Table of Contents
This case study analyses the application of postal acceptance rule in United Kingdom (UK) contracts and a civil law country, Germany. In addition, issues of forum law clause have been scrutinised. In this regard, various primary and secondary sources have been explored. Thus, academic books, authentic journals, and case law have been examined. In the UK, the postal acceptance rule is accepted, and the courts are in favour of this rule. This rule stipulates that where the circumstances are within the observation of the parties, acceptance of an offer by post is completed upon posting the same. Relating to this aspect, case laws have been adduced. In Germany, the mailbox rule is inapplicable. This is because, offer and acceptance are valid, only after they actually reach the concerned parties and should not have been revoked in the meantime. In German law, offer and acceptance are irrevocable after they become effective.
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This work comprises of an introduction, describing the facts of the case study, body section containing the postal acceptance rule in the UK contract law and Germany, and a conclusion based upon the case study and discussion. This work claims that the defendant (wine-seller) is incorrect in claiming invalidity of the acceptance under UK law. He will be liable for breach of contract under the UK law, since he sold the wine to a third party, after the acceptance letter had been posted by the plaintiff (buyer). If the case study had related to German contract law, then the acceptance would have been invalid, as it had not reached the defendant within the stipulated date.
Rule of Postal Acceptance in Contract Law
In a contract between two parties, one of them, a wine producer (defendant), offered to sell his wine to the other party, a distributor (plaintiff) in Spain, on 2 September. One of the conditions of the offer was that the acceptance had to be a manually signed reply by post by 7 September. Moreover, the contract had a forum selection clause that stipulated regulation of the contract by the law of the United Kingdom (UK). However, the offeror’s offer letter had been misdirected, which resulted in the offeree receiving it on 5 September. The distributor received the letter on 5 September and posted his acceptance on the same day. However, the acceptance letter was received only on 9 September, by which time, the wine maker had already sold the wine to another party. The plaintiff approached the court claiming that the contract had been concluded validly at the time of acceptance, to which the defendant contended that there was no binding contract till the acceptance had been received.
Correctness or Otherwise of the Defendant’s Stance
Postal Acceptance Rule of the UK
In our case study, the offer includes a forum selection clause that stipulates regulating of the contract by UK law. Hence, it is to be determined whether the defendant (offeror) is correct in claiming that, the acceptance by the plaintiff (offeree) is invalid, since it did not reach the former within the stipulated time, namely 7 September.
The postal acceptance rule was introduced in the UK with the decision in Adams v Lindsell. This rule states that where the circumstances are within the contemplation of the parties, acceptance of an offer by post is completed upon posting the same. This was reiterated in the ruling in Henthorn v Fraser. This rule aimed to avert a situation where an offer could be revoked at any instant until the offeree conceded that he had received the offer. Thus, in Household Fire Insurance Co v Grant and Re Imperial Land Co of Marseilles, ex p Harris, the court ruled that there was a valid contract when the acceptance letter had been posted, even if that letter was lost in transit. Another justification for the postal rule is that the offeror has to be regarded as having made the offer for the entire time of his offer being in the post. Therefore, posting of the acceptance of the offer completes the agreement between the parties (Al Ibrahim, 2007, p. 47). In our case study, the offeror based in London, made the offer on 2 September, to the offeree based in Spain. One of the conditions of the offer was that acceptance had to be manually signed and posted to reach the offeror by 7 September. Due to misdirection by the offeror, the offer reached the offeree on 5 September. The offeree posted his acceptance immediately upon receiving the offer, on 5 September, which was received by the offeror on 9 September. Thus, the offeree was not responsible for the delayed receipt of the acceptance by the offeror. The above discussed caselaw, including Adams v Lindsell and Henthorn v Fraser, establish that acceptance was completed, and a valid contract had been formed, with the posting of the acceptance by the offeree, on 5 September.
In a contract that stipulates the post as the required method of communication acceptance is deemed completed at the moment when acceptance is posted. This position remains unaltered, even if the letter of acceptance is lost, delayed or destroyed, and does not reach the offeror. However, the letter of acceptance must be addressed, stamped and posted in the prescribed manner. If the offer letter is misdirected, the offer is deemed to have been made when the offer letter reaches the offeree (Keenan & Smith, 2007, p. 277). Thus, the offer takes place only after the offer letter reaches the offeree, following any misdirection by the offeror. Hence, in our case study, it can be deemed that the offer was made only on 5 September, when the offer letter reached the offeror, after its misdirection and delay by the offeror (defendant).
For instance, in Byrne & Co v Leon van Tienhoven, Van Tienhoven had offered, by letter, to sell goods to Byrne, who cabled his acceptance. Prior to this Van Tienhoven posted a letter revoking the offer, which was received by Byrne after he had cabled acceptance. The court held that acceptance occurred with the transmission of acceptance (Byrne & Co v Leon van Tienhoven & Co, 1880). Similarly, in our case, acceptance had transpired with the posting of the letter of acceptance by the offeror on 5 September.
Moreover, in Holwell Securities v Hughes, Hughes had offered to sell his dwelling to Holwell Securities, and required acceptance by “notice in writing”. Holwell posted a letter of acceptance, which was not received by Hughes. The court held that the “notice in writing” clause excluded the postal rule (Holwell Securities v Hughes, 1974). This case is inapplicable to our case study, since the offeror requested the offeree to post acceptance via a manually signed letter. The offeree followed these conditions, and posted the manually signed letter. As such, the offeree had complied with the conditions stipulated in the offer.
In general, the postal rule is unfavourable towards the offeror, in the event of loss, delay or destruction of the acceptance letter, even when neither party to the contract is at fault. This was criticised by Denning LJ in Entores Ltd v Miles Far East Corporation, who held the postal rule to be inapplicable to instantaneous modes of communication. Furthermore, in Korbetis v Transgrain Shipping BV, the court ruled that the postal rule did not apply when the letter of acceptance had been addressed incorrectly (MacDonald, 2013). In our case study, since, the acceptance letter is addressed correctly and posted by the offeree, it can be deemed that a valid contract had been formed on 5 September through a letter of acceptance.
However, acceptance that is delayed is ineffective, unless the offeror agrees to the contract immediately. On the other hand, if the offeree had sent the acceptance within the stipulated time, but the same had reached the offeror after such time due to transmission delay, the offeree has to be notified if the offeror does not wish to form the contract. Late acceptance becomes effective, unless the offeror informs the offeree, without delay, that the offer is to be deemed as lapsed or where the offeror gives notice to that effect. However, such duty is imposed upon the offeror, only where the acceptance had been sent within the specified time and had arrived late on account of unforeseen delay in transmission (Commission on European Contract Law, 2000, p. 176). In our case study, the offeror had not notified the offeree about the lapse of the offer. The offeror is under an obligation to notify the offeror regarding the lapse of the offer. As such, the defendant is liable for the breach of contract according to the above discussion.
In addition, the English courts accept jurisdiction in accordance with a choice of forum clause. These courts avoid exercising jurisdiction that provides exemption from a choice of forum clause that submits disputes to a foreign court’s exclusive jurisdiction. English courts prefer to compel the parties to comply with their agreement, unless it can be established that the foreign court trial would be unjust or unfair (Zaphiriou, 1978, pp. 315-316). In our case study, the offeror, a resident of London, had included a choice of forum clause in his offer, stipulating the jurisdiction of UK courts for the proposed contract. Hence, the defendant cannot contend that UK court jurisdiction will be unfair or unjust towards him.
With the exception of those that are contrary to public policy or which endeavour to circumvent the relevant mandatory legal provisions, choice of law clauses are usually upheld by the English courts. Thus, in the UK, choice of law clauses are generally upheld, unless the defendant can establish that such trial would be unjust or inequitable (Zaphiriou, 1978, p. 333).
Furthermore, the courts of England and Wales implement forum selection or jurisdiction clauses, regardless of whether such clause grants jurisdiction to a foreign court or a UK court. These clauses can prove to be irksome in some situations, such as: first, the disputes pertain to related contracts that differ with respect to the choice of court by the parties. Second, the emergence of an unforeseen factor, after the agreement has been reached. Third, the clause is non-exclusive. Fourth, the party resisting jurisdiction commences legal proceedings in the court of another Member State of the European Union (EU) (Berezin & Phillips, n.d.).
Acceptance of Offer Under German Contract Law
It has to be examined whether the defendant is correct in claiming invalidity of acceptance under the German postal rule of acceptance.
German law regards an offer as being irrevocable, in general, unless stated otherwise. The German law does not adopt the postal rule, because the irrevocability of offers connotes that the offeree is sufficiently safeguarded during a reasonable period subsequent to the offer reaching him. With regard to French law, protection is provided against revocation via irrevocability or damages for delictual (intentional or negligent) breach of duty of care on its occurrence (MacDonald, 2013). Thus, the German law does not accept the postal rule of acceptance. In our case, the offeror can claim invalidity of acceptance, since it did not reach him within the time stipulated in the offer.
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Thus, under German law, offers and acceptances do not become effective till they reach the offeree, and in addition, they should not have been revoked in the meanwhile. Mere dispatch of the offer is insufficient. Moreover, it is not necessary for the offeree to actually become cognisant of the offer. All that is required is that the offeree should have been in a position where he would ordinarily have become aware of the offer. Till the time of their becoming effective or reaching the offeree, offers and acceptances can be subjected to revocation. If the revocation and offer or acceptance reach the addressee simultaneously, then there is no offer or acceptance (Pieck, 1996, p. 116). Under the German law, the offeror can claim invalidity of acceptance, based on its delayed receipt by him, namely on 9 September, instead of 7 September.
As such, there is an absence of uniformity, vis-à-vis the moment when a contract is to be deemed concluded via communication of acceptance, in the laws of different nations. For instance, the Cour de Cassation (court of final appeal for civil and criminal matters) of France has made the lower courts responsible for determining it. All the same, where the acceptance has to be conveyed prior to a specific date, the acceptance has to be dispatched before that date (Commission on European Contract Law, 2000, p. 173).
Under UK law, the offeror (defendant) is liable for breach of contract for selling the wine to a third party, after the acceptance letter had been posted by the offeree. The plaintiff (offeree) can obtain justice by taking recourse to the provisions of the UK Postal rule of acceptance.
Under the German law, the offeror (defendant) can circumvent liability for the breach of contract by claiming that he had not received the letter of acceptance within the stipulated time, and that the offer had lapsed due to delay in acceptance.
- Adams & Ors v Lindsell & Ors (1818) EWHC KB J59.
- Al Ibrahim, M., 2007. The Postal Acceptance Rule in the Digital Age. Journal of International Commercial Law and Technology, 2(1), pp. 47-53.
- Berezin, A. & Phillips, C. W., n.d. Litigation vs. Arbitration: Where and How?. [online] Available at: <https://shop.americanbar.org/PersonifyImages/ProductFiles/242046982/Choice%20of%20Forum.pdf> [Accessed 2 November 2017].
- Byrne & Co v Leon van Tienhoven & Co (1880) 5 CPD 344.
- Commission on European Contract Law, 2000. Principles of European Contract Law: Parts I and II. The Hague, The Netherlands: Kluwer Law International.
- Entores Ltd v Miles Far East Corporation (1955) EWCA Civ 3.
- Henthorn v Fraser (1892) 2 Ch 27.
- Holwell Securities v Hughes (1974) 1 WLR 155.
- Household Fire Insurance Co v Grant (1879) LR 4 Ex D 216.
- Keenan, D. J. & Smith, K., 2007. Smith & Keenan’s English Law: Text and Cases. London, UK: Pearson Longman.
- Korbetis v Transgrain Shipping BV (2005) EWHC (QB) 1345.
- MacDonald, E., 2013. Dispatching the dispatch rule? The postal rule, e-mail, revocation and implied terms. European Journal of Current Legal Issues, 19(2).
- Pieck, M., 1996. A Study of the Significant Aspects of German Contract Law. Annual Survey of International & Comparative Law, 3(1), pp. 111-176.
- Re Imperial Land Co of Marseilles, ex p Harris (1872) Law Rep. 7 Ch. App. 587.
- Zaphiriou, G. A., 1978. Choice of Forum and Choice of Law Clauses in International Commercial Agreements. Maryland Journal of International Law, 3(2), pp. 311-334.