Household Fire and Carriage Accident Insurance Company (Limited) v Grant
Court of Appeal
Citations: (1878-79) LR 4 Ex D 216.
The defendant offered to purchase shares in the claimant’s company. The company allotted those shares to the defendant. They then wrote him a letter informing him that the shares were his. However, the letter never arrived. The defendant later denied that he was a shareholder. He argued that the claimant had not accepted his offer because their letter never arrived.
- Had the claimant successfully communicated their acceptance to the defendant?
The Court of Appeal held in favour of the claimant. The postal rule was applicable to this case, meaning that the claimant communicated their acceptance the moment they posted the letter. It did not matter that the letter never arrived.
This Case is Authority For…
Where the offeree sends their acceptance by post, it is communicated to the offeror immediately. This is true even if the letter never arrives. This is known as the postal rule.
Thesiger LJ explained that the justification for the postal rule is based on agency. When he sends an offer reasonably anticipating that the recipient might respond by post, the offeror authorises the postal service to receive acceptances on his behalf as his agent. Baggallay LJ similarly thought that the postal rule would not apply in a case where the offeror has not expressly, implicitly, or customarily authorised a response by post.
Bramwell LJ dissented. He argued that it should not be possible to contract without the acceptance being actually communicated to the offeror. The postal rule, he thought, had no clear justification.
In particular, Bramwell LJ argued that there were serious problems with treating the Post Office as the offeror’s agent. For example, if the offeree sent a letter accepting an offer and enclosed payment, the courts would have to treat the offeror as having been paid even though he never received the money.