Discuss the problems that can arise when contracts are formed by exchange of letters or electronic communication and suggest ways in which the law in this area could be reformed

Question 1

What are the postal rules

Answer 1

The postal rules established in the Adams and Lindsell case. State that a letter of acceptance takes effect from the moment it is posted. If the letter is lost and never delivered then this does not affect the validity of the acceptance as shown in Household insurance v Grant. Once acceptance has been sent it probably cannot be overtaken by revocation by a faster means.

Question 2

What are the exceptions to the postal rules

Answer 2

• That the postal rule takes effect where it would be in the contemplation of the parties. Henthorn v Fraser
• That it will not take effect if it has been excluded by the parties. Holwell securities v Hughes
• That it will not take effect where a mistake in posting is the fault of the offeree

Question 3

What are the rules for revocation

Answer 3

Revocation must be communicated before acceptance as shown in Byrne v Van Tienhoven. That revocation by instant means takes effect within usual business hours. The brimnes

Question 4

What are the rules for acceptance by instant communication

Answer 4

• A telex takes effect from the moment it arrives and the postal rule doesn’t apply in instant forms of communication shown in entores v miles Far East corporation - states offeror has to be aware of acceptance
• That the exact time of acceptance depends on the expectation of the parties and sound business practice shown in Brinkibon v stahag stahl - which deals with the problem of out of hours messages

Question 5

What are the problems with the postal rules

Answer 5

• a party may be in a contract without knowing it
• it can be difficult to know when revocation is possible
• it can be unclear when the postal rule has been excluded by implication
• it is outdated and not in tune with the speed expected of modern business communication
• there is no clear authority on overtaking a posted acceptance with a revocation sent by faster means
• that the rules for offer and acceptance are too formal and outdated and don’t reflect current business practice

Question 6

What are the problems with acceptance by instant communication

Answer 6

• it may not be clear to the offeree when the other party has received and seen the acceptance
• the sound business practice rule can lead to subjective decisions by the judge and may lead to a lack of clarity in the law
• that the existing case law deals with contracts made by telex and this may not reflect modern communications by various forms of instant messaging

Question 7

What are the ways the law could be clearer

Answer 7

• The postal rule could be abolished unless it has been specifically adopted by the parties
• Standardised business hours could be adopted by the courts for communication sent out of hours and these would apply unless the parties have expressly or impliedly excluded them
• the rules for communication could be codified which would give greater clarity for businesses
• parliament could adopt the principles of European contract law which would help to standardise UK contract law
• the formal requirement for offer and acceptance should be replaced by a general requirement that there is a clear agreement between the parties