Holwell Securities v Hughes [1974] 1 All ER 161

• Plaintiff had a contract with Defendant whereby he had the option to purchase land, “exercisable by notice in writing” to Defendant. Plaintiff’s solicitors sent a letter to Defendant requesting to buy land but this was never received. Defendant didn’t sell them the land.

• CA dismissed Plaintiff’s claim for specific action on the grounds that the clause required that notice be given, and that in this case notice had NOT been given (even though this was through no fault of Plaintiff).

• It was held that the postal acceptance rule can be set aside where:

  1. There was no contemplation by the parties that the postal service would be used to convey the letter, or

  2. Where the contract prevented the rule having force and possibly

  3. Where the rule would produce “manifest inconvenience and uncertainty” (NB only Lawton LJ says this - the other 2 judges don’t comment). 

Russel LJ

• Generally there is a prima facie duty to communicate acceptance for it to be valid, upon which there is engrafted a doctrine that “if the parties contemplated that the postal service might be used for…forwarding the acceptance of the offer” then committing the acceptance to the postal service “in the usual manner” creates a contract, even if the letter isn’t delivered.

• However this rule doesn’t apply where the wording of the contract demands successful communication.

• The wording here implies a need for actual communication.

Lawton LJ

• Aside from where a contract’s wording denies it, the postal acceptance rule should also not apply in cases of manifest absurdity e.g. it would be wrong for a stockbroker who never received instructions to sell shares being sued for breach of contract by his client for failing to do so.

• It should not apply where, having regard to all the circumstances, the contracting parties cannot have intended that there should be binding agreement until acceptance was, in fact, communicated.