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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 § 3.33

§ 3.33 Attempts by the Offeree to State in the Acceptance the Legal Operation of the Agreement

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There is a material difference between an acceptance that is conditional upon the inclusion of a term that is already contained in the offer by implication,n1 and one that is conditional upon the recognition of certain rights in the offeree, these being rights that would in fact be created by an unconditional acceptance. Thus, if A offers to sell goods to B for $100 cash, an acceptance by B is not ineffective or conditional if worded thus, ''I accept and will pay $100 cash on receipt of the goods.'' In the absence of proof of a different usage, A's offer to sell ''for cash'' means ''for cash on receipt of the goods.'' If B's acceptance had been, ''I accept on condition that I shall be privileged to resell the goods,'' the express condition is of a different kind and yet the result is probably the same-the acceptance is effective. When one buys goods of another, one of the legal effects of the sale is that the buyer is legally privileged to resell them, in the absence of an express lawful agreement to the contrary. The acceptance, although conditional in form, would not be understood as adding anything new to the offer.

If, on the other hand, the nature of the subject matter and the terms of the offer are such that the existence of the legal privilege to resell would not be certain or commonly assumed, an acceptance in the form quoted would not be effective to create a contract. If A offers to sell oil lands to B, and the latter says: ''I accept on condition that under the existing statutes I am legally privileged to sell all the oil that I can produce from the land,'' the existence of federal and state statutory regulations of production and sale of oil may be such as to leave much doubt as to the existence of the stated privilege. The acceptance as expressed would subject the offeror to a risk that it would be unreasonable to suppose, from the terms of the offer, that the offeror already had in contemplation. There would be no consummated contract for the sale of the land, even though litigation might subsequently establish the fact that the attempted regulations of production and sale of oil are void. This conclusion is all the more certainly sustainable, if the acceptance is conditional on an ''agreement'' by the offeror that the offeree shall have the specified rights and privileges. There is no contract as long as the acceptance is conditional upon a new expression of agreement by the offeror.

In expressing agreement, the parties usually think and speak in terms of action and other facts, not in terms of the resulting legal relations. Usually, then, they must take their chance as to what the courts will subsequently hold their legal relations to be. If the offeree departs from the words of action and fact, as used by the offeror, and accepts in terms of the resulting legal relations (as of course the offeree is free to do), showing a requirement of an agreement on legal effects as well as on the action promised, thus the offeree does not assent to the taking of a chance on the matter.n2

The expression in words of that which is already implied in the terms of the offer is not a variation therefrom, but the attempt to express, in advance, the legal operation of the words used in the offer may be a material variation. It is more than mere interpretation of those words. This is a matter as to which the subsequent conduct of the parties is usually decisive. The acceptance should not be held to be conditional if the offeror did not so treat it, and after action has been taken in the belief that agreement has been reached, a court should not overweigh minor differences in form.

In Costello v. Pet Inc., n3 the plaintiff made an offer to purchase certain property, payment for which would be entirely by the agreement to pay off municipal liens on the premises. The offer expressly provided that title could be taken by a nominee of the offeror. The offeree accepted the offer but wrote a cover letter to the effect that ''Pet will convey the property to Thomas Costello, or his nominee, provided the nominee is financially capable.'' The italicized condition is clearly not consistent with the terms of the offer. Yet the letter expressly stated that Pet did not ''view this letter as an amendment or counter-offer with respect to the Agreement or property since these matters are implicit in the Agreement but merely need clarification.'' In view of this disclaimer, the court viewed the acceptance to be unequivocal and binding, but Pet's continued insistence on the financial capability of any nominee was a repudiation of the agreement.

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

Contracts LawFormationOffersGeneral OverviewContracts LawFormationAcceptanceGeneral Overview

FOOTNOTES:

(n1)Footnote 1. See § 3.32 above.

(n2)Footnote 2. On this ground the decision rendered in Phoenix Iron & Steel Co. v. Wilkoff Co., 253 Fed. 165, 1 A.L.R. 1497 (6th Cir.1918) , may be sustained. The court said: ''A decision that an absolute acceptance of an option followed in the same writing by a request or demand of something not within the option, and to which the optionee is not entitled, creates a contract, is not an authority for holding that one is created when the acceptance is on its face qualified by being made conditional on its being agreed that the optionee shall have a right not mentioned in the option if he would have had such right by virtue of law had he absolutely accepted the option, on the ground that in such a case the acceptance, though such is its character on its face, is in reality an absolute acceptance.''

The court found, however, that the acceptance was conditional on inspection of the goods ''before shipment,'' whereas by the law of sales the buyer had a right of inspection ''before payment.'' Even so, the difference was not great, and the question remained whether the parties did not eliminate it by their subsequent action.

In Brecht v. Cedar Rapids Development Co., 257 Iowa 1117, 136 N.W.2d 287 (1965) , a dispute over parking rights under a lease of commercial property arose. The lease contained a renewal option and in exercising the option, lessee added that he intended to occupy the premises including the parking rights under the lease. Held the added words merely stated what already existed and did not make the acceptance conditional.

(n3)Footnote 3. 17 Mass.App.Ct. 382, 458 N.E.2d 790 (1984) , review denied, 391 Mass. 1103, 461 N.E.2d 1219 .