Byrne & Co v Leon Van Tienhoven & Co 06 Mar 1880 5 CPD 344, CP

Defendants offered to sell goods by post, then posted a letter revoking the offer. Before receiving the revocation, the claimants accepted by telegram. The court held the revocation was only effective upon receipt, by which time a binding contract had formed.

Facts

The defendants, Leon Van Tienhoven & Co., were based in Cardiff. On 1 October, they posted a letter to the plaintiffs, Byrne & Co. in New York, offering to sell 1000 boxes of tinplates. On 8 October, the defendants posted a second letter revoking their offer. On 11 October, the plaintiffs received the initial offer letter and immediately accepted it by telegram. They also sent a letter of confirmation on 15 October. It was not until 20 October that the plaintiffs received the defendants’ letter of revocation, which had been posted on 8 October. The defendants refused to supply the tinplates, arguing that the offer had been withdrawn before the plaintiffs’ acceptance.

Issues

The central legal issue for the court was whether the withdrawal of an offer is legally effective from the moment it is posted or only from the moment it is communicated to the offeree. The case hinged on determining whether the ‘postal rule’, which makes acceptance effective upon posting, should also apply to the revocation of an offer. The ultimate question was whether a binding contract had been formed on 11 October when the plaintiffs dispatched their acceptance.

Judgment

The judgment was delivered by Lindley J., who found in favour of the plaintiffs. He methodically analysed the principles of contract formation, particularly in the context of correspondence by post.

Reasoning of the Court

Lindley J. acknowledged the established principle that acceptance sent by post is effective upon posting, known as the postal rule, referencing cases like Adams v Lindsell. However, he carefully distinguished the act of acceptance from the act of revocation.

He reasoned that an uncommunicated revocation is no revocation at all. A person who has made an offer is free to change their mind, but this change of mind has no legal effect until it is brought to the attention of the other party. He stated:

It has, however, been urged that a state of mind not notified cannot be regarded in dealings between man and man; and that an uncommunicated revocation is for all practical purposes and in point of law no revocation at all. This is the view taken in the United States: see Tayloe v. Merchans’ Fire Insurance Co. There is no direct authority on the point in this country.

Lindley J. heavily relied on the immense practical inconvenience and injustice that would result if a revocation were effective on posting. An offeree, having accepted an offer by post, would be in a state of uncertainty, unable to act upon the contract for fear that a letter of revocation might already be in transit.

If the defendants’ contention were to prevail no person who had received an offer by post and had accepted it would know his position until he had waited such a time as to be quite sure that a letter withdrawing the offer had not been posted before his acceptance of it. It appears to me that both legal principles, and practical convenience require that a person who has accepted an offer not known to him to have been revoked, shall be in a position safely to act upon the footing that the offer and acceptance constitute a contract binding on both parties.

He concluded that the contract was formed on 11 October when the acceptance was sent. The revocation, sent on 8 October, did not take effect until it was received by the plaintiffs on 20 October, by which time it was too late as the contract was already in existence.

Implications

The decision in Byrne v Van Tienhoven is a landmark case in contract law. It authoritatively established that the postal rule does not apply to the revocation of an offer. The key implication is that for a revocation to be effective, it must be communicated to the offeree. This creates a clear, bright-line rule that prioritises commercial certainty and fairness for the offeree. The offeree is entitled to assume an offer is open and can be accepted until they have actual notice of its withdrawal. This distinction between the rules for acceptance (effective on dispatch) and revocation (effective on receipt) remains a fundamental principle of contract law in common law jurisdictions.

Verdict: Judgment for the plaintiffs for 375l.

Source: Byrne & Co v Leon Van Tienhoven & Co 06 Mar 1880 5 CPD 344, CP