of Experimental Criminology, 2005
Taxman, F. Supervision: Exploring the dimensions of effectiveness. Federal Probation, September-Special Issue, 2002
Ward, T., & Stewart, C. Criminogenic needs and human needs: A theoretical model. Psychology, Law, & Crime, 2002
Case law cited:
R v Clarke (1927) 40 CLR 227 Australian High Court
Henthorn v. Fraser [1892] 2 Ch 77
Byrne v Van Tienhoven (1880) 5 CPD 344
Entores Ltd v Miles Far East Corporation [1955] 2 QB 327
Farmers’ Mercantile Union Mills v Coade (1921) High Court of Australia
Hudson Holdings Ltd v Rudder and French (1973) 128 CLR 387 High Court of Australia
Adams v Lindsell (1818) 106 ER 250
Empirnall Holdings v Machon Paull (1988) 14 NSWLR 523 Court of Appeal Supreme Ct NSW
Sindel v Georgiou – “correspondence” (1984) 154 CLR 661 High Court of Australia – Appeal from Sup Ct NSW
Turner Kempson & Co v Camm – suggestions, not stipulations? (1922)Sup Ct Vict – Full Ct.
Adams v. Lindsell (1818) 106 ER 250)
R.A. Brierley Investments Ltd (1966) 120 CLR 224 High Court of Australia
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