One of the elements of a contract is that an offer is made, and then accepted. The timing of when a contract goes into effect is usually when the acceptance of an offer is communicated. In many common law countries, one exception to the general rule of contracts taking effect upon the communication of acceptance of the offer is a theory known as the mailbox rule, which is also sometimes known as the posting rule or postal rule.
The theory of the mailbox rule posits that when a person wants to accept an offer through the mail, a contract is formed, assuming that the proposed contract itself is valid, as soon as they mail the letter, not when the original offeror receives the acceptance in their mailbox. This legal theory is usually only applicable when all parties involved in negotiating the contract are expecting communication through the mail.
Under the mailbox rule, if a person wants to revoke an offer made, then the offeror must notify the offeree before the offeree mails their acceptance of the offer. If a person mails their acceptance of an offer, then it is too late for the offeror to take back their offer. This rule puts a significant amount of the responsibility on to the offeror, as they cannot take back an offer even before they know of its acceptance. Because so much of the burden is on the offeror, it is very difficult to take back an offer if the acceptance of the offer is expected to take place through the mail.
Each state has variations on how they apply the mailbox rule, such as what types of contracts the mailbox rule gets applied to. For example, how strongly the mailbox rule applies to options contracts was the subject of a case in the Supreme Court of California, Palo Alto Town & Country Village, Inc. v. BBTC Company. In this case, The Supreme Court of California examined the question of whether an options contract is effective upon deposit in the mail or whether it would only be effective upon receipt by the option. While the Supreme Court of California applied the mailbox rule in this case, one of the parties in the lawsuit did point out that in many other states, the exercise of an option is usually only effective upon receipt.
