General Principle:
If acceptance is communicated through a letter that then becomes lost in the post, a contract will still be seen to have formed at the moment it is mailed.
Name:
Household Fire Insurance v Grant (1879) 4 ExD 216
Facts:
Grant took an interest in potentially buying shares in the plaintiff’s company. The company was content with the application, and sent Grant a letter in the post stating this, but it got lost in the postal system. The company liquidated soon afterwards. The liquidator, acting for the company, brought action against Grant in relation to any outstanding balance on the shares. Grant disputed the fact that he had to pay. He said he did not have to because he had not received a reply to his offer to buy the shares.
Ratio:
The court in Household Fire Insurance v Grant held that a contract came into existence the moment the letter of allotment of shares (the acceptance) was posted.
Application:
The “postal rule” still applies if the letter which communicates acceptance is lost in the post. Similarly to Adams v Lindsell, a contract is formed as soon as the letter is mailed, the fate of the letter has no effect on the validity of the contract.
Analysis:
The question here is whether Maisy’s acceptance is valid even though the letter was delivered improperly. “The postal rule” was laid down in Adams v Lindsell (1818), Where it was decided that the acceptance of an offer takes effect from the moment the letter of acceptance is properly posted. Furthermore, in Household fire insurance v Grant (1879), the courts held that the postal rule for acceptance still stood, even if the letter never reached the offerer. Therefore even though Jack never received the letter, Maisie’s acceptance is still valid from the moment she properly posted it via the postal rule. The offer has been accepted and thus there is a legally binding contract between Jack and Maisy for sale of the piano.
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