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Household Fire Insurance v Grant [1879] 4 Ex D 216

Contract – Postal Rule – Acceptance – Communication – Meeting of Minds – Valid Contract

Facts

The defendant, Mr Grant, applied for shares in the complainant’s company, the Household Fire Insurance. The complainants allotted shares to Mr Grant and they completed this contract by posting him a letter with notice of the allotment. However, this letter never reached Mr Grant and it was lost in the post. Mr Grant never paid for the shares as a consequence. When the Household Fire Insurance company went bankrupt, the liquidator asked the defendant for payment of the shares. Mr grant refused to pay, as he did not believe he was a shareholder nor was there a binding contract in his mind.

Issues

The court held that the liquidator was entitled to recover this money, as there was a binding contract between Mr Grant and the Household Fire Insurance company. This decision was appealed. The issue in the appeal concerned whether there had been an acceptance of the share offer and if there was a legally binding contract.

Held

The appeal was dismissed and it was held that there was a valid contract between the parties for the shares. The postal rule was affirmed, which states that acceptance is effective when it is mailed, as long as the parties consider the post as an acceptable way of communicating. This rule is true even though the letter never arrived to Mr Grant. Lord Justice Thesiger stated that posting acceptance creates a ‘meeting of minds’, which created a binding contract. Lord Justice Bramwell dissented, arguing that the postal rule can hinder transactions and that acceptance should only be effective once the letter arrives.


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