Issue
Discuss about the Business & Contract Legal Studies for Transgrain Shipping BV.
This case involves Peter and John. Peter was directed by John to conclude the contract for a sale of wine by sending John a written order together with a cheque to John for the purchase. However, John did not wait for Peter’s response before concluding a contract with another customer. Both parties dispute the existence of a contract.
The main issue for Peter and John case is the application of the postal rule in situations where an offer is accepted by posting the acceptance while the offeror contracts with someone else since he was not aware of the acceptance.
The rules of acceptance of an offer require communication of the offeree to the offeror (Miller and Hollowell, 2010, p.123). However, the postal rule provides an exception to this “general rule. According to (Macdonald, 2013), the basic rules that apply under English law in regarding acceptance by post states that acceptance becomes valid the moment the offeree posts his acceptance as opposed to when the offeror receives or opens it. These rules were first made in ruling of (Adams v. Lindsell, [1818]). These principles grant the offeree the right to enforce the contract even in situations where letters are delayed or lost provided that it was not the offeree’s faults (O’Sullivan and Hilliard, 2016, p.31). The principles exonerate the offerees from any liability that may arise after they have posted their acceptance. On the part of the offeror, the law requires them to wait for a reasonable time moving on to contract with other people.
When it comes to acceptance of an offer, the law allows the offeree to use the postal services provided that the rules set by the offeror do not displace this method of acceptance. Other times these rules apply are when the offeror expressly instructs the offeree to post their acceptance as found in the case between Peter and John. In (Adams v. Lindsell, [1818]), the defendant was offering to sell wool. He asked the claimant to communicate his acceptance through the poster. However, there were some delays in the postal services, and hence the defendants decided to trade with another customer. The defendant believed that the claimant was in no way going to be interested in the deal. The claimant brought suit requesting to enforce the contract. On hearing the case, the court found that the claimant had sent the letter the same day he was given the offer. The court reasoned that the contract was enforceable.
Rule
On analysis, the court found that it could not deny the claimant the right to enforce the contract since acceptance was sent the same day the offeror communicated the offer. It was the responsibility of the offeror to give the post office sometime to deliver the letter. Another justification for this reasoning was that it could have been inherently unfair to allow Lindsell dishonor the contract in which he had misaddressed his offer (Stevenson, 2010). As can be seen, the facts in John and Peter situation matches this scenario. John was the one who started the negotiation and provided the instructions for lodging an order which was possible through the poster. Peter was in full compliance with John’s rules. Again, a difference of one day could not be counted as a huge difference. Sending acceptance the following day was within the reasonable business time.
Another rationale provided by the court is that the ruling was necessary for business efficacy. The court reasoned that if the claimant had not sent the acceptance through the post, the contract would have remained ad infinitum with each side waiting for the confirmation (Stone and Devenney, 2015, p.63). If the same concept is weighed in Peter’s case, it is worth concluding that Peter’s postal acceptance was necessary to close the contract’s communications for the promotion of the business efficacy.
The ruling in (Dunlop v. Higgins, [1848]) also adopted the previous ruling of Adam’s case. In the Dunlop case, the claimant had offered to sell his pig-Iron to the defendant, Higgins. The defendant received the letter of the offer and replied with the acceptance on the same day, but the acceptance was delayed in the post office. The defendant, however, declined to honor the agreement citing an increase in the price. Adopting the decision in Adam’s case, the court the court found that the offeree had no responsibility for the delays caused by the transit. Therefore, there was a binding contract from the moment the offeree posted his acceptance. In essence, the same concept fits Peter’s case. John was supposed to give the post office sometime.
The ruling of (Household Fire Insurance Co. v. Grant, [1879]) took a further approach in adopting the decision on Adam’s case though the situation was completely different. Mr. Grant, the defendant had applied for shares in the claimant’s company, the Household Fire Insurance. The claimant awarded the defendant the shares, and a notification was sent to the defendant. Unfortunately, the letter of notice did not reach the defendant hence Mr. Grant did not pay for the shares. The defendant denied that there was acceptance since he never received the notice. Again, the court held that acceptance is deemed communicated when the offeree posts the letter. It is under the responsibility of the offeror to wait for the mishandlings or delays by the Post Office. In the justification of this ruling, work (McKendrick, 2017) explains various rationales for the adoption of this rule. The first one is that by asking the offeree to post his/her acceptance, the offeror holds the post office acting as its agent. This reasoning was the same held by judge Thesiger LJ when he stated that a valid contract requires both parties to have a meeting of minds and a mutual communication serves the best element for bringing them together. The judge held the post office was the agent that was providing the mutual communication. Though this case is dealt with a lost letter, the part that applies to Peter and John’s case is the comments made by Judge. In addition to the comments above, Thesiger LJ added that since the offeror is always waiting for the offeree’s response, it is a general conception that the offeror could have inquired on the status of the acceptance before moving on (Chen-Wishart, 2007, p.89). Therefore, John should have at least enquired about Peter’s last decision before moving on to sell to another customer.
Application
Also in (Henthorn v. Fraser, [1892]), the court held that the postal rule does not apply in all situations, only apply where reasonable. The claimant offered an offer to the defendant which was to be accepted within 14 days. Later the claimant contracted with someone else and sent a letter of revocation to the defendant. By then the defendant had already received the offer and sent his acceptance. The court held that the revocation was not effective since the acceptance had already been sent. The court reasoned that even if an acceptance is valid from the time the offeree sends the letter, it is not reasonable to apply the same rule to revocation of an offer. In this situation, the court looked at whether it was reasonable to post the letter (Andrews, 2015, p.53). The court looked at the distance between the two parties. Also, according to (Peel, 2015, 2–031), the ruling emphasized on the need to keep in mind the time post office takes while advising the other party to communicate its acceptance through posting a letter. The case would still apply to Peter and John since both parties do not live close to each other. John was supposed to reason that posting a letter could not take such a short period.
On the other hand, there are a few situations when it would seem illogical to hold the offeror responsible even when he does not know of the acceptance. In most cases, a claim arising from such situations is beneficial to the offeror as they offer some lines of defense. One of such circumstances was handled by the court of Scotland while ruling in (Mason v. Benhar Coal Co., [1882]). However, these were only the situations when the offeree is in mistakes or when he wrongly addresses the offeror. The judge viewed that even if the ruling of (Household Fire Insurance Co. v. Grant, [1879]) was right that the offeror should be held responsible even when the acceptance letter fails to reach him or delays, not when the delays are attributed to the offeree.
A similar ruling was also held in (LJ Korbetis v Transgrain Shipping BV, [2005]). In this case, LJ Korbetis, (complaint) sent Transgrain Shipping BV (defendant) a fax accepting one of the selected arbitrators. The complainant requested a confirmation message from the defendant which he repeatedly sent to the wrong address. Later the claimant found he had been sending to the wrong address. He sent to the correct address, but the defendant rejected the confirmation since it was too late. As an argument, the complainant said that the acceptance was valid from the time it was sent but the court denied this argument. The reasoning was that though the postal rules work like that, here the situation was different since the complainant was sending the confirmation to the wrong address. As can be seen, this could have been a probable defense for John, but it would not work since Peter had not caused the delays.
Conclusion
Peter will win the case over John. That is, the court will allow Peter to enforce the contract. The main reason behind the ruling is that acceptance happens as soon as when the offeree posts the letter as opposed to when the letter reaches the offeror. Other reasons that the court will consider are that John should have considered the letter’s duration in the post office. Another reason is that contracts are concluded once acceptance happens to prevent ad infinitum. Also, the post office acted as the agent of John. Finally, by stating that acceptance happened when the letter was posted, it allows the court to minimize the difficulties of getting the proof. That is, it is possible to proof when a letter is posted (by post office receipts) than proving its failure to reach the destination. The latter is relative to person, time and location which is very hard to prove.
References
Adams v. Lindsell [1818] B & Ald 1.
Andrews, N., 2015. Contract Law. Cambridge University Press.
Chen-Wishart, M., 2007. Contract Law. OUP Oxford.
Dunlop v. Higgins [1848] HLC 1.
Henthorn v. Fraser [1892] Ch. 2 1892.
Household Fire Insurance Co. v. Grant [1879] Ex. D. 4.
LJ Korbetis v Transgrain Shipping BV [2005] EWHC 1345.
Macdonald, E., 2013. Dispatching the dispatch rule? The postal rule, e-mail, revocation and implied terms. European Journal of Current Legal Issues, [online] 19(2). Available at: <https://webjcli.org/article/view/239> [Accessed 25 Jul. 2018].
Mason v. Benhar Coal Co. [1882] R 9.
McKendrick, E., 2017. Contract Law. Macmillan Education UK.
Miller, R.L. and Hollowell, W.E., 2010. Cengage Advantage Books: Business Law: Text and Exercises. Cengage Learning.
O’Sullivan, J. and Hilliard, J., 2016. The Law of Contract. Oxford University Press.
Peel, E., 2015. Treitel on The Law of Contract. 14th edition edition ed. London: Sweet & Maxwell.
Stevenson, P.J., 2010. Going Postal: An Examination of the Postal Rule and its Modern-Day Relevance.
Stone, R. and Devenney, J., 2015. The Modern Law of Contract. Routledge.
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