The Mailbox Rule
Repudiation of a Contract:
When parties do not negotiate face-to-face, a key question becomes when things like acceptances, rejections and revocations take effect.
The general rule is that acceptances are effective on dispatch (when they are mailed). Everything else becomes effective when the offeror actually receives them.
As we mentioned earlier, this idea is codified by the “mailbox rule” which states that acceptance is effective on dispatch, even before the offeror has received it. (The one minor exception to this rule involves option contracts for which acceptances are not effective until they are received by the offeror.) See Cities Service Oil Co., v. National Shawmut Bank, 172 N.E.2d 104 (Mass. 1961).
In order to be effective upon dispatch, the acceptance must be sent in a timely and proper manner. As far as timeliness goes, if no time period for acceptance is specified by the offeror, the offeree must respond within a reasonable period of time. If a period of time is specified, the general rule is that the time period begins running when the offeree receives the offer. For example:
On April 1st, Ramon Garcia sends a letter to the Boston Red Sox offering to play for them for $500,000 per season. The offer states that the team has one week to accept the offer. The Red Sox receive the offer on April 4th. Under the general rule, the team will have one week from the date they received the offer to accept. Therefore, the team will have until April 11th before their right to accept lapses.
Again, the determining issue here is when the acceptance is mailed out, not when it is received by the offeror. Therefore, if an acceptance is dispatched within the appropriate time period, a valid contract had been formed even if the offeror receives the acceptance after the time period lapses. For example:
On April 1st, Ramon Garcia sends a letter to the Boston Red Sox offering to play for them for $500,000 per season. The offer states that the team has one week to accept the offer. The Red Sox receive the offer on April 4th and, on April 10th they send Garcia an acceptance of his offer. Garcia receives the acceptance letter on April 15th. Although Garcia received the acceptance four days after the deadline for acceptance passed, a valid contract has been formed because the Red Sox dispatched their acceptance within the stated time period.
If an acceptance is dispatched late, it is ineffective as an acceptance. However, it will have the legal weight of a counteroffer and the offeror can either accept or reject the counteroffer.
Assuming that the acceptance was dispatched in a timely manner, it must also be dispatched in a proper manner. Essentially, this means that the acceptance must be dispatched via an appropriate medium of communication.
The modern rule is that, unless otherwise specified by the offeror, an offer can be accepted by any medium that is reasonable under the circumstances. A medium of communication is considered reasonable if it is the one actually used by the offeror to make the offer or if it is customarily used in similar transactions. Today, things like express mail, faxes, e-mail and the like are acceptable.
Please note however, that an offeror can specify the particular means that the offeree must use. So, for example, if an offeror specifies that the offeree must accept via fax, any acceptance other than via fax will be invalid.
If the offeror does not specify a particular means of acceptance and the offeree uses an unreasonable means of acceptance, the acceptance may still be valid. However, the mailbox rule will not apply, and the acceptance will not become effective until the offeror actually receives it.
The mailbox rule raises some interesting questions if the offeree mails out both an acceptance and a rejection to the offeror. Again, the mailbox rule says that an acceptance is effective upon dispatch and a rejection is effective upon receipt. That being the case, what happens when an offeree decides to accept and then changes his mind and rejects or vice-versa?
If an acceptance is mailed before a rejection, a valid contract is made. Because the acceptance is effective upon dispatch and the rejection is effective upon receipt, a contract is formed as soon as the acceptance is put in the mail. This is true even if the offeror receives the rejection first. For example:
On April 1st, Ramon Garcia writes a letter to the Boston Red Sox, offering to play for them for $500,000 per season. The Red Sox receive the offer on April 4th. On April 5th, the team sends Garcia an acceptance. On April 6th, the team changes its mind and sends Garcia a letter rejecting the offer. Garcia receives the rejection on April 10th. He receives the acceptance on April 12th. In this case, the Red Sox and Garcia have a binding contract because the acceptance was mailed first. Therefore, even though Garcia received the rejection first, the fact that the acceptance was dispatched first makes this a binding contract.
The one exception to this rule is if the offeror receives the rejection first and relies on it. So, for example, if Garcia received the rejection on April 10th and, on April 11th, signed a contract with the New York Yankees, and then on April 12th received the Red Sox acceptance, the Red Sox would not be able to enforce the contract because Garcia relied on the rejection.
If the offeree’s rejection is mailed before the acceptance, the result will depend on which letter the offeror receives first. If the rejection comes before the acceptance, there is no contract, even if the acceptance is mailed before the offeror received the rejection. (One might think that if the acceptance was mailed before the offeror received the rejection, there would be a binding contract because the acceptance would have become valid before the rejection became valid. This is not the case.)
Please note that, in this kind of case, the acceptance will be invalid as an acceptance, but it will have the weight of a counteroffer.
If the rejection is mailed first but the acceptance arrives first, a contract is formed. In such an instance, the later arriving rejection is not effective as a rejection and does not absolve the offeree of liability under the contract. However, the offeror can consider the rejection as a repudiation of the offeree’s contractual obligations. A repudiation of an acceptance is basically a communication by the offeree stating that he will not be bound by his acceptance. The difference between a rejection and a repudiation is that a rejection is a rejection of the original offer so that a contract is never formed. Repudiation is a rejection of a valid acceptance and, since the acceptance has already formed a valid contract, repudiation is a refusal to abide by a validly established contract. Repudiation is a form of contract breach, while rejection prevents the contract from being formed in the first place.