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Stellar Brewery posted an offer to sell a hundred barrels of its finest premium ale to Grange Pubs, requesting a reply "in course of post". The letter containing the offer was misdirected and arrived later than usual. Grange Pubs replied immediately by post, as requested, stating that they wished to accept Stellar's offer. However, Stellar informed Grange Pubs that, believing they were not going to accept due to the delay, the barrels had already been sold to another pub chain.

Which option best states whether there is a binding contract between the parties?

There is a binding contract between the parties in these circumstances because the court must apply the postal rule to stop Stellar escaping from what it might see as a bad bargain for the sale of the ale.

There is no binding contract between the parties in these circumstances; by the time the letter of acceptance was posted, Stellar Brewery had sold the barrels to another pub chain.

There is a binding contract between the parties in these circumstances; even though there was a misdirection of the offer, the offer was made when it actually reached Grange Pubs.

There is no binding contract between the parties in these circumstances; the fact of misdirection must have been so obvious to Grange Pubs, it would have been put on notice that the offer had lapsed.

There is no binding contract between the parties in these circumstances, because the letter had been misdirected in the post by Stellar Brewery.

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An acceptance by means of post is valid from the moment of posting, not from when the letter is received by the offeror. The postal rule, established in Adams v Lindsell (1818), stipulates that acceptance takes effect upon posting. In this case, even though the offer was misdirected, it was deemed made when it actually reached Grange Pubs. Therefore, once Grange Pubs posted their acceptance, a binding contract was formed. The fact that Stellar Brewery had sold the barrels to another pub chain does not negate the existence of the contract formed upon the posting of the acceptance letter.

Key Point: The postal rule in contract law holds that acceptance is effective when posted, providing certainty in communications between parties. This principle prevents the offeror from revoking the offer once the offeree has posted their acceptance, ensuring reliable contract formation through postal communication.

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Contract LawUnit 2Chapter 2: Agreement

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