Jesper (Jason Schwartzman) is the lazy and unambitious son of a Postmaster General, who deliberately under-performs at his father's postal academy. Jesper does not take the academy seriously and even undermines the authority of the Drill Sergeant (J. K. Simmons) the assistant head of the Johansen family's postal department who works under the Royal Postmaster General. Jesper had spent 9 months at the academy and learned nothing at all. Jesper was not good at sorting / filing, carrier pigeon handling, transport of fragile merchandise, among other things. In a final effort to get his son to change his behavior, his father sends him to the distant island town of Smeerensburg with the task of posting 6,000 letters in a year, and if he fails, he will be cut off from the family estate. That would be the end of Jesper's privileged life, and he would end up in the gutter. Jesper travels by coach to the end of the mainland and the only way to get to Smeerensburg is to take a ferry. The island is surrounded in fog, and it is miserably cold. Once there, it becomes clear, as explained to Jesper by the sarcastic, mischievous ferryman Mogens (Norm Macdonald) and bitter teacher-turned-fishmonger Alva (Rashida Jones), that the town's perpetually warring families, the Ellingboes and the Krums, and who comprise nearly all of the population, hardly exchange words, let alone letters. Few months go by, without any letters at all. The 2 families are in a constant state of war with each other and even the children are caught up in the frenzy and contribute to the animosity. Alva resorted to selling fish as people didn't send their kids to school in town. Now she is saving money to escape. The post office is a dilapidated structure, which is completely rotten and exposed to the elements, and Jesper has a tough first night sleeping in the bitter cold with high winds. Desperate to figure out a way to post letters from the town, Jesper notices on the map in his office a far-off little establishment. There, he discovers a reclusive woodsman named Klaus (J.K. Simmons), with a house filled with handmade toys. Terrified by the man's size and appearance, Jesper flees, and leaves behind a drawing made by one of Smeerensburg's children about his own home life. Jesper prepares to escape the town when Klaus comes to him, demanding to go to the house depicted in the drawing. There, Klaus forces Jesper to deliver a package to the boy inside-a toy. Word of this event spreads to other children, who go to Jesper the next day, thinking that, by sending letters to Klaus, he will deliver a toy to them. Jesper capitalizes on the idea and goes to Klaus with the proposal of donating the toys in his house, to which Klaus agrees provided the toys will be delivered at night so he can accompany Jesper. News of the deeds quickly spreads, and more and more town children begin writing letters to Klaus. The Krum boy's toy leads him to play with an Ellingboe girl, much to their clans' outrage. As more children write letters to Klaus, Jesper tells a boy who had earlier ridiculed him that Klaus knows whenever any child misbehaves and only gives toys to good children. Jesper says that Klaus always knows when any child misbehaves, the acts of kindness they subsequently perform gradually inspire the rest of the townsfolk to end their dispute. The children ask bitter teacher-turned-fishmonger Alva to teach them to read and write so they can send letters. With her faith restored, Alva uses her escape savings to reopen her school. Eventually, Jesper and Klaus begin running out of toys to give to the children, and Jesper suggests they make more in time for Christmas. Klaus initially refuses, but Jasper happens upon a keepsake of Klaus's late wife Lydia, Klaus forces him away. Motivated by Márgu, a Sami girl who can't write or speak in Norwegian, Jesper works with Alva to help Márgu write a letter asking for a sled, which he then attempts to build alone. Seeing Jesper's effort, Klaus reconciles with him and the two finish the sled. While making the sled for the Sami girl Margu (Neda Margrethe Labba) in a neighboring settlement, Klaus tells Jesper about his wife, Lydia. He explains he made the toys to give to the future children that the couple never had, especially due to Lydia's early passing. Klaus realizes their work has been spreading joy to the children, and comes around to the Christmas plan. Márgu arrives with the rest of her people to help. As the town and Jesper's relationship with Alva flourish, Jesper finds himself conflicted about whether to leave Smeerensburg. Meanwhile, family leaders Mr. Ellingboe (Will Sasso) and Mrs. Krum (Joan Cusack) form a temporary truce in order to stop Jesper and Klaus so that they can have the families resume their traditional feud. They eventually trick Jesper's father into believing Jesper had posted 14,000 letters. Jesper's father arrives on Christmas Eve to congratulate his son, inadvertently revealing the true reason he did everything he had since coming to Smeerensburg to everyone. Just before they leave town, Jesper's father notices his son's remorse; after a private talk, he allows Jesper to stay. When the 2 families heads go to destroy the Christmas toys, Jesper does everything he can to stop them and apparently fails, however, over the course of the resulting chase, Mr. Ellingboe's brutish daughter Magdalone (Sergio Pablos) and Mrs. Krum's oafish son Olaf (also Pablos) fall in love, and thanks to Alva having been informed by the children about their parents' plot, she and Klaus had already replaced the toys in Klaus' sleigh with wooden decoys. Jesper's actions have redeemed him to Klaus and Alva, and they then deliver the Christmas presents to the town. With Jesper now redeemed, Smeerensburg becomes a kind and happy town, with Mr. Ellingboe and Mrs. Krum being forced to end the families' feud due to the marriage of their children. Jesper and Klaus continue to deliver presents in Smeerensburg and beyond for the next ten years. The year after that, Klaus disappears, seemingly going to join his departed wife. Jesper marries Alva and they raise two children. He and Klaus continue to deliver presents in Smeerensburg and beyond for eleven years. On the twelfth year, Klaus mysteriously disappears. Every subsequent Christmas Eve, Jesper waits for Klaus, who returns every year to deliver toys across the world.
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