The Origins of the Mailbox Rule
The mailbox rule—the name of which derives from the actual physical mailboxes of the mid-19th century—is a type of legal rule that holds enforceable an offer that has been mailed. The mailbox rule reflects the idea that "the rules of the game" should be fair to all parties. Since both parties know that it may take some time for the mail to go through, it certainly would not be fair for one party to have an advantage over the other simply because one offer took longer to reach the other party.
The best definition of the mailbox rule was given by an early U.S. Supreme Court case, Adams v . Lindsell, which said that, "[w]hen the defendants, in answer to an inquiry from the plaintiff, wrote a letter containing an offer to sell wool, and directed it to the plaintiff, they, in contemplation of law, agreed that the property therein offered should be at the risk of the defendants, beginning [t]he moment [the letter] was put into the post office."
The rule can apply to other documents besides offers, such as an acceptance, counter-offer or rejection. For the mailbox rule to apply, either the offer or the acceptance must be mailed. If a conditional offer is revoked, for example, and the revocation fails to reach the offeree, the mailbox rule states that the revocation is ineffective so long as all of the conditions of the offer were met.
Historical Evolution of the Mailbox Rule
The historical context for the mailbox rule in law dates back to various ancient legal systems, particularly English common law. The rule was important because it clarified when legally binding communications occurred. Case law leading to the formulation of the mailbox rule includes the 1853 case of Adams v. Lindsell, 1 B & Ad 681, 152 ER 681 (KB 1818). The Court ruled that the time when an offer was sent is when risk and the rights of third parties truly attached to the offer.
The rule has also been cited in the United States since 1820. In the 1820 case of Humpal v. Rogan, 3 E 355 (NY App 1820), while there was no mention of the mailbox rule or a contract between the parties, the court ruled that when a letter is directed to a party, the liability of that letter includes the risk of it getting lost or mislaid in the course of the postal system. If the letter was received and then lost, the letter would be effective. In other words, the court in this case sided with the offeror and ruled that if the offeror’s attempt to communicate is in good faith, there is a deal. This would mean that the mailbox rule stated that the agreement or contract should become effective regardless of whether the attempt to communicate was successful.
The California Supreme Court also discussed the "Do Not Mail" (DNM) mailbox rule in the 2006 case of Johnson v. Sweet, 36 Cal.4th 1067 (Cal 2005), which highlighted the significance of the mailbox rule for contractual agreements. The Court referred to the court of appeal in the 1953 case of McKown v Smith, 190 Cal. App. 2d 518, 12 Cal. Rptr. 424 (1st Dist 1959) stated that it was a well-known principle of U.S. law that the sender assumes the risk of nondelivery and the offeree may make a contract by mailing an acceptance, even if the mail is inherently unreliable. The case further stated that it was the general rule that all legal actions may be served upon the company in Sacramento.
The mailbox rule is not restricted purely to making offers, but the same rule can also apply to the revocation of these offers. As in the case of Davis v. Eaton, 3 Mees & W. 194, 42 ER 1148 (Exchequer Chamber 1830), the party who would like to revoke the contract will take effect at the time the letter of revocation is received and not when the letter is sent. Another case that touched on the revocation of offers was in the 1875 case of Dalkowski v. Van Oosterhout, 2 Greenleaf 492, 7 Reprod. (Mich.) 639, 65 Am. Dec. 224 (1875). The Court ruled that the revocation is effective as of the time it’s received by the offeree.
Due to the increasing number of ways that people are able to communicate in the age of technology, the mailbox rule is becoming less popular in modern contract law. The Court in the case of Dahl v. HEM Pharmaceuticals Corp., 2000 BCSC 565 (CanLII), stated that the mailbox rule has been applied to the medium of facsimile (fax). The Court distinguished the fact that faxes are instantaneous and instantaneous electronic communication can be followed up by other forms of communication like a phone call or an email. By doing so, the Court emphasized the need to decide whether the sender of an application can assume that the fax was received.
Courts tend to be more stringent when it comes to digital mediums. These courts have focused on whether the sender of the electronic message could reasonably have assumed that the other party received the message. Generally, courts have emphasized that the sender must be able to ensure that the message was successfully delivered.
How the Mailbox Rule Functions
The mailbox rule applies in different ways, depending upon what dealing is taking place. Yet it is always focused on the point of time that is material to the transaction.
The mailbox rule applies chiefly to the acceptance of offers. In this instance, the rule states that acceptance occurs when the offeree has placed communication in a mailbox or otherwise delivered it (usually to the clerk of the mail), not when the offeror has received the acceptance. However, this only holds true for any communications sent by U.S. Mail, and not to other methods of communication.
The mailbox rule also applies in the case of assignments of offers, which are made when an offer to enter into a contract is assigned to someone else. In this instance, parties to the contract will have the time of the assignment taken into consideration.
It also applies to other important issues, such as revocation of offers and effective dates of insurance policies. For example, in the event that a letter is sent, recounting the terms of an agreement that has just been reached, it will be considered as binding the parties when the letter is placed in the mail, not when the letter is opened and read.
Parties should keep in mind that the mailbox rule only applies in cases where the specific circumstances are not outlined by a contract, which governs any other issue related to the transaction in that instance.
Mailbox Rule Exceptions
Exceptions to the mailbox rule include:
- (1) the notice must be properly addressed and properly stamped;
- (2) the presumption of delivery and acceptance of notice depending upon proper address and postage;
- (3) the timing of notice and evidentiary questions and quantum and quality of proof required;
- (4) the notice must be timely received in order for it to be considered; and
- (5) mail notice is invalid if improperly placed in postal service.
The Mailbox Rule in Electronic Communications
In our current legal landscape, there is a severe disconnect between the old rule and the new tools. E-mail and other electronic communications have not been embraced by all judges, and judges do not always see e-mails as contracts. Your authority to sign your name to an e-mail is where the issue arises. It hasn’t been widely accepted yet, except in California. Emails as contracts simply have not been taken seriously in some courts, despite the huge amount of money at stake. If a party signs an email, rather than a paper document, does that signatory have the authority to do so? That issue is still in debate. Adaptation has begun. Since 2011, California has allowed use of electronic signatures and contracts. They pass under the Electronic Signatures in Global and National Commerce Act. Practical use of electronic contracts is 10 years or so behind that in California. The evolution of commerce made the mailbox rule hard to apply. It was up to the legislature to make this easier. The Electronic Signatures in Global and National Commerce Act made the mailbox rule more sensible in the realm of electronic contracts. A contract or contract offer can be sent by any kind of technology: fax, email, instant message . It doesn’t matter. That offer is treated as made when sent. I might not receive the offer for a long time after it was sent, 8 hours, 18 hours, weeks or even never or in case the email gets lost. In that case you haven’t created a contract yet. But if you received the offer two weeks later, a contract exists now and the mailbox rule makes it valid. The mailbox rule is still in effect, though it is difficult to see its application today. But the mailbox rule is still used to determine whether a contract has been made when you sign a piece of paper to enter into a contract. The rule is now being adapted to work with emails. The legislature has made changes to make the rule work in cases involving emails. Problems have arisen when parties send out emails, but the recipient never receives them, or only receives them some time later. This is why the mailbox rule needs to be applied in to electronic contracts. By enacting changes in the law, we make it so that an email will be effective the moment it is sent. You can think of the process like a magic spell—it takes time for the spell to work, but the contract or offer is effective immediately.
Opponents of the Mailbox Rule
The controversy surrounding the mailbox rule is that it is often not applied to its full extent due to judicial discretion. When notice is given in a reasonable time and the recipient has not been misled, some courts have held that the communication has been received. This is at odds with the most common view that receipt occurs when the communication arrives at the intended address. Not allowing its full application leads to confusion and unreasonable delay. Critics also mention that the mailbox rule is regularly applied at the expense of justice.
Another concern of scholars is that the mailbox rule itself is too much a creature of common law and should be altered in the interests of containing costs in litigation, especially in an age of email, by limiting its application for delay: "Judicial discretion to apply the [mailbox] rule for ‘just cause’—whether exercised with restraint or otherwise—is no substitute for a clear-cut rule on the subject."
The mailbox rule has not gone unrevised by the American Law Institute, with its genesis as far back as the 1930s. Two articles published in 1932 that touched on problems associated with the mailbox rule were "The Mailing of Documents" by Robert MacKay and "Overnight Mail" by Alfred V. Alker, Jr.
Agreements for the parceling out of litigation burdens and costs have also been scrutinized by scholars. An example is how the mailbox rule "can be affected by agreement of litigating parties."
The Effect of the Mailbox Rule on Contract Law
The Mailbox Rule has considerable impact on contract law. The rule can mean the difference between enforcement of a contract or not. For example, in contract negotiations, a business may think it is successfully negotiating a contract with another party, but if the other party sends a letter communicating its acceptance before the first party sends an acceptance, a dispute may arise as to which agreement logically governs. The risk of such a dispute can create unwanted legal liability and expenses for all parties.
To avoid this, the best tactic for a business is to communicate both within six months and in writing any withdrawal or acceptance of an offer, and to delay any expectation of a contract being finalized until that communication is received from the other party. Successful businesses are able to protect themselves from the negative impact of the Mailbox Rule by avoiding any activity that could be understood as acceptance of an offer, while still demonstrating a willingness to negotiate a contract.
The Mailbox Rule also has impact in the context of termination of a contract, more commonly associated with employment contracts. Typically, a termination notice is communicated by an employer so that it’s received by an employee at least one week prior to employment termination, consistent with any legal requirements. A problem arises when the employer does not verify the employee has received the termination notice first. Without such verification, an employee may receive the notice several days late, and claim that notice was not provided a week in advance, or that the notice was provided on the same day of termination. Such a dispute can involve unwanted expense for the employer. To avoid such an unwanted disagreement, there are several common-sense strategies. First, employ a simple, easily verifiable communication strategy, such as Certified Mail. Second, avoid expecting an employee will verify their own receipt of a termination notice in writing.
Clearly, over the past few centuries, the Mailbox Rule has proven to have important impact on contract law. Individuals, businesses, and society generally would be naïve to exclude it from their consideration in contract negotiations or employment relationships.
Conclusion: The Mailbox Rule and Its Modern Significance
The continuing relevance of this rule in the digital era remains. Even with all the conveniences of email, scanning and electronic documents, the mailbox rule questions still arise. Lawyers certainly continue to debate this rule. This can be seen in the case law but also, in my experience client queries come up at least once a year even from lawyers.
At one level it is hard to understand why still our courts have to be hashing out this rule. As I discussed in an earlier post, there are solid public policy reasons for when the contractual relationship between parties is created.
And yet the courts continue to disagree on the proper running of the mailbox rule.
In order to reduce the litigation over this issue, it begs the question whether Canada would benefit from legislative intervention. In the United States a number of states have modified their mailbox rules. For example , according to a California Court of Appeal, the rule in that state has been adapted to accommodate electronic means of communications with regard to determining when an electronic document is "received" by a particular party.
As has been suggested elsewhere, perhaps the best way to proceed at least in the short term may be to make an amendment to the Rule 6(1) of the Federal Rules of Civil Procedure to make the time for filing a document effective on the day received. This solution will give litigators certainty about calculating the commencement of limitation periods so they can properly preserve their clients’ rights. Further details on the nature of the change can be read here. Hopefully the change will receive the support required to make it into Rule 6(1).