Facts[]
Grant had negotiated to purchase shares in Household Fire. His application was accepted, and his name was added to the list of registered shareholders, However, the letter informing the appellant of this never reached him and thus Grant never paid for the shares. His earnings from dividends were credited to his account. Eventually Household Fire went into liquidation and the liquidator applied for money from the appellant. He refused to pay on the grounds that he was not a shareholder – he had never received the notification in the mail and was not aware.
The appeal judge Thesiger J found that the appellant implied that the respondent was to send him the notification that he had been issued the shares in the mail by requesting them by mail, and therefore they were not to be penalized for sending the notification that way. The liquidator was thus successful at recovering the money, which Grant appealed.
Issue[]
- When do acceptances becoming binding when they are sent via mail?
Decision[]
There was a valid contract. Appeal dismissed.
Reasons[]
Thesiger and Baggallay agree with the trial judge's decision that the contract was formed when the acceptance was mailed. They discuss the pros and cons of the postal rule, and decide that the pros outweigh the cons. They state that the offeror can always choose to make the acceptance binding only upon his through the mail as long as that is a medium of communication that the parties contemplated as at the time of mailing there is a meeting of the minds.
Bramwell, in the dissent, disagrees and gives several examples of situations where he believes that the postal rule would hinder transactions. He says generally that the notice of acceptance must reach the party who made the offer before it can be considered binding. He says that if the rule proposed in the majority is accepted then it must be adhered to in all instances of notices via mail. For example, if you mail money to someone in an acceptance, then you have paid even if the money never reaches the other party.
Ratio[]
A contract becomes binding the instant that the acceptance is put in the mail, so long as the parties have contemplated the mail as a viable means of communication in their dealings (the postal rule).