89 Of 174 documents

Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

CHAPTER 3 ACCEPTANCE AND REJECTION OF OFFER

1-3 Corbin on Contracts § 3.11

§ 3.11 When the Words ''I Accept Your Offer'' Would Be Ineffective

An offer may be so worded that the offeree gets no power to accept by the words, written or spoken, ''I accept your offer.'' There is a variety of such situations. The clearest is where the offer unequivocally looks to an acceptance by performance and only by performance. Most reward offers are in this category. There are many other such offers which look purely to unilateral contracts. In Anthony v. Jersey Central Power & Light Co., n1 the defendant adopted and distributed a ''severance pay'' rule. Later, when its business was sold, it refused to pay the plaintiff the amount promised, asserting that it was a mere gratuity. The court held that the plaintiff's continuance in service up to the termination of employment was both an acceptance and a sufficient consideration.n2 A promise to remain in the employer's employ for the period indicated in the offer would not have created a contract.

As earlier discussed,n3 there are offers that create power in the offeree to make a series of separate contracts by a series of independent acceptances. Where one party wrote to another offering to supply specified goods at certain prices for the period of twelve months in such quantities as the latter might order from time to time, a reply by the offeree saying ''I accept your offer as made'' did not make a contract.n4 This is not for lack of mutual expressions of assent, but because the form of the offer (if indeed it was an offer)n5 is such as to make the offeree's expression insufficient as a consideration or as definiteness of subject matter. By using the quoted words the offeree has made no promise to buy any quantity and has given no other consideration. Yet the proposal by the first party may have been found to be an operative offer and remain so for a year unless sooner revoked. If it can properly be characterized as an offer, the offeree can effectively accept at any time within the year by ordering some specific quantity, thereby consummating a bilateral contract to sell and to pay for that quantity.

In another case the defendant promised the plaintiff that if the plaintiff placed its orders for gasoline through the defendant, and the latter accepted such orders, the defendant would pay the plaintiff a specified rebate per gallon sold. If the plaintiff had replied, ''I accept your offer,'' no contract would have been made. However, a contract was made each time the defendant sold gasoline to the plaintiff.n6 Perhaps no offer had been made by the defendant. Its statement of selling price, including a rebate, was an implicit term of each order placed by the buyer.

In an earlier case, the defendant signed a writing headed ''Hopkins Gate Contract,'' saying ''The Racine Iron Company hereby agrees with Floyd Hopkins to furnish, at any time hereafter during the life of the patent, castings for the patent farm gate of said Hopkins ... for forty cents per set.''n7 This was a standing offer, but it was not itself a contract.n8 Nor could it be accepted by Hopkins by merely signing the document itself, or by saying ''I accept your offer.'' An order for a specific number of castings would be an effective acceptance and would consummate a bilateral contract to make and to pay for the number of castings ordered. The order for definite goods is an acceptance that is invited, and it is a sufficient consideration for the reason that it is a promise to pay the specified price.

In another case, the state of Louisiana had set a minimum price at which milk could be sold by producers to processors. Previously, the parties had a long relationship involving the purchase and sale of milk. The association of producers notified the processor that they would bill at more than the minimum price and ''[y]our acceptance of milk from members of this association ... will constitute your agreement to these announced prices.'' The processor replied that it would pay only the minimum set by the state commissioner or federal market order. Discussions ensued and each party testified that it stuck to its position and had the last word prior to delivery of milk. Despite the absence of an express agreement on price, deliveries took place on almost a daily basis. The court ruled that the each delivery was a separate offer at the seller's terms and that the acceptance of each shipment created a contract on these terms. This may be explained on the ground that a fictitious contract is created when the purchaser exercises dominion over the offered goods despite the purchaser's express refusal to pay the seller's price.n9 The court's explanation is different.n10 The buyer's expressed willingness to take delivery at the minimum price had no quantity term and thus was not an offer. The seller's delivery of specific quantities with the demand for its price constituted the offer. The processor's acceptance of delivery constituted the acceptance of the offer. Because of the clearly expressed disagreement as to price, perhaps it would have been better to find that no contract price had been agreed upon and that the obligation of the buyer was to pay reasonable value. This would be the probable result in a jurisdiction that had adopted the Uniform Commercial Code. There was no definite expression of assent by the offeree, whichever party might be deemed the offeree. Consequently, a contract was formed without a price term and the Code would fill the price gap by imposing a reasonable price.n11

Again, if an employer offers employment at specified wages, and on stated conditions to continue for an indefinite period and to be terminable at the will of either party, a mere statement ''I accept your offer'' creates no binding contract. This is because neither party has yet made a promise that can be enforced or that purports to bind the party to render any performance whatever. By express provision, performance is still to be subject to the promisor's will. A refusal to render any performance at all would be no breach of duty.

Nevertheless, the employer's offer creates a real power of acceptance, one that exists before any verbal acceptance and that continues to exist after such an acceptance. The words ''I accept your offer'' are certainly not a rejection.

The employee may be fully authorized by the employer's proposal to proceed with performance without any further assent by the employer, and if the employee does so proceed, the employer will be bound to pay the specified wages for services rendered. If this is true, the employee had power to accept by action, though not by the words ''I accept your offer.'' If the offer was one to pay one thousand dollars per week, the provision for termination at will might be meant to reserve the privilege of termination only at the end of a weekly period. In such case, actually beginning work may reasonably be held to create a bilateral contract for one week's service and pay.n12 If the provision is not so interpreted, then acceptance by rendering service makes only a unilateral contract to pay for service actually rendered before notice of revocation.n13

Legal Topics:

For related research and practice materials, see the following legal topics:

Labor & Employment LawEmployment RelationshipsAt-Will EmploymentGeneral OverviewLabor & Employment LawEmployment RelationshipsAt-Will EmploymentDuration of EmploymentContracts LawFormationAcceptanceMethods of AcceptanceGeneral OverviewContracts LawPerformanceTender & DeliveryContracts LawTypes of ContractsUnilateral ContractsGeneral Overview

FOOTNOTES:

(n1)Footnote 1. 51 N.J.Super. 139, 143 A.2d 762 (1958) .

(n2)Footnote 2. A similar case is Gronlund v. Church & Dwight Co., 514 F.Supp. 1304 (S.D.N.Y.1981) (N.J. law). The jury could properly have found that the employer informed plaintiff that pursuant to a reorganization the employee's job would be eliminated. At the same time the employer promised 12 weeks severance pay if the employee continued working until the end of the year, but if the employee found a new job the severance pay would be paid anyway. On such a finding a unilateral contract would exist. The court collects many cases so holding. The plaintiff's claim for a bonus rested on the same basis, but there was no showing that the denial of the bonus was arbitrary.

(n3)Footnote 3. See §§ 2.18 and 2.33 above.

(n4)Footnote 4.

Eng. -Great Northern R. Co. v. Witham, L.R. 9 C.P. 16 (1873).

In Morrow v. Southern Exp. Co., 101 Ga. 810, 28 S.E. 998 (1897) , the defendant promised to carry at specified rates all the milk that the plaintiff would offer for shipment as long as the plaintiff desired. Such an offer could be accepted only by tendering milk, not by words of acceptance. As to the milk not yet tendered, the offer remained revocable.

Other similar cases are:

Mass. - Thayer v. Burchard, 99 Mass. 508 (1868) , standing offer to carry freight at stated rates.

N.Y. - Railroad Service & Adv. Co. v. Lazell, 200 App.Div. 536, 192 N.Y.S. 686 (1922) .

Wash. - Mowbray Pearson Co. v. Stanton Co., 109 Wash. 601, 187 P. 370 (1920) , adhered to, 109 Wash. 601, 190 P. 330 , standing offer to sell ice at named prices.

(n5)Footnote 5. Where a proposal for the sale of goods contains no quantity term, only rarely will it be deemed to create a power of acceptance. See §§ 2.1-2.4 above. It is, however, the contract, not the offer that ordinarily requires a quantity term, provided that the offer sets a mechanism for its establishment. Thus a proposal to sell a buyer, ''up to 15 widgets @ $1,000 a widget,'' qualifies as being sufficiently definite.

(n6)Footnote 6. Nat Nal Serv. Stations, Inc. v. Wolf, 304 N.Y. 332, 107 N.E.2d 473 (1952) .

(n7)Footnote 7.

Wis. - Hopkins v. Racine M. & W. Iron Co., 137 Wis. 583, 119 N.W. 301 (1909) .

See also Strang v. Witkowski, 138 Conn. 94, 82 A.2d 624 (1951) , where there was a standing promise to pay a commission of 5% on all orders obtained by the promisee. No promise was made by the latter, but the sending in of each order consummated a separate unilateral contract.

(n8)Footnote 8. Query. The plaintiff had assigned the patent to the defendant. This could have been consideration for an irrevocable promise to sell. Yet, it does not appear that the parties bargained for an irrevocable offer in exchange for the assignment.

(n9)Footnote 9. See § 3.8 above.

(n10)Footnote 10. North La. Milk Producers Ass'n v. Southland Corp., 352 So.2d 293 (La.App.1977) , cert. denied, 354 So.2d 200 (La.) .

(n11)Footnote 11. U.C.C. § 2-207(3). See § 3.37 below.

(n12)Footnote 12. In Roessler v. Burwell, 119 Conn. 289, 176 A. 126 (1934) , an express agreement of employment left the wages to be paid to be determined later on. They were so determined and paid for a period of four years. It was held that this was sufficient to justify enforcement of a subsidiary promise of the employee not to solicit customers for one year after termination of the employment. By rendering service as requested, the employee was binding himself by a promise not to solicit in addition to binding the employer to pay wages.

(n13)Footnote 13. Such seems to have been the case in General Paint Corp. v. Kramer, 57 F.2d 698 (10th Cir.1932) , cert. denied, 287 U.S. 605 . If this is true, a subsequent oral agreement, applicable only to services not yet rendered, changing the terms and conditions, was merely the revocation of an offer and the making and accepting of a new one. The decision that it was made invalid by a statute prohibiting the alteration of a written contract by oral agreement seems erroneous.

The Restatement (Second) of Contracts § 34(2) says:

''Part performance under an agreement may remove uncertainty and establish that a contract enforceable as a bargain has been formed.'' Section 34(3) goes on to say ''Action in reliance on an agreement may make a contractual remedy appropriate even though uncertainty is not removed.''

The question of curing indefinite agreements is further considered in §§ 4.7-4.8 below.