Adams v Lindsell

(1818) 106 ER 250

Summary

Where an offer was accepted by post, acceptance took effect at the date of posting.

Facts

The defendant Lindsell wrote to the claimant Adams offering to sell them some wool and asked for a reply 'in the course of post'. Lindsell sent the letter to the wrong address, so it arrived two days late. Adams posted a letter of acceptance on the same day that he received the offer. However, due to the delay, Lindsell assumed that Adams was not interested and sold the wool to someone else. Lindsell refused to honour the offer to Adams.

Adams sued for breach of contract and argued that there was a valid contract from the time the letter was posted.

Lindsell disagreed and argued the general rule applied that the offeror must receive the acceptance before it is effective. The sale to a third party amounted to a revocation of the offer. So, Lindsell argued that no contract had been made since he did not receive the letter before selling the wool to the third party.

Issue

When acceptance occurs in the context of a postal contract.

Held

The court sided with Adams and agreed that a valid contract came into existence when the letter of acceptance was placed in the post box.

Analysis

This case established the postal rule, which states that acceptance becomes effective when the acceptance letter is posted. The postal rule is an exception to the general rule that acceptance is valid when the offeror receives it. The postal rule only applies to post and does not apply to quicker communication types like Telex (Brinkibon Ltd v Stahag Stahl).

There are four things to note about the postal rule. First, it only applies to acceptances, not to offers or revocations (Henthorn v Fraser). Second, the acceptance letter must be posted correctly. If it does not arrive because of a fault by the person accepting (offeree), the acceptance is not valid. If the letter does not arrive for a reason outside of the offeree's control, then the acceptance is still valid (Household Fire & Carriage Accident Insurance v Grant). Third, the postal rule only applies where it is reasonable to accept by post. If the offer was made by email or telephone, the rule would not apply. Finally, the offeror can relatively easily exclude the postal rule expressly or by implication (Holwell Securities v Hughes).

Some reasons can be given for the postal rule. The rule prevents offerees from accepting offers by post but then cancelling the acceptance with a quicker form of communication. The rule also provides certainty to offerees as to when exactly they have entered into a contract.

One party will suffer in all dubious offer-acceptance cases, and the line needs to be drawn somewhere. Adams v Lindsell simply draws the line in favour of the offeree. This can be justified because offerors take the risk of postal delays and accidents when starting postal negotiations. Moreover, the offeror can easily avoid the postal rule expressly or by implication.