HOUSEHOLD FIRE INSURANCE CO v GRANT

The defendant applied for shares in the claimant company. The company allotted the shares to the defendant and posted a letter addressed to him containing the notice of allotment, but he never received the letter.

Held (Thesiger and Baggally LJJ; Bramwell LJ dissenting): The defendant had become a shareholder. Acceptance was complete when the letter of allotment was posted and it was irrelevant that it never arrived.

THESIGER LJ: An acceptance, which only remains in the breast of the acceptor without being actually and by legal implication communicated to the offerer, is no binding acceptance. How then are these elements of law to be harmonised in the case of contracts formed by correspondence through the post? I see no better mode than that of treating the post office as the agent of both parties, and it was so considered by Lord Romilly in Hebb's Case (1867) LR 4 Eq 9, when in the course of his judgment he said:

'Dunlop v Higgins (1848) 1 HLC 381 decides that the posting of a letter accepting an offer constitutes a binding contract, but the reason of that is, that the post office is the common agent of both parties.' Alderson, B., also in Stocken v Collin (1841) 7 M &W 515, a case of notice of dishonour, ... says: 'If the doctrine that the post office is only the agent for the delivery of the notice were correct no one could safely avail himself of that mode of transmission.'

But if the post office be such common agent, then it seems to me to follow that, as soon as the letter of acceptance is delivered to the post office, the contract is made as complete and final and absolutely binding as if the acceptor had put his letter into the hands of a messenger sent by the offerer himself as his agent to deliver the offer and receive the acceptance.

What other principle can be adopted short of holding that the contract is not complete by acceptance until and except from (p. 49) the time that the letter containing the acceptance is delivered to the offerer, a principle which has been distinctly negatived? ... The acceptor, in posting the letter, has, to use the language of Lord Blackburn, in Brogden v Directors of Metropolitan Ry. Co. (1877) 2 App Cas 666, 'put it out of his control and done an extraneous act which clenches the matter, and shews beyond all doubt that each side is bound.'

How then can a casualty in the post, whether resulting in delay, which in commercial transactions is often as bad as no delivery, or in non-delivery, unbind the parties or unmake the contract? To me it appears that in practice a contract complete upon the acceptance of an offer being posted, but liable to be put an end to by an accident in the post, would be more mischievous than a contract only binding upon the parties to it upon the acceptance actually reaching the offerer,…