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Holwell Securities v Hughes [1974] 1 WLR 155

Contract – Postal Rule – Offer – Acceptance – Expiration – Communication – Valid Contract

Facts

The defendant, Dr Hughes, gave the complainants, Holwell Securities, the option to purchase his house for £45,000. It was stated that this option was exercisable ‘by notice in writing’ within six months. The complainants posted a letter agreeing to this option by Dr Hughes and this was done five days before the six-month expiry. However, this agreement letter was lost in the post and it never reached Dr Hughes.

Issues

Holwell Securities claimed specific performance of the contract when Dr Hughes refused to complete the sale of his house. This claim was originally dismissed by the court. But, it was appealed. The issue in the appeal concerned whether the postal rule applied and if there were any exceptions to this rule. The complainants tried to argue that the postal rule meant that acceptance was in effect when the letter was posted, which was before the six-month expiration date.

Held

This appeal was dismissed. It was stated by the court that the postal rule does not automatically apply in every case, despite the post being an acceptable means of communication in transactions or business proposals. It is important to look at all the circumstances of the case to see what the parties intended, which may mean a binding agreement does not apply until it is communicated. In this case, Dr Hughes stated the option was exercisable ‘by notice in writing’ within six months, which meant that he would have to receive the communication in writing before a valid contract would be created. This specification meant that the postal rule did not apply.


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