Holwell Securities posted a letter exercising an option to buy Hughes’s property, but the letter never arrived. The Court of Appeal held that posting alone did not satisfy the option’s requirement for written notice to the vendor. The postal rule was excluded by the wording and the applicable provisions for serving notices.
Court: Court of Appeal. Judgment: 5 November 1973. Citations: [1973] EWCA Civ 5; [1974] 1 WLR 155; [1974] 1 All ER 161.
The option and the missing letter
Holwell Securities Ltd held an option to purchase 571 High Road, Wembley, from Thomas Hilaire Hughes. It could exercise the option by notice in writing to the intending vendor within six months. The house was both Hughes’s residence and his place of work.
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On 14 April, Holwell’s solicitors properly posted an ordinary letter to Hughes at the house. It enclosed a copy of another letter delivered by hand to his solicitors that day. The posted letter and enclosure went astray and never reached either the house or Hughes. Their wording would have exercised the option if they had arrived. Holwell did not contend that delivery to Hughes’s solicitors itself amounted to exercising the option.
Templeman J rejected Holwell’s claim. On appeal, the company argued principally that the sale contract had been formed when the letter was posted, so its subsequent loss was immaterial. It also relied on a telephone conversation between Hughes and his solicitors.
Permission to use the post did not settle the issue
Russell LJ began with the ordinary rule that acceptance must be communicated to the offeror. The postal rule is an exception: where the parties contemplate that acceptance may be sent through the post, properly posting it can constitute acceptance even if the letter is lost. The offer itself need not have been made by post.
The court accepted that these parties contemplated using the post to exercise the option. However, that did not automatically make posting sufficient. The offer’s terms also had to be consistent with replacing actual communication by the act of posting.
The decisive wording was the requirement for “notice in writing to” the intending vendor. Although this permitted delivery by post, it required notification to Hughes. Russell LJ regarded that wording as inconsistent with acceptance merely by posting. He contrasted it with a provision simply allowing the option’s offer to be accepted in writing within six months, which could have produced a different result.
Lawton LJ approached the matter first as a question of construing the option. An option-holder must comply strictly with its stipulated conditions. This was a formal conveyancing document, and its requirement for notice had significance: elsewhere it used expressions such as agreement in writing without requiring notice. The option called for written information to be communicated to the vendor, which the lost letter had not achieved.
Lawton LJ also explained that contemplating use of the post was insufficient where the offer required acceptance to reach the offeror. More broadly, the postal rule did not apply if the circumstances showed that the parties could not have intended a binding agreement before communication. He treated manifest inconvenience or absurdity as illustrations of that wider principle.
The statutory service provisions
Section 196 of the Law of Property Act 1925 provided a further reason for excluding acceptance on posting. Under subsection (5), the section applied to notices required by an instrument affecting property unless a contrary intention appeared. The option agreement was such an instrument, and the court treated giving notice as serving it.
Subsection (4) provided for service by a registered letter addressed to the person at the appropriate home or business address. If the letter was not returned undelivered, service was deemed to occur when it would ordinarily have been delivered. Recorded delivery was also covered.
Those provisions were read into the agreement. A registered letter posted on the final day, with ordinary delivery due after expiry, would not exercise the option in time. It would be inconsistent to treat an ordinary letter posted at the same time as immediately effective merely because the postal rule was invoked.
This reasoning did not require proof that Hughes had personally read every validly served notice. The statute specified circumstances in which actual knowledge could be dispensed with. Russell LJ also suggested that timely delivery through the house’s letter-box might amount to invited communication even if Hughes was absent. Neither possibility assisted Holwell: its ordinary letter never arrived.
The telephone conversation was insufficient
After receiving the hand-delivered letter, Hughes’s solicitors communicated with him by telephone. They did not read it to him. He was told that a letter had arrived and that he would receive a letter or copy himself.
Holwell argued that Hughes knew it wished to exercise the option and that a written notice existed. Russell LJ rejected the attempt to combine those circumstances into written notice to Hughes. Knowledge that a notice had been written was not itself its communication in the required form. Hughes also lacked knowledge of the combination of the two letters which would have exercised the option.
Decision
The court unanimously dismissed the appeal with costs and refused leave to appeal to the House of Lords. Buckley LJ agreed with Russell LJ’s judgment; Lawton LJ gave a separate concurring judgment.
The decision turned on the requirements of this option and its statutory context. It did not abolish the postal rule or prevent an option from being exercised by post. It established that an authorised method of sending acceptance must still satisfy the conditions governing when that acceptance becomes effective.
