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What Is the Postal Rule?

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  • Written By: Barbara Wells
  • Edited By: Angela B.
  • Last Modified Date: 19 April 2014
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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.

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The postal 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because, once the offeree received the offer, he would not know if the offer still stood or if the offeror had already rescinded it.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 postal 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.

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