CONTRACTS BY CORRESPONDENCE
Asher Kahn*
FORMATION – MUST ACCEPTANCE BE COMMUNICATED?
How does the law determine if and when a contract has been created? The
traditional method has been to employ the terms “offer” and “acceptance”.
By considering the behaviour of the parties we can determine whether an
offer has been made. An offer may be described as a promise by the offeror
to do, not to do, or to give something, on certain conditions, leaving the option
of acceptance or rejection of this offer to another party, the offeree. By this
first step, the offeror indicates to the offeree his desire that a contract contain-
ing certain terms should arise between them. At this point, the intent and
wish of one party only is known.
The offeror has thus created a power in the offeree. If the offeree rejects
the offer by not acting on it, or by informing the offeror that he is not interested,1
after a reasonable time we may consider the offer rejected or lapsed. If, on
the other hand, there is a manifestation by the offeree that he wishes the
proposed arrangement contained in the offer to ripen into a contract, we can
say that he has accepted the offer. The manifested assent of the offeree shows
that the parties are of one mind –
there is offer and acceptance of the offer
–
hence the contract is formed.
An offer must always be communicated to the offeree. Otherwise it can have
no existence as an offer, for there must be an offer to someone.3
*This article is a condensation of a third year thesis, written as one of the require-
ments for the degree of B.C.L. Mr. Kahn is presently in fourth year law at McGill
University.
lBut cf. Devarennes v. Halle et al, (1881), 7 Q.L.R. 252 where the Court of Review
held that an offer which did not specify any time limit, not having been withdrawn,
could be accepted twelve days after it was made, notwithstanding a refusal by offeree
in the interval.
2 Given a clear offer specifying object, price, and an unequivocal acceptance, the
contract is formed and the parties are bound. Because we are dealing with the problems
surrounding time and place of formation it is assumed throughout
this paper that
whenever the terms ‘offer’ and ‘acceptance’ are used they refer to offers and acceptances
defined by law as capable of leading to formation. The question as to whether a
particular letter or telegram constitutes an offer or an acceptance is irrelevant to the
subject matter under discussion. For cases dealing with this problem, see Keating v.
Dillon, (1905),
39 S.C. 22.
28 S.C. 323; Robinson v. The E. P. Charlton Co. Ltd.,
(1911),
SThis has been generally assented to. It was well stated in the American decision
Fitch v. Snedaker, (1868), 38 N.Y. 248, where Woodruff J. said: “How can there
be assent or consent to that which a party has never heard?” The problem of com-
munication of the offer may also arise in that rare but possible occasion where one
party, by letter, offers to sell a certain object and asks for a certain sum, and the
other party offers to buy that same object for the same price asked. The letters cross
in the mail, giving rise to what is known as cross-offers. In the English decision
No. 2]
CONTRACTS BY CORRESPONDENCE
With acceptance we face a similar problem –
can there be acceptance without
communication? We have already seen that an offer has no existence if there
is no communication. Assuming there can be acceptance without communication,
is the contract formed immediately, or must the acceptance be communicated
to the offeror before the perfection of the contract takes place?
Let us assume, for the sake of exposition, that an uncommunicated acceptance
does perfect the contract. This means we have a lapse in time between formation
and actual knowledge of such formation by the offeror. In this interval one
of two things, or both, might conceivably occur. The offeror might withdraw
his offer, or the offeree, having accepted, may find a better bargain elsewhere
and, desiring to free himself from any ties with the offeror, may attempt by some
speedier means of communication to inform the offeror that his letter of
acceptance is to be disregarded.
Revocation by either party is intimately bound up with acceptance. If we set
formation at a particular point in time during the period beginning with and
including acceptance by the offeree and ending with knowledge of acceptance
by the offeror, that point in time will determine how long it is open to the
offeror to withdraw his offer. In other words, revocation can only take place
as long as the contract has not been perfected. The time of acceptance, assuming
it to be the time of formation, will determine when the offeree has done enough
to bar the offeror from revoking.
Revocation is only one of the many issues relating to the time of formation.
Place of formation can be, and frequently is, a very important factor as well.
Although every contract made by parties who are not face to face is a
contract betveen absents, contracts between absents are not necessarily contracts
by correspondence. A New York manufacturer, who contracts with a Montreal
merchant through his agent or travelling salesman in Montreal, is concluding
what can be called a contract between absents. Yet, the offer and acceptance
both take place in the Montreal merchant’s office 4 The agent binds his absent
principal, but he binds him in Quebec, i.e. the contract is created wholly in
Quebec by two people who are present, although the parties to the contract
are absents.
Tinn v. HoJfrmann & Co., (1873), 29 L.T. 271, Blackburn J. said: “When a contract
is made between two parties, there is a promise by one in consideration of a promise
made by the other; there are two assenting minds, the parties agreeing in opinion and
one having promised in consideration of the promise made by the other –
there is
an exchange of promises. But I do not think.that exchanging offers would, on principle,
be at all the same thing .
. . The promise or offer being made on each side in
ignorance of the promise or offer made on the other side, neither of them can be
construed as an acceptance of the other.” See also Valery, Jules, Des Contracts par
Correspondance, Paris, (1895) at p. 202 where he points out that the concurrence of
wills necessary for formation of a contract must be intentional and not fortuitous.
if, for example, the terms of the
sale are delivery F.O.B. New York; but as to formation, there can be no question
of foreign jurisdiction and both parties may bring an action under article 94 C.P.
4Performance may take place outside Quebec
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On the other hand, if the same manufacturer was to send an illustrated
catalogue of his merchandise giving price and all other relevant details, or a
letter offering a certain specific item, and the Montreal merchant was to mail.
or telegraph, or telephone his acceptance, there would be a contract between
absents, which would also be a contract by correspondence.
What, then, is it- that makes the latter a contract by correspondence?
It is simply the fact that the contract is concluded directly between the absents
via modes of communication uniquely designed to transmit the will of the
parties with the greatest possible accuracy5
The first example is not truly a contract between absents because the forma-
‘tion takes place between presents. The agent does not simply transmit his
the agent’s
principal’s will, but, within the limits of his power to bind,
expression of will on behalf of the principal creates a contract. Indeed, the
contract is formed by two people negotiating face to face and is subject to
the general rules of contract. Those problems which characterize contracts by
correspondence, (e.g. time of formation, place of formation, jurisdiction, etc.)
can never arise in connection with the formation of such a contract. The
problems surrounding contracts between presents and
those surrounding
contracts by correspondence are different, and we should not and can not
apply the same principles to both insofar as communication is concerned. The
fundamental distinction is the absence of any intermediary between
the
contracting parties when the contract is one between presents. The agent can
never be an intermediary because he “is” the party he represents.
Vipond, 6 in his penetrating criticism of the Supreme Court judgment in
Charlebois v. Baril,7 has not made this distinction and he says:
An offer may be sent by mail and the contract becomes complete and binding
from the moment the offeree dispatches a telegram of acceptance at the telegraph
office… Likewise, as soon as the offeree may deliver a letter of acceptance
to the’representative of the proposer, especially sent for the purpose of receiving
the reply, then from that moment… both parties are bound. In both cases the
contract is negotiated by correspondence and the acceptance of the offer automatic-
ally binds the parties.
Both contracts are negotiated by correspondence and both bind from the moment
of acceptance. The statement is true as far it goes, but it creates an erroneous
impression. The second contract which Vipond mentions binds immediately on
the same reason that a contract between presents binds
acceptance for
immediately when acceptance is given –
because giving the letter to a
“representative… especially sent for the purpose of receiving the reply” is
5Valery, op. cit., p. 1. See also Planiol & Ripert, Traiti Pralique de Droit Civil
Frangais, (1952), Vol. 6, No. 155, where the authors state that a contract made by
the representative of one of the parties in the presence of the other must be treated
as a contract between presents since this is a consequence of the idea of representation.
6Obligations Arising from Contracts, (1945), 5 R. du B. 443 at p. 475.
7[1928] S.C.R. 88.
No. 21
CONTRACTS BY CORRESPONDENCE
the same as if the offeree were to hand his acceptance to the offeror himself.
By grouping these two contracts together, Vipond is
to accept the
“Agency” theory which was fully expounded in Charlebois v. Baril and has,
in turn, led to a restriction of the rule laid down in Magann v. Auger.8
led
Thus, one must keep in mind that what is meant when the term “Contracts
by Correspondence” is used, is a contract concluded directly between the absents
via such modes of communication as mail, telegraph, etc.
THE THEORIES ADVANCED TO DETERMINE
THE TIME OF FORMATION
The offer is a power created by the offeror and he can make this power
as broad or as narrow as he wishes. He may state in the offer that acceptance
will not bind until it comes to his notice, or, on the other hand, he may state
that as soon as the offeree performs a certain act the offer will be accepted.
Where the offeror has been specific and express the question of time of
formation can rarely, if ever, be subject to uncertainty. But where, as in most
cases, he does not specify any definite method of formation or communication,
we must determine when formation takes place.
At this point we shall examine the various theories which have been advanced
to pinpoint the moment of formation, and later we shall ascertain the answer
to the problem given by the positive law in Quebec. The different theories
advanced may be divided into two main categories:
1. Declaration Theories:
(a) Declaration ‘strictu sensu’
(b) Expedition
(c) Reception
2. Information Theory:
1. Declaration The6ries: When the two parties are dealing face to face,
the offeror brings the offer to the knowledge of the offeree. The latter manifests
his intention to accept the offer. The concurrence of wills required for the
conclusion of a contract exists as soon as the party has obliged himself, i.e.
accepted. Both have consented to the creation of a lien de droit between them –
a contract is formed.
(a) Declaration ‘strictu sensu’: In contracts by correspondence, as soon as
the will of the offeree finds itself in the presence of the express and existing
will of the offeror, and adheres to it in a manner equally express, the consent
of the two parties is realized and their wills take reciprocal possession of
8(1901), 31 S.C.R. 186.
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one another. The agreement is perfect from that instant. Such is the opinion
of those who hold the theory of Declaration ‘strictu sensu’. 9
The consent of the offeree must of course be manifested, for in law, we
deal with outward acts, not feelings. Some have chosen the mailing of a letter,
or the dispatch of a telegram, as definitive acceptance.10 But these acts are
only two of many which are equally definitive. Consider the offeree who,
immediately upon reading the offer, orders raw material of the nature and
quantity necessary to satisfy the offer. Or, take the case where the offeree makes
certain entries in his books,’ or calls in a partner and tells him the firm
is going to accept the offer. Another illustration would be dictating a letter
of acceptance and signing it.
All of these examples, given surrounding circumstances which validate them,
might well be considered as “acceptances”. Unfortunately, they all take place
at different times. While each one taken separately is truly an acceptance, a
judge would have a merry time rummaging through the facts of each case to
find when that particular offeree accepted. More important would be the
terrible uncertainty on both sides as to when the contract was actually formed.
There is no guiding principle, no definitive time which determines formation.
(b) Expedition: The acceptance of the offer binds, only now we select that
the time of mailing
one point in time which is common to all acceptances –
a letter or dispatching a telegram, etc.
The offeree receives an offer, considers it, writes or dictates a letter of
acceptance, signs it and mails it. He has performed a series of acts which
require time and careful thought. He has made a conscious effort and done
something positive to ‘close the deal’. Is not the mailing a true, final, and
definitive acceptance?
We do not have to examine the facts to find that point in time, that event
which in this man’s method of operation can be considered as final and binding.
The posting of a letter, or the dispatch of a telegram, are easy to prove.
They are recorded and preserved by an impartial third party. Neither party
can “move” the time of formation backward or forward to suit his convenience.
Thus, a clear cut acceptance is easily discernible and easily proved. It is the
final act by the offeree, an act which can properly be held to be the last
connecting link forming a solid lien de droit between the parties. The mailing
is manifest; it is final; it is unequivocal.
ODuranton, Vol. 16, No. 45; Demolombe, Obligations, 1, No. 75; Story, Commen-
(1846) Ch. 8,
taries on the Conflict of Laws Foreign and Domestic, Boston, 3rd ed.,
No. 285. For a detailed and comprehensive list of the adherents of the various theories
see Valery, op. cit., pp. 128-133.
10 Such is -the contention of the Expedition theory.
flBorgfield v. La Banque d’Hochelaga, (1905), 28 S.C. 344, where the court held
that an acceptance of an order by correspondence, although noted on the company’s
books, is not completed until the letter of acceptance is posted.
No. 2]
CONTRACTS BY CORRESPONDENCE
No one can deny that it is manifest, but there are still those who do not view
the posting of a letter of acceptance as final. Until it reaches the offeror the
offeree can, in fact, nullify it in one of two ways: either by informing the
offeror by a speedier means of communication that he no longer desires the
offer and he wishes to retract his acceptance, or by withdrawing his letter
from the post.
Thus the offeror can change his mind and withdraw his acceptance by speedier
means. But why shozdd he be able to change his mind? He has consideried
the proposal and taken definite action. Surely the letter can be taken as a
valid acceptance. In truth, if the mailing of the letter is considered as the
acceptance which forms the contract and thus binds both parties, there is no
possibility for the offeree to change his mind, nor need there be. The argument
is fallacious, for it assumes what it is attempting to prove: merely mailing the
letter of acceptance is not binding because the offeree can, in fact, change his
mind until the letter arrives or comes to the knowledge of the offeror. Therefore,
if he can change his mind up to the time of arrival then the letter is not
binding. To put it more succinctly: assuming a letter of acceptance will not
be binding until receipt by the offeror, it will not be binding until that time.
This error, which some claim is based on common sense, arises from a
failure to distinguish between the “world of fact” and the “world of law”.
Factually, no one can deny that the offeree can cable or ‘phone before his
letter arrives and inform the offeror that he has changed his mind. But
legally, once he has accepted the offer he is bound. As Mathieu J. said in
Hislop v. Bernatz:12
Deux choses l’une: ou le contrat est parfait, ou it ne l’est pas. S’il est parfait
il ne peut pas Etre rgvoqu6
par la mise de la lettre d’acceptation A la poste,
par une d~p~che contraire.
(c) Reception: The adherents of this theory state that the contract is formed
only when the letter containing the offer is received by the offeror. They argue
that only on receipt is the acceptance truly definitive for then the offeree cannot
withdraw his acceptance.
We must note that receipt in this context is receipt in fact. The offeror need
not know the contents of the letter or even that it has arrived.
Although this theory eliminates the possibility of withdrawal of the acceptance,
the exact time of reception is difficult to establish. The offeror might even claim
that he never received the letter 1
2. Information Theory: With this theory we have returned to the classical
situation. The written word must be seen just as the spoken word is heard.
The acceptance contained in a letter or telegram is of no legal consequence
12-(1901), 3 P.R. 451 at p. 459.
l3This would not be trie if the acceptance was sent by registered mail, but as a rule,
this method is not used.
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until it comes to the knowledge of the offeror. Only when he knows that his
offer has been accepted is the contract formed.
This approach seems quite reasonable, yet when it is applied to contracts
by correspondence it creates a bias in favour of the offeror. He knows when
the contract has been formed but the offeree is left in the dark. The offeree
does not know when his acceptance came to the knowledge of the offeror.
Should not he have knowledge of the offeror’s “knowledge”?
This problem was aptly stated in an English decision of one hundred and
fifty years ago a4
For if the defendants were not bound by their offer, when accepted by
the
plaintiff, till the answer was received, then the plaintiffs ought not to be bound
tiff after they received notification that the defendants had received their answer
and assented to it And so it might go on ad infinitum.
If we follow this line of thought (i.e. that both parties must know) to its
logical conclusion we find the real solution would be to have both parties know
simultaneously that the contract has been formed.
Were knowledge by each party that the contract has arisen essential, it would be
necessary to reach the logical but absurd conclusion that the parties could not
contract unless
in each others’ presence, because where the contracting parties
are not together it is impossible for each to know that the contract has arisen
at the precise point it arises, the knowledge of at least one of the parties must
come at a time subsequent to the origin of the contract.’ 5
Therefore, if we accept this reasoning, contracts by correspondence are no
longer possible and cannot ever come into existence.
QUEBEC JURISPRUDENCE ON FORMATION
Having examined briefly the various theories advanced to solve this problem
we can now consider the jurisprudence. The problems involved in contracts
by correspondence have not led to an excessive number of cases. Since 1863
there have been some thirty-odd cases and they may be grouped conveniently
into three periods:
1. Information
2. Expedition
3.
“Agency”
In each period a particular time was selected as the time of formation. In
determining that time the emphasis shifted. First the question was one of
deciding amongst the different theories. Later the judicial mind sought justi-
fication for the theory which had been chosen. As a result of this attempt
to justify, the legal approach tended to become involved in pure theory and
appeared to lose sight of the practical aspects of the law as defined and applied
up to that point.
14Adams v. Lindsell, 1 Barn. & Ald. 681.
15Ashley, Formation of Contracts Inter Absentes, (1902), 2 Columbia L, Rev. 1.
No. 2]
CONTRACTS BY CORRESPONDENCE
1. Infornmation
Beginning with Clarke v. Ritchie-6 in 1863, until 1901, the Quebec courts
adhered to the Information theory. At first the treatment of the problem was
simple and direct. In dealing with an order made in Toronto and sent to
Montreal, where a Toronto merchant alleged that because of his order the
whole cause of action had not arisen in Montreal, the court had this reply:
The defendant in fact could not have given the order at Toronto because his order
was a mere piece of waste paper until it had been executed here (Montreal). The
order was nothing at all till it had been accepted here.
The subject was treated in greater detail in Underwood v. Maguire,17 where
the court considered the opinion of many celebrated French jurists who support
the Information theory.
In his dissenting opinion, Bosse J. cited two reasons advanced for adhering
to this theory: (a) the letter merely represents the spoken word; as the
spoken word is heard so the written word must be seen.’ 8 (b) concurrence
of wills only occurs when the offeror knows of the offeree’s acceptance; till
then we have merely a co-existence of wills.’ 9
–
However, the learned judge also cited Marcad6,20 who opposes the Informa-
tion theory with the same objection raised in the English decision, Adams v.
Lindsell’2
that letters would keep going hack and forth between the parties
to inform each other that they are bound. In view of the confusion and delay
such a situation would engender, and for the sake of commercial expediency,
Bosse J. decided in favour of the Expedition theory, with the proviso that
the offeree did not notify the offeror of his withdrawal between the time
of posting and time of arrival. His opinion was not adopted in the later case
of Magann v. Auger 2 2 However, his justification for adopting time of dispatch
as time of formation, in view of commercial expediency, was cited with
approval.
Wurtele J., who spoke for the majority of the court, in Underwood v. Maguire,
quoted the same authors as Bosse J. and also cited certain articles of the Civil
Code as concrete instances that the Information theory was truly the approach
adopted by our legislators. Thus, having combined the theoretical arguments
16(1863), 9 L.C.J. 234. This case was followed by McFee v. Gendron, (1889), M.L.R.
5 S.C. 337; Underwood v. Maguire, (1897), 6 Q.B. 237; Beaubien Produce & Milling
Co. v. Richardson et al, (1901), 3 P.R- 464; Hislop v. Bernatz, (1901), 3 P.R. 451;
Reeves v. McCulloch, (1902), 4 P.R. 285. In almost all these cases a declinatory
exception was made and thus the issue of place of formation arose.
ITSupra, footnote 16.
1STroplong, Vente, Vol. 1, No. 22 et seq.
19Laurent, Vol. 15, No. 479.
2OVol. 4, Art. 1108, No. 2.
21Supra, footnote 14.
22(1901), 31 S.C.R. 186.
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and the positive enactments, he felt that the Information theory was the one
which must be adopted.
The attempt to prove that the Information theory must be adopted because
it is applied in the Civil Code was also made by Mathieu J. in HJslop v’.
Bernat#2 and by Dorion J. in Association Pharmaceutique de la Province de
Qu6bec v. T. Eaton Co.2 4 This argument has been widely debated in France.
It has been carefully analyzed by Mazeaud 25 and his discussion applies equally
well to Quebec. 26
What is the basis for the assertion that the Information theory is the one
which our codifiers adopted?
In dealing with gifts inter vivos, the Code expressly states that such gifts
“do not bind the donor nor produce any effect until after they are accepted.1 27
As for the kind of acceptance necessary: “If the donor be not present at the
take effect only from the day on which
acceptance, they (i.e. the gifts)
he acknowledges or is notified of it.”2
8 There can be no question that acceptance
must be communicated. However gifts are made by a specific type of contract
which is surrounded with a rigorous formalism.
Mathieu J.2 has attempted to answer the objection that Gifts are “contrats
solennels” by saying that we are confusing solemnity with the juridical act,
which must be expressed in solemn form. But if a gift is not in the proper
“form” it has no existence as a juridical act.
A second instance where the Code deals specifically with a communicated
acceptance is in determining whether or not a “stipulation pour autrui”
is
revocable: “he who makes the stipulation cannot revoke it, if the third person
have signified his assent.”30 The binding force of the stipulation depends on
whether or not the acceptance has been “signified”.
Wurtele J. felt that these positive enactments were clear and express
indications of what the codifiers had in mind but Mathieu J. was dubious
23Supra, footnote 16.
24(1933), 50 K.B. 482.
2 5Lefons de Droit Civil, Paris, (1955), Vol. 2, p. 114 ff.
2 6Both articles 787 C.C. and 1029 C.C. have their source in the Code Napolion;
articles 932 and 1121 respectively.
2 7Article 787 C.C.
28Ibid.
29In Hislop v. Bernats at p. 458. The codifiers, in their fifth report at p. 155 make
the following statement about Gifts: “It is believed that the exposition of the subject
the freedom of gifts
will be found to agree with the actual
a little more than that of contracts in general”, and later on the same page: “Article
13 [art. 766 C.C.] is merely an assimilation of gifts to other contracts as regards the
capacity of acquiring possessed by corporations.” Both these statements point to the
fact that in the minds of the codifiers, gifts are a special type of contract, outside
the law of contracts in general.
law which restrains
30 Article 1029 C.C.
No. 2]
CONTRACTS BY CORRESPONDENCE
107
about the force of article 1029 C.C. It does not specify to whom acceptance
must be signified, so at least it does not conflict with the article on Gifts.
One can reasonably object to the suggestion that the notice of acceptance
necessary in a “stipulation pour autrui” is really outside the issue: a “stipulation
pour autrui” does not consist of an offer made by the stipulator to the third
person who accepts it; a direct right exists as soon as the stipulation is made.
The acceptance merely consolidates an already existing right, it does not
create a new one.?1
Both judges mentioned article 1701 C.C., the first article in the section
of the Code that deals with Mandate. It describes the nature of the contract and
states that the acceptance of the mandatory “may be implied from the acts
of the mandatory, and in some cases from his silence.” Thus we do have an
acceptance which need not be communicated to be valid. This, however, is a
special case. “II nous semble que ‘la r~ponse se trouve dans la nature
particuli~re du mandat.”3 2 The agent must act immediately without waiting for
acceptance and the acts of the agent can subsequently be ratified. Mandate is
really an exceptional contract and we must not generalize its application to the
whole field of contract.
Articles 1025 and 1026 C.C. 3 a deal with one of the effects of formation –
the transfer of ownership and when it takes place. If the thing is certain, the
transfer takes place simultaneously with the perfection of the contract. On the
other hand, when the thing is uncertain the transfer of ownership does not
take place until two conditions have been fulfilled. One of these conditions
is that the buyer must be “legally notified”. Notification here has nothing to do
with formation.
Dorion J. 4 pointed to the fact that article 1026 C.C. made notification
imperative, and in answer to those who said that this was really an exception
to the general rule he stated:
Mais une disposition particuliire ne cr~e une exception que lorsqu’elle s’6cart
de la r~gle gnrale… Or, oiL prend-on la rigle gin6rale qui engage tne personne
par l’effet d’une d~claration qui ne lui est jamais parvenue?
alMazeaud, op. cit., footnote 25, at p. 116. This notion of an acceptance merely
consolidating an existing right was raised in the plea of Dunlop v. Higgins, (1848),
1 H.L.C. 381. Had counsel for the appellant in that case succeeded, the law on contract
by correspondence might have followed quite a different line of development from the
one it actually took.
32Mathieu J. in Hislop v. Bernatz.
331025: A contract for the alienation of a thing certain and determinate makes the
purchaser owner of the thing by the consent alone of the parties, although no delivery
be made.
1026: If the thing to be delivered be uncertain or indeterminate, the creditor does
not become the owner of it until it is made certain and determinate and he has been
legally notified that it is so.
34In Association Pharmaceutique de la Province de Quibec v. T. Eaton Co., supra,
footnote 24.
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(Vol. 6
He then proceeded to cite article 1029 C.C. as an illustration of the fact that
notification must be made.
It is respectfully submitted that the word “engage” is not appropriate in
this context. As illustrated above, 1026 C.C. deals with the time of transfer of
ownership’and not with the question of whether or not one party is “obliged”
toward the other. On the issue of communication of acceptance we can derive
little or no guidance from these articles.
Thus, until the year 1899 an acceptance had to be communicated to the offeror.
2. Expedition
In 1899 the Supreme Court decided the case of Magann v. Auger and the
result was a complete reversal of the law on contract by correspondence. We
must consider this case carefully because subsequent interpretation of it has
brought/the law to where it stands today.
Many references, both to decisions and learned texts, were cited by both
sides. After considering these references the Court had this to say.U
If counted merely, the respondent’s contention that the question should be answered
in the affirmative would seem to have a majority [of references]
in its favour
But if the reasoning is weighed, the question [must acceptance be communicated]
should we think be answered in the negative.
Taschereau J. then raised the objection to communication which we saw
raised earlier,36 that if acceptance must be communicated so the acknowledg-
ment of acceptance must also be communicated, and so on ad infinitum. Thus
the Information
the
Expedition theory was undoubtedly the most desirable from the commercial
point of view, and also, the law in Quebec would then be similar to the law
in England and in the rest of Canada. This similarity of law was extremely
important in view of the increased trade and commerce that was developing,
both inter-provincially and internationally. The learned judge clearly stated that
Underwood v. Maguire was overruled and held that:
theory was not
the answer. On
the other hand,
… in the Province of Quebec, as in the rest of Canada, in negotiations carried on
by correspondence, it is not necessary for the completion of the contract that the
letter accepting the offer should actually have reached the party making it, but is
complete on the mailing of such letter…
Note that the Court spoke of completion of the contract, and did not refer
to or imply communication or presumed communication.
To sum up, the decision was based on three points:
(1) the reasoning of the adherents to the Expedition theory is superior;
(2) the necessity for communication leads’to an endless chain of communica-
tions in order that both parties be bound, thus effectively crippling
commercial operations;
35Per Taschereau J. at p. 192.
361n Adams v. Lindsell, supra, footnote 14, and by Bosse J. in Underwood v. Maouire,
supra, where he cited Marcad6 to the same effect.
No. 21
(3)
CONTRACTS BY CORRESPONDENCE
the law would be uniform throughout Canada and the same as that
in England.
It is unfortunate that in choosing the Expedition theory the learned judge
was not more specific as to the reasons for his choice. Because he merely said
that the reasoning was superior, but did not explain why, a subsequent
decision37 was able to read into this judgment a justification for the selection
of the Expedition theory which was never intended. However, until 1928, the
Quebec courts followed the instant case and applied it correctly.
This case was followed immediately as it came to the attention of the
Quebec judiciary. In Ward v. Johnson,38 dealing with an acceptance by
telegram, decided some six months after Magann v. Auger, Dorion J.3 9
in the Court of Review made the following statement, after mentioning the
judgment of the court in Underwood v. Maguire, Beaubien Produce & Milling
Co. v. Richardson et al,40 etc.: “Nonobstant ces decisions je me sens li6 par
le jugement de la Cour Suprrne, re Magann v. Auger.”
In Schmidt v. Crowe,41 which came just a few months after the Ward
case, the Court held:
That a contract by correspondence is made at the place where the acceptance
sent, by letter or telegram, to the party making the offer.
is
This case illustrates that the acceptance is valid when dispatched, whether it is
a letter or a telegram, because it is the fact that a definitive acceptance is
dispatched. The mode of communication used for the acceptance is not affected
by the mode of communication used for the offer.
Subsequent cases42 affirmed Magann v. Auger and applied it. In one of these
cases,4 Carol J.” suggested that since the law was silent and did not specify
when formation took place in contracts by correspondence, we must look
to the droit commun to determine how contracts by correspondence are
perfected. He concluded that once the letter of acceptance was posted, the
offeree was definitely bound. (The court did not apply the holding of Magann
37Charlebois v. Baril, [1928] S.C.R. 88.
38(1902), 5 P.R. 123.
W9Ibid., at p. 123.
4oSupra, footnote 16.
41(1902), 5 P.R. 361.
4QTimosi v. Palangio, (1904), 26 S.C. 70; Borg!ield v. La Banque d’Hochelaga
(1905), 28 S.C. 344; United Shoe Co. v. Caron, 11 R de J. 59; Beaudoin v. Watterson,
(1910), 19 K.B. 530; Butler v. Mechanical Equipment Co. of Canada Ltd., (1912),
22 K.B. 199, also reported at 7 D.L.R. 77, affirming (1911), 13 P.R. 410; Bell et al
v. Chase & Co., (1916), 22 R.L.n.s. 438; Laferte v. Martel, (1917),
19 P.R. 249;
Gagnon v. Labrecque, (1919), 25 R.L.nrs. 376. In addition, see the following cases from
other provinces holding the same as above but not citing Magann v. Auger: Horsenail
v. Shute, 27 Brit. Col. Rep. 474, in Court of Appeal; Clark v. Barrick et al [1950]
1 D.L.R. 260; R. v. Steel Co. of Canada, [1952] Ex. C.R. 200.
43Gagnon v. Labrecque, supra footnote 42.
Ibd., at p. 380.
McGILL LAW JOURNAL
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v. Auger here because the so-called “acceptance” had changed conditions in
the offer and hence could not be considered a true definitive acceptance.)
In Beaudoin v. Watterson,45 a reply had been requested by telegram and
the offeree had answered by mail. The offeror did not raise this point in his
pleading. Archambault J. 4 6 mentioned this fact and pointed out that since
the offeror had specifically requested a reply by telegram, the offeror could have
pleaded the delay in reply.
In this case, in a dissenting judgment, Cross J.47 pointed out that where
the offeror had expressly indicated a mode of acceptance, a reply by some other
mode would only bind when it arrived and not when it was posted –
but only
when there is a definite specification, e.g. “Please answer by telegram.”
In only one case4″ decided during this period was an attempt made to explain
Magann v. Auger. Archibald J. 49 stated that “tvo wills must agree upon
the same thing, at the same time, and together.” We have already suggested
that this reasoning cannot be applied to contracts by correspondence because
-the two parties can never know simultaneously that the contract is formed.
The learned judge then continued and said of Magann v. Auger:
That was a judgment overruling the jurisprudence of our own court of appeals which
had existed up to that time; but that judgment was founded upon the consideration
that when the Post Office receives a letter addressed to a person it is the agent
of that person, and the letter is supposed to be in the possession of that person
by his agent. The sender of the letter has lost all control over it and nobody
but the person to whom it is addressed can receive it.
3. “Agency”
The Expedition theory was applied in Quebec law as the result of Magann
v. Auger. This approach was maintained in both the trial court and the
provincial appeal court in Cliharlebois v. Baril.5 The facts were quite simple.
Charlebois made an offer in writing, to purchase some property that belonged
to Baril. About ten days after the offer was made, Baril mailed an acceptance
to Charlebois which the latter claimed he never received. About three weeks
after he made the offer, and also after the acceptance was mailed, Charlebois
mailed a letter containing a withdrawal of his offer.
Baril formally instituted an action against Charlebois on the basis of the
contract created by his acceptance, praying that Charlebois perform the contract
or pay damages. In both Superior Court and Appeal Court, the main issue
was the question of whether the plaintiff was entitled to either specific perform-
ance or damages. The issue as to formation was never doubted –
the contract
45(1910), 19 KB. 530.
4GIbid., at p. 535.
47Ibid., at p. 538.
48Martin v. loly, (1913), 44 S.C. 134.
49Ibid., at p. 139.
50(1926), 64 S.C. 421; affirmed in (1927), 43 K.B. 295.
No. 21
CONTRACTS BY CORRESPONDENCE
was considered
Magann v. Auger.
formed when acceptance was posted, as
laid down
in
Baril proved to the trial court’s satisfaction that he had mailed the letter.
The court was somewhat less satisfied with Charlebois’ claim that he never
received the letter of acceptance: “Les objections de d6fendeur ne sont pas
sfrieuse; c’est un prftexte que le dffendeur prend pour essayer de se soustraire
son obligation de pass6 titre.”51
On appeal, the decision of the trial court as regards formation was affirmed.
As Lafontaine C.J. said,5-” “Mais comme la question du moment de IA
formation d’un contrat par correspondence se trouve d6finitivement d6cidfe
par le jugement de la Cour supreme dans la cause de Magann v. Auger, il serait
bien inutile de recommencer la discussion de cette question.” Rivard J. entered
a dissenting opinion but on other grounds; he too affirmed the holding in
Magann v. Auger.
In the Supreme Court,53 however, things took a different turn. The judgment
of the court, which was very brief, was delivered by Anglin C.J.C. He set out
the facts and then continued:
letter of acceptance
The courts below, while they undoubtedly cast serious doubt on the defendant’s
denial of the receipt of the plaintiff’s acceptance, refrained from making a finding
on this question of fact, no doubt deeming it unnecessary because they regarded the
judgment of this court in Magann v. Auger as determining that the mailing of
the plaintiff’s
to the defendant constituted communication
of it to him.
With great respect this is an erroneous view of the scope and effect of the
decision of this court. That case was one of contract by correspondence,
i.e., the
offer was sent by mail and that was held to constitute a nomination by the sender
of the post office as his agent to receive the acceptance for carriage to him.
The civil law of Quebec was held to be the same in this regard as the law of
. But this decision has no application to a case where the offer
England. .
is communicated, as here, not by mail, but by another means. To make a contract
the law requires communication of offer and acceptance alike either to the person
for whom each is respectively intended, or to his authorized agent.
Here there was nothing to constitute the post office the defendant’s agent and a
finding of actual receipt by him of the plaintiff’s acceptance was, therefore, essential.
The burden of procuring such a finding was upon the plaintiff. Without it he
cannot succeed.
.
The learned judge, in distinguishing between this case and Magann v. Auger,
stated that the latter dealt with a “contract by correspondence,
i.e., the
offer was sent by mail and that was held to constitute a nomination by the
sender of the post office as his agent to receive the acceptance for carriage
to him.” We can only apply the doctrine of Magann v. Auger to a case where
both offer and acceptance are by mail. However, we must note that Magann
v. Auger considered the problem as one of when completion takes place and
did not deal with communication or “agency”.
51At p. 424 of the Superior Court judgment.
52At p. 310 of the Appeal Court judgment.
53Supra, footnote 37.
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Anglin ,C.J.C.’s remarks immediately following indicate that he did not
intend so narrow an interpretation, because he stated that the offer may
be communicated to the offeror or his authorized agent. Hence if the offer
is communicated to an authorized agent, whether or not it is the same means
of communication, the contract will be formed.
Just as the courts had followed the holding in Magann v. Auger for some 28
years, so they followed this new interpretation of it.
In a case decided in the Quebec Court of Appeal very shortly after
Charlebois v. Baril, we find this statement by Letourneau J. :54
Mais il faut rappeller i
l’intim~e que cette jurisprudence qu’elle invoque pour
pritendue qu’une raise i
la poste est suffisante, ne reqoit pas d’application dans
le cas qui nous occupe: Magann v. Auger, telle que ricemment interpritie par la
Cour suprime du Canada dans Charlebois v. Baril, nous oblige de dire que cette
mise i la poste ne peut suffire que si
l’offre est venue par cette interm6diaire
de la: poste.
The offer had been made by messenger and the acceptance was mailed in
Quebec. The place of formation was of crucial importance because the appellant
had withdrawn an offer before the expiration of the time he had granted
to the offeree. Had the contract been formed in Quebec, Quebec law would
apply and the offeror could not have withdrawn his offer with impunity. On
the other hand, if the contract was formed in Ontario, by that law an offer
could always be revoked (so long as there had been no consideration) before
expiration of the time allotted. Applying the interpretation of Anglin C.J.C.
to these facts, the only possible way to achieve acceptance would he to send
the answer by messenger. Mailing a letter of acceptance –
the logical, usual
and practical method for most dealings – would not, and in fact did not, suffice.
Some 10 years later in Premier Trust Co. v. Turcotte, Charlebois v. Baril
was again applied with the following result: where an offeror had mailed a
catalogue and asked the offeree -to “reply at once” and the offeree wisely
telegraphed his acceptance, the Court held that such an acceptance “s’en est
fait non par la poste mais par telegramme, c’est i dire par F’entremise d’un
autre agent choisi par l’acceptant, le contrat se trouve conclu A l’endroit ou
l’acceptation est parvenue i l’offrant.”
How is one to reconcile the holding with the judgment of the court in
Schmidt v. Crowe,5″ where the Court held that the contract was made where
54Renfrew Flour Mills v. Sonschagrin, (1928), 45 K.B. 29 at p. 36. See supra, the
remark by Dorion J. in Ward v. Johnson to the: same effect.
“5(1938), 64 K.B. 401. The same reasoning was applied in the following cases:
Allaire v. Lamontagne, (1934), 72 S.C. 69; Gagnon v. La Founderie de St. Anselm Ltd.,
(1933), 36 P.R. 40; Poulin v. Regent Lumber, [1951] P.R 188.
56Supra, footnote 41.
No. 2]
CONTRACTS BY CORRESPONDENCE
acceptance was sent, by letter or telegram, which is also based on Magann v.
Auger?
The answer lies in the new element introduced by Anglin C.J.C. in Char-
“agency”. That medium which the offeror uses is his agent
lebois v. Baril –
to receive communication; communication to his agent has the same effect
as communication to him personally. The contract can then be formed by
communication to his authorized (i.e., the mode he uses to send the offer) agent.
The contract then is made by communication.
I
It is true that Magann v. Auger laid down that the contract is complete on
mailing, but it is respectfully submitted that it did not provide for completion
the contract for the reason that the acceptance was then deemed
of
communicated.
The word or even the notion of communication was not raised and certainly
nowhere was agency mentioned or even suggested. This fact is of utmost
importance, for Anglin C.J.C. stated explicitly that the law required communica-
tion to offeror or his agent, and he also said that -the only reason a contract
could be completed on mailing was because the acceptance was communicated
to the agent of the offeror. In other words, the Expedition theory applies, but
not because dispatch constitutes a definitive acceptance and hence there is
consent and a completed contract exists, but because dispatch really constitutes
communication to the agent. Also, since the agent has received
the letter
it is just as if we have communication to his principal –
the offeror. This is,
in fact, the Reception-Information theory with the concept of reception being
extended to the Post Office or mail box in the place where the offeree is.
is necessary because communication is necessary, and thus
The “agency”
the very theory which the
we are back with the Information
Supreme Court clearly overruled in Magann v. Auger!
theory
–
The writer respectfully submits that this analysis of the judgment in Charle-
bois v. Baril is a logical consequence of the judgment. The cases cited above which
followed this decision substantiate this. The Premier Trust case affords a
pertinent illustration: a telegraphed acceptance to a mailed offer will not bind
on dispatch because the offeree chose his own agent; if the acceptance had been
mailed then it would bind on dispatch because it was communicated to his
agent –
theory. However, in this latter
instance it “looks like” the Expedition theory. This is the result of reasoning
from and insisting on communication.
hence we apply the Information
We see then that this paradoxical result is achieved because we have attempted
to explain the Expedition theory by “Agency”. If we can show that the notion
of “agency” has no application here, and is, in fact, erroneous, it follows that
we cannot use it as the logic or rationale behind the Expedition theory.
McGILL LAW JOURNAL
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“AGENCY”: ITS SOURCE AND
A CRITICAL EVALUATION
It is submitted, with all due respect, that, as illustrated above, nowhere in
the judgment of Magann v. Auger did the court mention “agency”. It is true
that in Martin v. Joly57 the courts did interpret Magann v. Auger in the same
way, but this judgment was never followed or referred to and no reference
was made to it by Anglin C.J.C.
That the “agency” notion is not uncommon as an explanation is true, but
one must look for the source. Its ormission in Magann v. Auger is especially
noteworthy because it was quite definitely referred to in the pleadings of that
case by counsel for Respondent, who cited Addison’s book on contracts, where
Household Fire Insurance Co. v. Grant58 –
a celebrated English case on
contracts by correspondence –
is referred to.
This approach had little currency in France. The dispute there was based
on the merits of one theory over the other and the question usually turned
quite properly on the nature of acceptance. “Agency” was considered only
in determining precisely what was the function of the post office in transmitting
the offer and acceptance.59
In common law jurisdictions the approach is more pragmatic
and because
the Household case can be said to be based on the same grounds as Charlebais,
v. Bar//, it is respectfully submitted that it was the former case on which
the learned judge in the Supreme Court based his decision. For that case
held that in order for a contract to be formed there must be communication,
and this is achieved if we treat the post office as agent of both parties.
In view of the fact that the English decision is undoubtedly the primary
source of the “agency” doctrine, it appears worth while to examine how this
notion was evolved At the same time we shall examine the manner in which
the English law, in regard to contracts ‘by correspondence, was established.
On the facts, the decision in Household Insurance v. Grant seems at first
57Supra, footnote 48.
58(1879), 4 Ex.D. 216.
59Valery, op. cit., at p. 71, points out that those who consider the relationship
between the sender and the post as one of Mandate are mistaken, since Mandate
(or “Agency”) usually has the accomplishment of some juridical act as its goal. This
is not the usual service rendered by the post. It is surely closer to the factual situation
to characterize this legal relationship as one of Lease and Hire of Service. See also
Dorion J. in Association Pharmaceutique de la Province de Quebec v. T. Eaton Co. Ltd.,
(1933), 50 K-B. 482, to the same effect.
6The English authors and judges never deal with the problem of formation, or
offer and acceptance, in terms of theories. Cheshire and Fifoot, The Law of Contract,
at p. 30, state that “the rules which the judges have elaborated from the promise
of offer and acceptance are neither rigid deductions of logic nor the inspiration of
natural justice. They are only presumptions, drawn from experience,
to be applied
insofar as they serve the ultimate object of establishing the phenomena of agreement.”
No. 2]
CONTRACTS BY CORRESPONDENCE
somewhat startling. The defendant, Mr. Grant, had applied for shares in the
plaintiff company. The company allotted the shares to Grant and duly addressed
and posted a letter accepting his offer and notifying him of the allotment. The
letter was never received by him. It was held by Baggallay and Thesiger L.JJ.,
Bramwell L.J. dissenting, that the defendant was a shareholder.
that once an acceptance had been duly posted
The judgment of most importance for us was that delivered by Thesiger
L.J. who referred to a leading case on this subject, Dunlop v. Higgins.”1
in
This case held
good time, the acceptor should not lose the benefit he would derive even if the
letter did not arrive when it ordinarily should. He was not to suffer for
accidents which might occur in the post. He continued: “This direction was
wide enough in its terms to include the case of the acceptance never being
delivered at all.” He concluded that a letter of acceptance, once posted, will
bind even if it never arrives. This is truly a remarkable conclusion and one
senses that the learned judge felt he had to ‘retreat’ somewhat and, as Cheshire
and Fifoot say62 “he felt bound to pay lip service to the doctrine of
communication”, for Thesiger L.J. went on to say:
Now whatever in abstract discussion may be said as to the legal notion of its
being necessary, in order to the effecting of a valid and binding contract, that
the mind of the parties should be brought together at one and the same time,
that notion is practically the foundation of English law upon the subject of the
formation of contracts. Unless therefore a contract by correspondence is absolutely
concluded at the moment that the continuing offer is accepted by the person to
whom the offer is addressed, it is difficult to see how the two minds are ever to be
brought together at one and the same moment.
Quite so. But at this point the anomaly presented by a contract by
correspondence manifested itself, for the learned judge continued:
But on the other hand it is a principle of law, as well established as the legal
notion to which I have referred [that the contract is absolutely ioncluded when
acceptance takes place] that the minds of the parties must be brought together by
mutual communication… 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 Case63 when in the course of his
judgment he said: ‘Dunlop v. Higgins 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’.
The learned judge based his decision on two previous cases which we shall
consider chronologically.
In Dunlop v. Higgins,64 the acceptor had posted his letter promptly but it
arrived late due to an accident in the post. The court found that by mailing
the letter of acceptance the offeree had done all he could. Thus, “if a party
61(1848), 1 H.L.C. 381.
620p. cit., at p. 42.
6(1867) L.R. 4 Eq. 9 at p. 12.
64Supra, footnote 61.
McGILL LAW JOURNAL
[Vol. 6
does all he can do that is all that is called for”.’ ; He cannot be held responsible
for accidents in the post. Is the party who posted the letter on the right day
to lose the benefit he would have had if the letter had arrived in due course?
The court cited as an instance of this principle the fact that notice of
dishonour is validly made if posted at the right time, and whether the letter
is delivered or not is quite immaterial, because the sender is not responsible
for accidents in the post office.
Arrival may not be an issue of great moment for notice of dishonour but
it is surely of prime practical importance that an offeror learn of acceptance
to his offer. This argument was raised by counsel for Appellant, who pointed
out that:66
… when a person seeks to acquire a right he is bound to act with a degree of
strictness such as may not be required where he is only endeavourin& to excuse
himself from a liability. The question of reasonableness of notice, which may be
admitted in cases of bills of exchange, cannot be introduced in a case where one
party seeks to enforce on another the acceptance of a contract. A bill of exchange
is already a binding contract; no new right is acquired by notice. It is merely 3
necessary proceeding to enable the party giving it to enforce a right Previously
created.
Had the court accepted -this argument it is quite conceivable that the law
on contracts by correspondence might have followed a very different line of
development. However, this contention, which seems valid, was not accepted,
The case laid down the principle that once the acceptance was posted the
contract was formed so long as the acceptance was posted on time. The offeree
had accepted the offer and -had done all that could possibly be expected of him.
The question to be decided was, had -the offeree posted his letter in time?
In Hebb’s Case67 this principle was given an “explanation”.
Hebb applied to the agent of a company for shares. The directors allotted
the shares to him, but they sent the letter of acceptance to their own agent
for transmission to Hebb. Before the agent had delivered the letter, Hebb
withdrew his offer. On the facts described above, and in view of the principle
laid down in Dunlop v. Higgins, it seems reasonable to state the issue in this
case as follows: assuming that a letter of acceptance will cause formation of
the contract and bind both parties once it is posted to the offeror, will it have
the same effect when it is posted to the agent of the offeree who is to transmnit
it to the offeror?
Unfortunately, however, Lord Romilly did not see the issue in Hebb’s Case
in this way. He confused transmission and communication, for he said :68
These applications for and allotments of shares must be treated upon the same
principle as ordinary contracts between individuals. If A. writes to B. a letter
offering to buy land from B. for a certain sum of money and B. accepts the offer.
65Ibid., at p. 389.
66Ibid., at p. 387.
67Supra, footnote 63.
68Ibid., at p. 12.
No. 2]
CONTRACTS BY CORRESPONDENCE
and sends his servant with a letter containing his acceptance, I apprehend that
until A. receives the letter, A. may withdraw his offer, and B. may stop his
servant on the road and alter the terms of the acceptance or withdraw it altogether;
he is not bound by communicating his acceptance to his own agent. Dunlop v.
Higgins decides that the posting of a letter constitutes a binding contract, but
the reason for that is that the post office is the common agent of both parties.
In the present case, if Mr. Hebb had authorized the agent of the company to accept
allotment on his behalf, there would be a binding contract, but he gave no such
authority…
Therefore, Lord Romilly stated the issue as a question of whether or not
Hebb had authorized the agent to receive the communication.
But it seems that he has confused two separate questions. On the one hand,
there was a question of transmission. The learned judge stated that the contract
was binding because the post office was the common agent for transmission.
On the other hand, there -was the question of reception or communication,
i.e., did Hebb appoint the company’s agent his agent to receive the letter of
acceptance? This was the issue as Lord Romilly saw it. Surely Dunlop v.
Higgins, which dealt with transmission, has no application here.
This discrepancy was pointed out by Lord Justice Kay in Henthorn v.
Fraser,609 a later case, where he said :70
in which
the decision
the cases
.Higgins has been explained
In his judgment Thesiger L.J. refers to
in
(i.e. Hebb’s Case) by saying that the
Dunlop v
post office was treated as the common agent of both parties. That reason is not
satisfactory. The post office are only carriers between them. They are agents to
convey the communication, but not to receive it. The communication is not made
to the post office, but by their agency as carriers. The difference is between saying
‘Tell my agent A. if you accept,’ and ‘Send your answer to me by A.’ In the
former case A. is to be the intelligent recipient of the acceptance, in the latter
he is only to convey the communication to the person making the offer which he
may do by a letter knowing nothing of its contents. The post office are only agents
in the latter sense. All that Dunlop v. Higgins decided was that the acceptor of an
offer having properly posted his acceptance, was not responsible for the delay of
the post office
in delivering it; so that after receipt the said party could not
rescind on ground of that delay.
Thus “agency” as an explanation for the principle laid down in Dunlop v.
Higgins has arisen as a result of an error in discerning the issue which arose
out of the facts. This principle, which has no basis in law or logic, was
unfortunately reiterated and applied in the Household case.7′ Lord Herschefl,
in the Henthorn case commenting on -the same judgment, said :2
And . .
. Lord Thesiger based his judgment on the defendant having made an
application for shares under circumstances ‘from which it must be implied that
he authorized the company in the event of their allotting to him the shares applied
for to send the notice of allotment by post’.
The learned judge was really applying the rule he was about to lay down
in this case to a case which had preceded it, thus giving consistency to the
various decisions on this point. He continued :73
60[1892] 2 Ch. 27.
7OIbid., at p. 35.
7 1Supra, footnote 58.
72[1892] 2 Ch. 27 at p. 32.
73Ibid., at p. 33.
McGILL LAW JOURNAL
[Vol. 6
the doctrine
that an
I am not so sure that I should myself have regarded
is complete as soon as the letter containing” it is posted as resting
acceptance
upon implied authority by the person making the offer to accept it by those means.
,It strikes me as somewhat artificial to speak of the person to whom the offer
is made as having the implied authority of the other party to send his acceptance
through any particular channel; he may select what means he pleases, the post
office no less than any other. The only effect of the supposed authority is to make
the acceptance complete so soon as it is posted, and authority will obviously be
implied only when the tribunal considers it is a case in which this result ought
to be reached. I should prefer to state the rule thus: where the circumstances are
such that it must have been within the contemplation of the parties that according
to the ordinary usage of inankind the post might be used as the means of com-
municating the acceptance of an offer, the acceptance is complete as soon as it is
posted.
There is no agent here. The offeree is not obliged to use the same method
of communication as the offeror. As long as he uses a logical common-sense
method to reply, his acceptance will bind on dispatch.
One question remains. Here, Henthorn took away with him a written offer
he had received from the offeror in person. The offer was “communicated”
face to face. On this point, Lord Herschell said :74
in Liverpool,
Although the plaintiff received the offer at the defendant’s office
he resided in another town and it must have been in contemplation that he would
take the offer, which by its terms was open for some days, with him to his
place of residence, and those who made the offer must have known that it would
be according to the ordinary usages of mankind that if he accepted it he should
communicate this acceptance by post.
This case extended the rule to an instance where the offer was delivered
by hand and accepted -by post, and at the same time, by necessary implication,
overruled the “explanation” given in the Household case.
It is interesting to note how two leading English texts treat the “agency”
notion. After citing Lord Thesiger’s remarks, Ansen states :7
This is to treat the post office as the agent of the offeror, not only for delivering
the offer, but for receiving the notification of its acceptance, and there is a certain
in that way … but.., some rule is
artificiality in looking on the transaction
necessary and the rule (i.e., that of ‘agency’) at which the Courts have arrived,
whether or not it can be logically justified, is probably as satisfactory as any other
would, be.
Cheshire and Fifoot76 take the matter somewhat further, and in this writer’s
opinion reflect the true state of the English law, in the light of the decision in
Henthorn v .Fraser:
the
The difficulties felt to arise from the assumption that the post office was
offeree’s agent were met at first by suggesting that it might be regarded as the
joint agent of both parties and later by denying the assumption in toto. The
courts could take their stand on business practices …
However, we submit that one can safely say that the English courts have
discarded the “agency” notion.
W4Ibid., at p. 33.
75Principles of the English Law of Contract, (20th ed., 1954), p. 38.
760p. cit., p. 63.
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CONTRACTS BY CORRESPONDENCE
In addition to the statement on the “agency” notion made by Cheshire and
Fifoot, one finds remarks of other authors:
If the offer itself was made by mail it has been supposed that this made the post
office an agent of the offeror to receive the letter of acceptance. This theory has
been disproved and has little to support it.7
This is quite true. As we saw above, the idea was arrived at by an earnest
desire to reconcile the notion that acceptance must be communicated, with
contracts by correspondence and the rapidity and certainty necessary for
commercial dealings. Wherever “agency” is cited as an explanation, we find
that it almost always rests on the Household case.
We find criticism of the “agency” notion in many places. Bramwell J. in his
dissenting judgment in the Household case said this :s
I am at a loss to see how the post office is agent for both parties. What is the
agency as to sender? Merely to receive? … But if the post office is the agent
of both parties then the agent of both parties has failed (if the letter is not delivered)
in his duty, and to both.
D. M. Gordon, 79 has put it this way:
The offeree has a perfect right to say: ‘Make the post office your agent if you
like; but it is as much my agent as yours; I have as much right to its service as
you, and I treat it as my own agent.’ So treating it, he appears to have a perfect
right to revoke any acceptance in his hands … The result is that the offeree can
treat the acceptance as binding when posted, or not, according to his inclination
For this reason Mr. Gordon decided to reject the Expedition theory. A leading
South African jurist raised this same objection.80
in a note on Canadian
We do not know whose agent the post office really is. But assuming it is
the offeror’s, then by using it to explain the Expedition theory, in fact we
to
deny it. This was established
Charlebois v. Baril), where it was demonstrated that by making the post
office the agent we combine Reception and Expedition theories. When a letter
is posted the offeror receives, and once received, knowledge is presumed, there-
fore we have knowledge when the letter is posted and a contract is formed
because there is knowledge of acceptance, not because there has been a definitive
acceptance.
law”‘
(referring
In discussing the reasons why a letter of acceptance binds when posted,
Corbin8 mentioned:
77Corbin, Offer and Acceptance, (1916-17), 26 Yale L.J. 169. The “Agency” doctrine
is most often dismissed in this cursory fashion because it has little currency today.
However, because of the direction given to our law by Charlebois v. Baril and the
application of this decision, a more detailed and comprehensive rebuttal of this notion
must be made.
78At p. 238.
79(1931), 9 Can. Bar Rev. 55.
SOKahn, Some Mysteries of Offer and Acceptance,
(1955), 72 South African L.J.
246 at p. 256
81(1928), 27 Rev. Trim. du Droit 1013.
82On Contracts, Vol. 1, p. 247.
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Sometimes it is said that the post office is the common agent of both parties. It
requires only slight consideration to see that this reasoning is defective. The term
‘agent’ is generally used to refer only to some human person with power to act
there are many
on his principal’s behalf. The ‘post’
persons in the postal service; and it is by no act of any such person that tile
making of the contract is consummated. A letter box on the corner is neither a
person nor an agent and yet the acceptance is effective when the letter of acceptance
is dropped into that box. It is the offeree himself (or some person authorized
by him) who drops the letter in the box. It is he who has the power and who
exercises it by his action. The ‘box’ has no power and it does not act. It is true
that the postman may thereafter remove the letter from the box; but the contract
has already been made and removal has no legal operation.
is not a person although
Both ValeryM and Dorion J.84 have pointed out that the true legal relationship
between the post office and the sender of a letter is one of lessee and lessor
of services for the transmission of a letter.
Thus, in attempting
to support and explain a judgment which stated
emphatically that in a contract by correspondence formation takes place when
and where a letter is dispatched, and which expressly overruled an earlier
decision of the Quebec Court of Appeals upholding the Information doctrine,
the Supreme Court used “agency” of post office. The notion of “agency” derived
its origin and support chiefly from an English decision and we have attempted
to indicate that it is based on a misconception of the true portent of the
Expedition theory. Upon examining the notion of “agency” itself we found
that that application led to confusion and contradiction.
Therefore, we submit that “agency” should not be applied in contracts by
correspondence.
A SUGGESTED RATIONALE
In view of the analysis presented thus far, we can conclude that “agency”
must be discarded as an explanation for the Expedition theory. We are left
with the judgment of the Supreme Court in Magann v. Auger. The judgment
is sound but it does not go into any detail. We must therefore attempt to give
a reasonable and usable explanation.
Before we proceed, three points must be clarified. First, it is impossible
that both parties can know simultaneously that a binding contract has been
formed between them. An oft-quoted American case”5 has put the issue in
this way:
If a bargain can be completed between absent parties it must be when one of
them cannot know the fact whether it be or not completed. It cannot begin to be
obligatory on the one before it is on the other; there must be a precise time when
the.obligation attaches to both and this time must happen when one of the parties
cannot know that the obligation has attached to him; the obligation does not
therefore arise from a knowledge of present concurrence of wills of the contracting
parties.
8Op. cit., p. 71.
841n the Association Pharmaccutique case, supra, footnote 24.
85Maetier z’. Firth, 6 Wend. 103, 21 Am. Dec. 262 (1830).
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CONTRACTS BY CORRESPONDENCE
Because both parties can never know simultaneously, no matter what point
in time we pick (and it must be one point in time) ,86 one party will not know
he is bound.
Secondly, formation of a contract and communication of acceptance are
separate and distinct matters. There is no positive enactment in the law requiring
that assent be communicated to the offeree. Art. 984 of the Quebec Civil Code
is quite clear: one of the four requisites necessary for the validity of a
contract is “Their (i.e., the parties’) consent legally given”.8 7 Once we have
consent, the contract is formed. Consent must of course be manifested otherwise,
as far as the law is concerned, there is nothing. However, communication of a
communication of completion
manifested assent
is quite different from completion by communication.
is a different matter –
The third point that must be kept in mind is that there can be acceptance
without communication.
It is not indispensible that consent should be express. Civil Code Art. 1805
[Louisiana]. It may be implied … For it is not true to say, at least in all cases,
that there must not only be acceptance of the proposition, but a knowledge of
acceptance by the proposer. The authority of the code is clear on this point.
‘If the party making the offer die before it is accepted, or he to whom it is
made die before he has given his assent, the representatives of neither party
are bound, nor can they bind the survivor. But, if the offer be accepted
before the death of the party offering it, although he had no notice of it,
the obligation is complete.’88
Mignault8 9 deals briefly with this matter.
However, our positive law” does provide for acceptance without com-
munication, i.e., implied. If I offer by mail to pay a farmer $50.00 to cut down
a tree on my country estate, and he does so –
even if I do not know exactly
when, surely I am bound when he cuts down the tree. If he first cut down the
tree and then notified me, we would have a contract that was first executed
and then formed.
There still remain, however, those contracts which involve future perform-
ance. Will the offeror be bound when all the offeree has done is post his
acceptance?
Because both parties can never know simultaneously, the logic behind the
Information theory collapses. The only problem now is to select that point
in time for completion of the contract which is most consistent with law and
80As Planiol & Ripert, op. cit., Vol. 4, p. 182 ff. point out, two points in time
so that
will mean two different “formations”. Which formation will be binding
ownership passes?
8 7As to the meaning of “legally given”, suffice it to say that one can reasonably
infer from the remarks of the Codifiers at p. 9 of the First Report the reason for
this qualification is to ‘cover consent obtained by fear, error or fraud. These words
can have no bearing on communication.
88Ryder v. Frost, 3 La. Ann. 523 (New Orleans, 1848).
8 9Droit Civil Canadien, Vol. 5, p. 198.
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fact. The time selected by the vast majority of courts and writers is the time
when the acceptance has been dispatched. This moment in time is also the one
accepted in business practice.
is delayed, or is actually lost or destroyed
Let us also consider the relative position of the parties:
If we hold the offeror bound on mailing the acceptance he may change his position
in ignorance of the acceptance; even though he waits a reasonable time before acting,
he may still remain unaware that he is bound by contract because the letter of
in the mails. Therefore
acceptance
the rule is going to cause loss and inconvenience to the offeror in some cases.
But if we adopt the alternative rule, that the letter of acceptance is not operative
loss and
until receipt, it
inconvenience. He can not know that his letter has been received and that he is
letter
bound by a contract until a new communication
of acceptance may never have been received and so no letter of notification is sent
to him; or it may have been received and the letter of notification may be
delayed or entirely lost in the mail.9 ‘
is received by him. His
is the offeree who
is subjected
to
the danger of
We can put the risk on either party and there seems little to choose between
insure itself against either case.
them, for the business community could
Yet the time of posting, when the risk would -be on the offeree, does have
a slight but significant advantage.
By selecting the moment of dispatch as the moment of formation we are
closing the deal more quickly and enabling performance more promptly than
otherwise. There is good reason for this.
The offeree is already relying with the best reason in the world on the deal being
on; the offeror is holding things open; and in view of the efficiency of means of
is neither lost nor
communication (in the vast majority of cases the acceptance
delayed) we can protect the offeree in all these deals at the price of hardship
on the offeror in very few of them.92
Consider this same situation in a factual, business setting. What the offeror
really wants is agreement from the offeree. Agreement does not merely mean
that the offeree is legally bound. As Lewellyn puts it: “Buying law suits is
junkyard business.” 93 He wants agreement for the future in order to arrange
his affairs.
For a valid de facto acceptance there must be overt expression of assent,
and news of this assent must be given to the offeror. If the overt expression
of agreement occurs before efforts at notification, will that overt expression
by itself be enough to cause formation and hence bar revocation from that time
forward (provided only that it is followed in due time by the proper effort
at notification) ?94 Or,
to
…if two facts of importance have been treated as coincident, and proceed
occur separately, then: (1) Are we to take either as being the only significant one?
90Article 988 C.C.: “Consent is either express or implied .
91Corbin, op. cit., footnote 82, at p. 248.
92Lewellyn, Our Case-Law of Contract: Offer and Acceptance II, (1939), 48 Yale
.
L.J. 779 at p. 794.
93 Ibid., at p. 793.
94This is merely another way of opposing the Declaration or Expedition theories.
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CONTRACTS BY CORRESPONDENCE
And if so, which? or (2) Are we to re-examine the situation, and give each fact
its due weight and its specialized legal effect? And if so, how?95
In face to face dealings, the two requirements coincide, but when dealing
with negotiations between parties at a distance we are forced to discriminate.
The courts have decided that the whole legal effect lies in the offeree’s
attempt to communicate. This is the justification given in American law, and
although no English writer has dealt with the subject in such detail, this
analysis would probably be acceptable in English law, because of the common
origin of both legal systems.
The situation in France was quite unclear until 1933. Before then the Cour
de Cassation had refused to give a definitive opinion as to the time and place
of the formation. The Court had stated that each case was to be decided on
its merits, and time and place of formation was solely a question of fact. This
approach was widely criticised for the following reason:
II y a certes une question de fait, qui est de discerner, dans les correspondance
6changies, la lettre qui a eu pour but de consacr6 un accord d6finitif. Mais ce
point une fois fix6, la question de savoir si, dans le silence des parties a cet 6gard,
l’accord des volont6s est reput6 s’8tre r~alis6 au depart on A l’arriv~e de la lettre,
est une question de droit et d’interprgtation de la loi, sur laquelle la Cour de
Cassation devrait exercer son contr6le.98
In a very detailed and comprehensive note on a case dealing with contract
by correspondence, Salle de la Marniee, 97 after surveying
the various
approaches one might take, adopts a theory of risk. The risk, as we saw above,
could fall on either party. He determines that the risk shall fall on the person
who chooses the mode of communication. If the offeror has specified some
means of communication, any accident or delay is his responsibility. If he has
not specified, then it is assumed the answer is to be sent in the same way as
the offer. Thus, once the letter of acceptance is dispatched, the contract is
formed and risk from that point is on the offeror and he will be forced to
withstand any damage. If the offeree could withdraw before the letter arrives,
no damage would be suffered by the offeror and hence revocation by a speedier
means is possible.
The offeree then has the best of both worlds. The contract exists from the
moment of posting but if he finds a better opportunity elsewhere and is able
to inform the offeror before the letter has arrived, the contract is revoked.
In other words, Marni~re, in seeking a solution to the problem of the precise
moment of formation in order to establish greater certainty and to conform
to the world of fact, selected a solution which would lead to the wildest forms
of speculation. Setting the time of formation at posting and allowing the offeree
to revoke is akin to having both “a bird in the hand and two in the bush”.
MiLewellyn, op. cit., at p. 794.
96D.P. 1926.2.15. note signed A.C. See also Valery, op. cit., and the note at D.P.
1933.1.65.
97D.P. 1933.1.65-68.
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The “equality” which is supposed to exist between contracting parties does not
exist at all.
Such a solution makes formation dependent solely on the will of one of the
parties. “An obligation conditioned on the will purely of the party promising,
is void.”98 Further, as was pointed out in Maetier v. Firth,”” both parties are
bound by a contract at the same time, i.e., one cannot be bound before the other.
Thus Marni~re’s solution can not be adopted although it does help to emphasize
the problem of withdrawal. The question of withdrawal of the acceptance either
by a speedier means of communication, or by the actual withdrawal of the letter
from the post, remains to be considered.
We have seen that legally withdrawal is quite impossible, since the party
is bound by his acceptance. Notwithstanding the legal impossibility, the de facto
power still remains in the offeree to withdraw, and some countries, e.g. the
United States, France, do provide that a sender can retrieve his letter from
the mail.
In the United States the long accepted rule in Henthorn v. Fraser was
reversed in the decision Dick v. United States.1 0 The Court held that because
of the ‘regulation allowing withdrawal from the mails the old rule, which
depended on the loss of control, was no longer applicable. “It has been said
that this rule is harsh upon the acceptor; but there is no reason for giving him
an advantage that he would not have been entitled to if the contract had been
made by word of mouth.”‘ 0′ This truly is a valid argument. The fact that
the offeror does not know of the offeree’s acceptance does not strengthen or
weaken the acceptance. He has accepted and he is bound. 102
How can the authors and the courts glibly assert that once the acceptance
is dispatched the offeree is able cancel it? Surely the fact that the offeree has
considered the offer, written a letter and then mailed it, indicates his active
consideration of the offer and his acceptance. If we are forced to weigh one
acceptance against the other, it appears that an acceptance by post is equally
as strong as a spoken acceptance. However, this logic has not always prevailed.
This problem received careful consideration and a suitable solution in a
case comment’ 03 in 1914 in the United States. In that article, the author pointed
theory was unsatisfactory and suggested that we adopt
out that the “agency”
98Article 1081 C.C.
99Supra, footnote 85.
looF. Supp. 326 (Ct. Cl. 1949).
lO1 Turnbull, Revocability of Acceptance in Correspondence Contracts, (1930), 8 Can.
Bar Rev. 615.
O12Mazeaud, op. cit., demonstrates that the law does not require communication but
merely acceptance. This notion has been explicitly adopted in draft of the new French
Code. Article 13 in the chapter on contracts is as follows: “Saul stipulation contraire,
le contrat se forme entre presents comme entre absents au temps et au lieu ou l’accep-
tation de l’offre a 6t6 6mise.”
103(1914), 13 Michigan L. Rev. 672.
No. 2]
CONTRACTS BY CORRESPONDENCE
then acceptance
the moment of expedition “because
irrevocably
manifested and notice of such acceptance put into reasonable course of com-
munication to the offeror.”‘ 0 4 Communication is not necessary for formation,
which takes place when acceptance is manifested, but it is necessary, beiore
the offeror can be held liable for breach of contract. Thus he harmonised
the English cases with the necessity to fit communication into the picture.
is first
Various solutions have been proposed in different countries. In France
it has been decided that contracts by correspondence, like other contracts, will
be formed at the time and place acceptance is manifested. The United States
have also suggested the time of dispatch.0 5 Finally, there is a draft code’0
on contracts by correspondence in Private International Law. Because parties
to contracts by correspondence often reside in different countries with different
systems of law, these contracts presented formidable problems.
The committee which drew up the draft felt that where both countries
(i.e., that of the offeree and that of the offeror) followed the same system,
e.g. Reception, or Expedition, then that system should apply. However, where
is
the system
followed by the law more often applied in
the two laws differ on this point, the place and moment in which the acceptance
is dispatched are the place and moment of the conclusion of the contract, because
this
international
commerce… The draft only makes exception
in the case where a different
stipulation exists or where so unusual a means of acceptance
is employed to
make it known 07
Now, what is the situation in Quebec? Firstly, if we assume that Charlebois
vt. Baril is an erroneous interpretation of the law we are left with the decision
of the Supreme Court in Magann v. Auger. Secondly, there are no regulations
in Canada permitting withdrawal of letters from the post. On the contrary,
the Post Office Act’ 08 expressly states:
1O4Ibid. On this point he is surely a precursor of Lewellyn and Corbin.
105Restatement of The Law of Contract (American Law Institute), St. Paul, (1932)
at p. 70.
Sec. 64. An acceptance may be transmitted by any means which
the offeror has
authorized the offeree to use and, if so transmitted, is operative and completes
the contract as soon as put out of the offeree’s possession without regard to
whether it ever reaches the offeror, unless the offer otherwise provides.
This section appears to reflect the holding in the Household case and Charlebois v. Baril.
It turns on the meaning of “authorization”.
Sec. 66. An acceptance
is authorized to be sent by the means used by the offeror
or customary in similar transaction at the time when and the place where
the offer is received, unless the terms of the offer or surrounding circumstances
known to the offeree otherwise indicate.
It appears then that Charlebois v. Baril could not be supported.
lO7Ibid., at p. 91.
1081952 R.S.C. c. 212, s. 39.
lO6Explanatory Report
pondence, “Unification of Law’ published by
Unification of Private Law, Rome, (1948).
to the Preliminary Draft Code on Contracts by Corres-
the
the International
Institute for
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[Vol. 6
Subject to the provisions of this Act and the regulations respecting undeliverable
mail, mailable matter becomes the property of the person to whom it is addressed
when it is deposited in a post office 1o9
Thus we have a positive enactment which indirectly prohibits withdrawal of
acceptance. This statute has absolutely no bearing on formation of the contract
and obviously cannot create or dissolve any agreement between the parties.
It may, however, be used to counter the objection that an offeree can withdraw
his acceptance.
The suggested rationale may be set out as follows:
1. The “agency” doctrine can have no application in contracts by corres-
pondence.
2. The decision of the Supreme Court in Magann v. Auger is still good law.
This means that a contract by correspondence in Quebec is completed by
dispatch, whether or not the offeree uses the same mode of communication as
the offeror as long as it is a reasonable mode under the circumstances.
109″Post office”
in s. 2i as “letter box or other receptical or place
authorized by Postmaster General for the deposit, receipt, sortation, handling or
dispatch of mail”
is defined
