Henthorn v Fraser [1892] 2 Ch 27

The case of Henthorn v Fraser [1892] 2 Ch 27 is a landmark decision of the Court of Appeal in England and Wales, which deals with the postal rule in contract law. The case clarifies the application of the postal rule to acceptance and revocation of offers, reinforcing the principle that an acceptance by post is effective when posted, whereas a revocation is only effective when received by the offeree. This distinction is crucial in contract formation, particularly in distance contracts, where delays in communication can affect the timing and validity of contractual agreements.

Facts of Henthorn v Fraser

The dispute arose between Mr. Henthorn (the claimant) and Mr. Fraser (the defendant), who were negotiating the sale of houses. The parties were situated in different locations, with the defendant residing in Liverpool and the claimant in Birkenhead. The defendant visited the claimant’s office to negotiate terms regarding the sale of properties. During the negotiations, Mr. Fraser provided Mr. Henthorn with a written option, granting him the right to purchase certain houses for £750. This option was expressly stated to be valid for 14 days.

The next day, however, Mr. Fraser decided to revoke the offer. He sent a letter withdrawing the offer by post at midday, but this letter did not reach Mr. Henthorn until 5 PM. Meanwhile, Mr. Henthorn, unaware of the revocation, had already posted a letter of unconditional acceptance at 3 PM on the same day. This acceptance letter was delivered to Mr. Fraser’s office after business hours, and he only read it the next morning.

The conflict arose because Mr. Fraser claimed that he had revoked the offer before the acceptance was communicated. Mr. Henthorn, on the other hand, argued that his acceptance was valid as soon as he posted the letter, making the contract legally binding. As a result, he sued Mr. Fraser for specific performance of the contract.

Issue Before the Court

The central issue in Henthorn v Fraser was:

• Was there a legally binding contract before the revocation was effective?
• Does the postal rule apply to acceptance and revocation in the same way?

Henthorn v Fraser Judgement

The Court of Appeal in Henthorn v Fraser ruled in favour of the claimant, Mr. Henthorn, and held that there was a valid contract between the parties. The court granted an order for specific performance, requiring the defendant to proceed with the sale at the agreed price of £750.

Key Legal Reasoning

Application of the Postal Rule

The court reaffirmed the postal rule of acceptance, established in Adams v Lindsell (1818), which states that an acceptance is effective the moment it is posted, not when received. Since postal communication was an anticipated means of acceptance, it was reasonable to apply the postal rule to this case. Therefore, the contract was formed at 3 PM when the acceptance letter was posted, making the revocation ineffective because it arrived too late.

Revocation Must Be Received to Be Effective

The court ruled that revocation of an offer is only effective when it is actually received by the offeree. Unlike acceptance, posting a revocation letter does not immediately nullify the offer—it must be communicated and understood by the offeree before they accept the offer. Since Mr. Henthorn accepted before receiving the revocation, the offer was still valid, and the acceptance was legally binding.

Contemplation of Postal Communication

The court noted that in situations where parties are negotiating at a distance, it is reasonable to assume that post might be used as a means of communication.

Lord Herschell stated:
“Where the circumstances are such that it must have been within the contemplation of the parties that, according to ordinary usage of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.”

Given that the parties were in different towns, it was reasonable to expect postal communication, making the postal rule applicable.

Legal Significance of the Case

The decision in Henthorn versus Fraser further clarified the application of the postal rule and its exceptions. The ruling has had lasting significance in contract law, particularly in cases where communication delays affect contract formation. The key takeaways include:

1. Acceptance via Post Takes Effect When Posted: Once an acceptance letter is placed in the mailbox, the offeree is legally bound by the contract, regardless of whether the offeror has received or read the acceptance.
2. Revocation Must Be Received Before Acceptance: An offeror must ensure that the revocation reaches the offeree before they accept, otherwise, the contract remains binding.
3. Postal Rule Applies Only Where Post is a Contemplated Means of Communication: If it is reasonable for the parties to expect postal communication, then the rule applies. In cases where instantaneous communication is the norm (e.g., phone, email), the postal rule may not apply.
4. Ensuring Certainty in Contract Formation: The ruling prevents offerors from unfairly withdrawing offers after an offeree has accepted them in good faith. This rule protects the offeree, ensuring they are not disadvantaged by postal delays.

Conclusion

Henthorn v Fraser [1892] 2 Ch 27 is a fundamental case in contract law, solidifying the postal rule’s application to acceptance while distinguishing it from revocation. The ruling ensures certainty in contract formation by holding that an acceptance via post is binding upon posting, whereas a revocation must be received to be effective. This principle is particularly relevant in distance contracts and continues to shape legal interpretations of contractual communication today. The case provides a practical balance between fairness and efficiency in contract law, preventing unfair revocation of offers while ensuring clear communication in contractual agreements.