The postal rule is a concept of contract law that is commonly referred to as the mailbox rule. It was formed at a time when contracting parties did much of their bargaining from a distance. Bargaining at a distance, typically through the mail, created a problem, because the parties could not know at the same time whether they had formed a contract. As a result, a general rule dictating the time of an effective acceptance was necessary. Thus, the postal rule was created and stands for the proposition that acceptance is effective on dispatch.
The postal rule is an exception to the general rule, which dictates that acceptance is effective on receipt. The rational behind the postal rule is that it encourages contracting by parties at a distance by making the person in the position of giving an acceptance just as secure as if the contract was being made face to face. From a policy standpoint, it also fosters the creation of contracts at the earliest possible moment.
The rule is easily understood by describing how it operates. For example, a person — known as an offeror — sends an offer to a second person — known as an offeree — via mail. According to the rules of contract formation, the offeror can revoke the offer at any time before acceptance; this makes the offeror the "master of the bargain." At a time when bargaining through the mail was becoming commonplace, the offeree was at a tremendous disadvantage because, once the offeree received the offer, he would not know if the offer still stood or if the offeror had already rescinded it. Additionally, he would not know when he was contractually bound, because he could not determine the exact time of the receipt of his acceptance.
This uncertainty led to the creation of the postal rule to make contract formation more equitable for the offeree. By applying the rule, the offeree's acceptance is good from the moment it is mailed; in other words, it becomes effective upon dispatch. By eradicating much of the uncertainty involved in bargaining through the mail, the rule did what it was meant to do. It created security for the offeree and, by extension, it encouraged contracting between two parties when meeting face to face was difficult, if not impossible.
Frequently Asked Questions
What exactly is the Postal Rule?
The Postal Rule is a legal theory stating that once an offer is mailed, it is considered accepted and final, regardless of whether or not the offeror has received it. This indicates that a contract is created when the acceptance is mailed, and not when it is received by the offeror. The rule applies to instances in which parties negotiate a contract via mail or other comparable means.
What effect does the Postal Rule have on contracts?
The Postal Rule applies to contracts created via mail or comparable modes of communication. Once an offer is made and accepted via mail, a legally binding contract is created, even though the offeror has not yet received the acceptance. This indicates that the parties are legally compelled to fulfill the contract's provisions.
What exceptions to the Postal Rule exist?
The Postal Rule does not apply where the offeror states that the acceptance must be received prior to the offer being deemed valid. In addition, the rule may not apply where the offeror and offeree are in close proximity and may simply convey acceptance via other methods. In some instances, an acceptance may only be regarded valid once it has been received by the offeror.
Why was the Postal Rule put into place?
The Postal Rule was established to give a clear and objective criterion for evaluating when a contract is formed. In the past, it was difficult to tell when a contract was formed because parties frequently negotiated through a variety of channels. The Postal Rule standardized the approach for determining when a contract was established, so streamlining the process of contract creation.
What impact has technology had on the Postal Rule?
With the development of modern technologies such as email and file sharing, the Postal Rule has become less applicable in some circumstances. Email and other forms of electronic communication have made it easier to communicate approval, and many contracts are now formed electronically. Yet, the Postal Rule still applies when parties are negotiating over traditional mail, and it may also be applicable in cases when internet communication is unavailable or impractical.