Issues related to postal rule are considered as controversial part of the contract law, as it includes the question related to the time and type of contract formation. There is requirement of remote communications when parties to the contract are not available for discussing every fact related to the transaction, otherwise it impose various questions related to the offer and acceptance of the contract. This rule is introduced for the purpose of solving the conflicts and problems in communication of contract and acceptance. This section of the paper discusses the meaning and history of the postal rule1.
Meaning- offer and acceptance are considered as two important element of contract law which mainly consider the existence and operations of the contract between the parties. Postal rule is considered as an exception to the general rules of offer and acceptance. Generally, offer and acceptance rules stated that it is possible to revoke or withdraw the offer any time before it is accepted by other party. Postal rule is introduced by the party to solve the issues occurred between offeror and offeree. These particular issues are raised by the different modes of communication. Usually, post or mail is referred as “snail mail” because it take long period of time to get by recipient. This may result in issues in context of both formation and revocation of contract between the parties. Offerors are not able to known about the acceptance and revocation
In general mode of communication, it is deemed that acceptance is received when it is given to the offeror by the offeree, even though such acceptance not even read by the offeror. In case of post, special rule is applied which state that in case of post acceptance occurred when offeree post the letter.
This can be understood through case law Bressan v Squires, Supreme Court of New South Wales 1974 2 NSWLR 4602. In this case, Court held that contract was not formed until acceptance related to the contract is actually communicated to the offeree, but postal rule was an exception to this general rule which states that acceptance was communicated when letter was posted by the offeror3.
Creation of postal rule- this rule was introduced in case law Adam v Lindsell 1818 B & Ald 6814. In this case, court held the contract formation period through mail. In this case, two parties communicated by post in which precise time of the acceptance was not able to determine. In this mail send by the parties last for few days and both the parties were not aware about the communication at the same time. This issue creates number of problems and result in the introduction of postal rule. There was one more case Henthorn v Fraser 1892 5in which Court discusses the postal rule.
After discussing the facts of both the cases, it can be said that when situations are of such nature that it must have been within the inspection of the parties, post can used as means of communication for the purpose of accepting the offer directed by the offeror, and in this context acceptance is completed as letter is posted.
In the situation when parties made deal face to face, business parties discuss every fact and communicate whenever any issue arises. However, in the situation of distant contracting or indirect business, method of communication which is instantaneous in nature is not available. In this type of situation parties to the business are not aware of the acceptance or refusal of the contract, this rule of post is used by the Court to resolve the problematic cases related to delay of communication.
On the basis of United Nations Commission on International Trade Law’s Model Law on Electronic Commerce (UNCITRAL), the Electronic Transactions Act 1999 (Cth) was initiated on March 15th 2000, and this Act was considered as part of the strategic policy framed by the government of Australia for the purpose of developing information economic. Government of Australia established the Electronic Commerce Expert Group for the purpose of reporting the issues related to ecommerce adopted UNCITRAL for dealing with the issues in B2B business. In this context, UNCITRAL gives the surety that people get the advantage from the growth of new information technology (IT)6.
As per the report published by the Attorney General’s E-Commerce Expert Group during the period of April 1998, the country of the offeror operating the business will regulate the contract in case acceptance related to the contract arises at the offeror’s place of business, unless agreed by the parties.
Government created the Electronic Transactions Act 20007 for the purpose of responding to the report. As per this Act, communication in electronic form paralleled to the individual to whom information is needed to be given, which consent related to the information must be given through electronic communication only. Time of receipt in context of electronic communication is considered as time when such communication enters in the information system. This statement reflected role of postal rule application in email contracts which are not received by the offeror until offeror operated the system. It must be noted that, provisions of this Act does not applied in case of telex machines or facsimile.
It can be said that, both the Act provide new way to the postal rule application. Once communication exists, then it is possible to use the postal rules for solving the issues in distant business. Various times postal rule have been developed and amended for the purpose of meeting the demand of present business environment8.
The main purpose of Commonwealth’s Electronic Transaction Act 19999 is to provide facility in context of electronic transactions, as it also validates the digital or electronic versions of signatures, and electronic communications in case hard copies are required10.
In regards of E-mail there are two ways of communication. First way of communication is through the internet. In this press button is press by the user for the purpose of transmitting the E-mail to the internet server provider (ISP). With the help of ISP, E-mail travels by way of internet where it may send on across the world until it reaches the receivers ISP. Then the receiver is able to download the e-mail by logging onto his ISP11.
Second way of communication is the electronic data interchange (EDI). EDI is considered as system which creates direct link between two parties and because of this email send by one party immediately reaches the computer of receivers. It must be noted that this direct link between the parties, makes the communication instantaneous. However, internet takes time to send the information and cannot be classified as instantaneous.
With the changing business environment Court needs to decide whether scope of postal rule extend to the modern developments in communication named as instantaneous communication. With the progression of electronic methods, dispatch and receipt of any message needs to coincide and any law that dealt with the delay of message between the two parties such as postal rule considered as useless or outdated law.
There are number of reasons which deal with the discussion in context of applicability of postal rule and reason of not applying the postal rule on E-mail communication through the internet. The basis reason behind this is the type of communication. It is already stated above that E-mail through internet is a non-instantaneous type of communication and stated as the digital equivalent of the postal system. However, there is exception to this rule that speed of the communication is equal to the instantaneous communication systems such as telex12.
In case experts concluded that E-mail is an instantaneous method of communication, then in such case postal rule is not applied to the acceptances transmitted by E-mail. However, argument is also stated for the purpose of supporting the application of postal rule in context of E-mail, and such argument is that offeree in the contract must not be responsible for any fault which might be occur after the transmission of the message of acceptance. The idea behind this argument is that generally offeree lost all the control over the acceptance and he done all the possible action for transmitting the acceptance to the offeror. This argument mainly held the offeror liable for any fault and in this assumption is taken that oferor bear all the risk related to problems which might be occurred after the transmission of E-mail by the offeree. However, in lieu of functionality provided by available e-mail systems this argument is not convincing in nature because it is possible for offeree to check the progress of E-mail sent by offeree and even offeree can also detect the time when such E-mail is actually opened by the Offeree13.
It can be said that offeree retains the control over the acceptance till the time such acceptance is read by the offeror. This shift in the balance of power state the majority of policy considerations which have been justify the application of postal acceptance rule. This fact is also considered that offeree can make telephone call to make confirmation that the e-mail acceptance message has been received by the offeror. Therefore, it is possible for offeree to determine whether binding contract is made and he or she can also state their fats accordingly. The success of commercial transactions which are generally conducted over the internet shows that contracting parties does not need a rule of postal acceptance for addressing any delays in communication of E-mail.
In recent decision, court showed their dissent for applying the postal acceptance rule to modern communication especially in case of instantaneous methods of communication. This ruling is mainly reflected by Hedigan J of the Supreme Court of Victoria in case law Nunin Holdings v Tullamarine Estates. In this Hedigan J stated, recent authority discuss the more modern methods of communication, and prefer not to apply the postal rule of acceptance in strict manner, and consider the intention of parties while applying the general rule of acceptance that is for being effective acceptance to the contract must be communicated. Therefore, it is concluded by the Court in context of general rule of acceptance, that acceptance which is sent by the E-mail must not be effective till the time such acceptance is communicated to the offeror.
The concept of instantaneousness communication can be understood through case law Entores Ltd v Miles Far East Corporation 1955 2 QB 327 14and Brinkibon v Stahag Stahl und Stahlwarenhandels GmbH 1983 2 AC 3415. These cases state that postal rule will not be applied on E-mails because they are instantaneousness mode of communication.