Adams v Lindsell [1818] EWHC KB J59 (05 June 1818)

Facts

The defendants, wool-dealers in St. Ives, sent a letter to the plaintiffs, who were woollen manufacturers in Bromsgrove, on 2 September 1817, offering to sell them a quantity of wool. The defendants required an answer ‘in course of post’. Critically, the defendants misdirected this letter to ‘Bromsgrove, Leicestershire’, instead of the correct address in Worcestershire. Consequently, the letter did not reach the plaintiffs until the evening of 5 September. Upon receipt, the plaintiffs immediately wrote a letter of acceptance, which they posted the same evening. This acceptance letter was delivered to the defendants on 9 September. However, not having received a reply by 7 September as they would have expected had the letter been correctly addressed, the defendants sold the wool to another party on 8 September. The plaintiffs sued for breach of contract, claiming that a binding agreement was formed upon their posting the letter of acceptance.

Issues

The central legal issue before the King’s Bench was to determine the precise moment at which a contract is concluded when the parties communicate by post. Specifically, the court had to decide whether a contract is formed at the moment the letter of acceptance is posted by the offeree, or only when it is actually received by the offeror. The court also implicitly considered whether the delay, caused by the offeror’s own error, impacted the validity of the acceptance.

Judgment

The Court found for the plaintiffs, holding that a binding contract had been formed. The judgment established what is now known as the postal rule of acceptance.

Key Arguments

The defendants argued that there could be no binding contract until the plaintiffs’ acceptance was actually received by them. They contended that until they were aware of the acceptance, there was no ‘aggregatio mentium’ (a meeting of the minds). Therefore, they were free to sell the wool to a third party at any point before receiving the plaintiffs’ letter on 9 September.

Court’s Reasoning

The Court, in a judgment delivered by Law J, rejected the defendants’ argument. The reasoning was based on commercial efficacy and the inherent nature of postal communications. The Court considered the offeror to be making a continuous offer throughout the time their letter was in transit. The judgment states:

the defendants must be considered in law as making, during every instant of the time their letter was travelling, the same identical offer to the plaintiffs; and then the contract is completed by the acceptance of it by the latter.

The Court reasoned that if the contract was only formed upon receipt of the acceptance, it would lead to an absurd and unending chain of communication. The offeree would not know their acceptance was effective until the offeror had acknowledged its receipt, and this acknowledgment would itself need acknowledging, creating perpetual uncertainty. The judgment articulated this point succinctly:

for if the defendants were not bound by their offer when accepted by the plaintiffs till the answer was received, then the plaintiffs ought not to be bound till after they had received the notification that the defendants had received their answer and assented to it. And so it might go on ad infinitum.

By establishing that the contract is formed upon posting, the Court provided a definitive point of formation, thereby creating commercial certainty. The Court also noted that the delay was entirely the fault of the defendants due to the misdirection of the initial offer letter.

Implications

The decision in Adams v Lindsell is a foundational case in English contract law, establishing the ‘postal rule’. This principle stipulates that for acceptances communicated by post, the contract is formed at the moment the letter of acceptance is posted, not when it is received. This rule allocates the risk of delay or loss of the letter in the post to the offeror, who has initiated the use of the postal service as the means of communication and can, if they wish, stipulate that acceptance is only effective upon receipt. The case created a crucial exception to the general rule that acceptance must be communicated to the offeror. Its importance lies in the certainty it brought to commercial transactions conducted at a distance, a principle whose rationale has been debated and distinguished in the modern era of instantaneous communication like email and telex.

Verdict: The court refused the defendants’ motion for a new trial, thereby upholding the original verdict in favour of the plaintiffs.