• In the case of Holwell Securities v Hughes 1974 Q W.L.R 155, the postal rule was overridden.  

Facts of the Case

  • In October 1971, the defendant granted the claimants a six-month option to purchase certain property.
  •  The option was to be exercised “by notice in writing to” the defendant, ad on April 14th 1972, the claimant’s solicitors sent a written notice exercising the option by ordinary post to the defendant.
  • This notice never reached the defendant or his address.
  • On March 2nd 1973, the action was dismissed against the claimant for specific performance on the grounds that, as the defendant had not received the notice, the claimant had not exercised the option to purchase.

Issues in Holwell Securities v Hughes 1974 Q W.L.R 155

  • Whether the postal rule applied and if there were any exceptions in this case.
  • Could it be argued that acceptance took place at the time of sending the letter?

Held by Court

  • Appeal dismissed

Lawton LJ

  • The appeal was dismissed on the grounds that the need for communication of an acceptance to an offeror could only be displaced by the artificial concept of communication by the act of posting where the offer was in its terms consistent with such displacement.
  • The notice in this case was inconsistent with such a displacement.
  • The provisions of The Law of Property Act 1925 s.196 were that these provisions were inconsistent with the application of the theory of acceptance at the tie of posting and accordingly the posting of the notice could not constitute an exercise of the option to purchase.
  • “The object of this subsection, as also of subsection (3), is to specify circumstances in which proof of actual knowledge may be dispensed with. This follows from the use of the phrase ” any notice . . . shall also be sufficiently served . . .” If Mr. Macpherson’s submissions are well-founded,
    a letter sent by ordinary post the evening before the option expired would have amounted to an exercise of it; but a registered letter posted at the same time and arriving in the ordinary course of post, which would have C been after the expiration of the option, would not have been an exercise. The parties to the option agreement cannot have intended any such absurd result to follow. When the provisions of section 196 (4) are read into the agreement, as they have to be, the only reasonable inference is that the parties intended that the vendor should be fixed with actual knowledge of
  • The exercise of the option save in the circumstances envisaged in the rj subsection. This, in my judgment, was enough to exclude the rule.
  • I would dismiss the appeal.” P. 162

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