Case Facts
The defendants, a Cardiff-based firm, and the plaintiffs, a New York-based firm, conducted business by post at a time when letters between Cardiff and New York took ten or eleven days to arrive. On 1 October 1879, the defendants wrote from Cardiff offering to sell 1,000 boxes of 'Hensol' brand tinplates (14x20) at 15s. 6d. per box f.o.b., inviting the plaintiffs to cable their acceptance on or before 15 October.
On 8 October, before the offer had even reached the plaintiffs, the defendants posted a letter purporting to withdraw the offer. The reason for the withdrawal was a sudden panic in the tinplate market, which had caused prices to rise by approximately 25%, making the original offer price commercially disadvantageous to the defendants.
The plaintiffs received the offer on 11 October and, having no knowledge of the withdrawal letter, immediately accepted by telegram on the same day, sending the message "Accept thousand Hensols." They followed this with a confirmatory acceptance letter on 15 October, enclosing a letter of credit. The plaintiffs had already resold the 1,000 boxes on 17 October at a net profit of 1,850 dollars, still entirely unaware that the defendants had attempted to withdraw.
The defendants' withdrawal letter did not reach the plaintiffs until 20 October — nine days after the acceptance had already been communicated by telegram. The case was tried at Cardiff Assizes before Lindley J sitting without a jury. It was agreed at trial that, if the plaintiffs were entitled to succeed, the quantum of damages would be £375. The defendants raised two further defences — that there was no sufficient writing within the Statute of Frauds and that they had contracted only as agents — but both were correctly abandoned at trial as wholly untenable.
Held
The defendants' attempted withdrawal of 8 October was inoperative in law. A complete and binding contract had been formed on 11 October 1879, when the plaintiffs accepted the offer of 1 October by telegram. At that moment, the plaintiffs had no reason to suppose the offer had been withdrawn, and the withdrawal letter had not yet been received by them. The plaintiffs were accordingly entitled to damages in the agreed sum of £375.
Ratio Decidendi
Lindley J identified two distinct questions requiring resolution.
First question: does an uncommunicated revocation of an offer have any legal effect?
The settled principle, affirmed in Routledge v Grant (1828), is that an offeror may withdraw an offer at any time before acceptance, even where the offer was stated to be open for a fixed period. However, Lindley J held — preferring the weight of authority over Pothier's contrary view — that a revocation which has not been communicated to the offeree is, for all practical purposes and in point of law, no revocation at all. This conclusion was supported by United States authority, academic opinion of Benjamin on Sales, Pollock's Principles of Contract, and Leake's Digest of the Law of Contracts, all of which agreed that communication of revocation to the offeree is essential to its legal effectiveness.
Second question: does the mere posting of a revocation letter constitute communication of it to the offeree?
Lindley J considered the postal rule for acceptances — the established principle, confirmed in cases such as Harris' Case and Dunlop v Higgins [1848], that a contract is completed at the moment a letter of acceptance is posted, even if it never reaches its destination. He declined to extend that rule to revocations.
The rationale for the postal rule as it applies to acceptances rests on the implied authority of the offeror: by inviting acceptance through the post, the offeror impliedly constitutes the post office as their agent to receive the acceptance on their behalf. No equivalent authority operates in the context of revocation. The offeree has given no authority — express or implied — for revocation to be notified by the mere posting of a letter. Accordingly, a revocation posted by an offeror takes effect only when it is actually received by the offeree, not when it is dispatched.
Applying these principles, the defendants' letter of 8 October was not communicated to the plaintiffs until 20 October, by which time a binding contract had already come into existence on 11 October upon the plaintiffs' acceptance by telegram. The attempted revocation was therefore wholly without effect.
Obiter Dicta
Not applicable.