Goodbye to Postal Rule

POSTED BY Rick Shera
04 June 2014

posted in | Cloud | Consumer Law | Contract Law | Information Technology | Data Protection



In the days when most things went by physical post, in envelopes, delivered by actual people, in real life, mostly on bikes, the law developed the postal rule.  It is an exception to the general rule of contract formation.  The general rule is that a contract is not formed until the acceptance from the offeree (the person receiving the offer) is received by the offeror (the person making the offer).  Until the offeror receives the acceptance, he or she can withdraw the offer.  If the offeree then sends back their acceptance, no contract is formed, but their acceptance could itself be a counter-offer, which is then available for acceptance by the original offeror (now the offeree) unless it is withdrawn by the original offeree (who is now the offeror) in which case there would be no contract ... and the space time continuum will have collapsed!

Many, many, cases have been fought over whether the offeror's acceptance has been withdrawn before the contract has been formed.

In the absence of a specific agreement, the postal rule creates an exception to the general rule. The postal rule holds that the offer is considered to be accepted and the contract formed as soon as the offeree puts his or her acceptance in the post. The reason is that the post is (or was) considered more reliable in terms of regular delivery compared to the uncertainty of whether or not a recipient actually opened it.

This doesn't make sense though in light of the presumptions of delivery already built into the Electronic Transactions Act 2002 and the instantaneous nature of email and other electronic communication. So, in a recent change, the Electronic Transactions Act has been amended to clarify that the old postal rule doesn't apply to electronic communications.

Contract formation is now dictated by the time of receipt of the offeree's acceptance, as determined by section 11 of the Electronic Transactions Act:

11 Time of receipt
  • An electronic communication is taken to be received,—

    • (a)in the case of an addressee who has designated an information system for the purpose of receiving electronic communications, at the time the electronic communication enters that information system; or

    • (b)in any other case, at the time the electronic communication comes to the attention of the addressee.

Makes sense.

Postbox Image courtesy of David, Johnny English

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