Com of Acceptance - Postal Rule, Electronic Com. Intention to Create Legal Relations Flashcards
ADAMS v LINDSELL (1818) 1 B & ALD 681
The postal rule – a letter of acceptance which is posted is complete on posting.
Subject to certain limitations (see below), a letter of acceptance which is posted is complete on posting and the contract will be formed at that point.
The postal rule applies only to acceptances. It has no application to offers, or to revocations of offers, to which the actual communication requirement applies. It is a serious error to apply the postal rule to, for example, a revocation of an offer.
Provided certain conditions are satisfied, a letter of acceptance will be binding when it is posted (Adams v Lindsell). For the postal rule to apply, it must be reasonable to use the post as a means of communication, the letter must be properly posted, and the offeror must not have excluded the rule either expressly or by implication (Holwell v Hughes).
Holwell Securities Ltd v Hughes [1974] 1 WLR 155
The offer said ‘notice in writing to [the defendant]’ and the court held that, by using the word ‘notice’, the offeror had impliedly excluded the postal rule. So whilst it might have been appropriate to accept by post, the acceptance actually had to arrive with the defendant to be effective. The postal rule did not apply.
All the offeror needs to do is use words requiring actual communication of the acceptance (Holwell Securities Ltd v Hughes (1974): ‘notice in writing to [the offeror]’).
What other forms of wording do you think will suffice? Examples: ‘Let me know your answer’, ‘I must know by …’ Compare this form of wording with ‘send your response to …’.
HOUSEHOLD FIRE & CARRIAGE ACCIDENT INSURANCE CO LTS v GRANT (1879) 4 EX D 216, CA
The postal rule may apply even if the letter of acceptance is lost or delayed in the post.
BALFOUR v BALFOUR [1919] 2 KB 571, CA
In domestic agreements there is a presumption that the parties did not intend to create legal relations
Merritt v Merritt [1970] 1 WLR 1211, CA
The above presumption ( that in domestic agreements there is a presumption that the parties did not intend to create legal relations) can be rebutted.
If the couple had been separated the likelihood is that they would have been bargaining at arm’s length. They would not have been prepared to rely on honourable understandings and accordingly would have intended the agreement to have legal effect
Authority for the above proposition is Merritt v Merritt [1970] 1 WLR 1211, CA. The husband had left the wife and was living with another woman. He signed a written agreement to the effect that he would pay his wife £40 a month, and in consideration of her repaying the mortgage on the jointly owned matrimonial home, he would transfer it to her sole ownership. The couple clearly had not wanted to leave anything to chance. It was a formal agreement which they obviously intended to be legally binding.
Factors which will help to rebut the presumption of no contractual intention in domestic agreements include: (a) The consideration involved – that is the benefit conferred on the other party, or otherwise the detriment suffered by the claimant. The greater the value of the consideration, the more likely it is that the parties intended legal relations. So, for example, the consideration was significant. The young couple sold their own house in order to move in with elderly relatives so that they could care for them.
(b) The parties to the agreement are not on good terms; eg the husband and wife are separated as in Merritt v Merritt and so can be said to be bargaining at arm’s length.
(c) If it is a formal agreement in writing. This is also illustrated by Merrit v Merrit.
EDWARDS v SKYWAYS [1964] 1 WLR 439
In commercial agreements there is a strong presumption of contractual intention.
In a commercial context very clear words are needed to rebut the presumption of an intention to create legal relations. In other words, it is much more difficult to rebut this presumption than the presumption of no intention to create legal relations in a social or domestic context.
As to what was meant by ‘ex gratia’, the judge in Edwards v Skyways [1964] 1 WLR 349 (from which the facts of the question are taken) said the words simply indicated that the employer did not admit any pre-existing liability on its part to make the payment: ‘The words did not mean, to put it another way, that the promise, when accepted, should have no binding effect at law.’ Accordingly, it was held that the employer had not rebutted the presumption in order to establish that there was in fact no intention to be bound.
A case where the presumption was rebutted is Rose and Frank Co v Crompton Bros [1925] AC 445, HL, in which the agreement between the two companies included an ‘Honourable Pledge Clause’. The clause specifically stated that it was not entered into as a ‘formal or legal agreement’, but was only a definite expression and record of the intention of the parties. The parties ‘honourably pledged’ themselves to the agreement in the confidence ‘that it will be carried through by each of the … parties with mutual loyalty and friendly co-operation’. The Court of Appeal regarded this as clear evidence that the parties did not intend the agreement to be legally binding and this was accepted by the House of Lords.
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelgesellschaft GmbH [1983]
The key statement is an obiter comment by Lord Wilberforce in Brinkibon Ltd v Stahag Stahl GmbH (1983) concerning such non-instantaneous telex (and presumably fax) messages: ‘No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie.
THE BRIMNES [1975] QB 929
If a notice of revocation is sent to a business and arrives during normal office hours, it is likely to be effective at that point, even if not read until the next day. However, it all depends on what is reasonable, bearing in mind the particular context and the situation as a whole.
There is a reasonable expectation that a notice of revocation sent to a business during normal business hours it is likely to be effective on receipt.
It would appear from the case of The Brimnes [1975] QB 929 that in this situation the notice will be effective on receipt where it is reasonable to expect a member of staff to be available to read a notice of revocation.
If a notice of revocation is received (eg a fax) but not read until the following day, the court will have to decide when communication takes place, and this will depend on the reasonable expectation of the sender
