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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 § 3.35

§ 3.35 Counter-Offers and Their Effect

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In the process of negotiation concerning a specific subject matter, there may be offers and counter-offers. One party proposes an agreement on stated terms; the other replies proposing an agreement on terms that are different. Such a counter-proposal is not identical with a rejection of the first offer, although it may have a similar legal operation in part. In order to deserve the name ''counter-offer,'' it must be so expressed as to be legally operative as an offer to the party making the prior proposal.n1 It is not a counter-offer unless it is itself an offer, fully complying with all the requirements that have been previously discussed. This does not mean that all of its terms must be fully expressed in a single communication. Often they can be determined only by reference to many previous communications between the two parties.n2 In this, a counter-offer differs in no respect from original offers. But there is no counter-offer, and no power of acceptance in the other party, unless there is a definite expression of willingness to contract on definitely ascertainable terms.

If the party who made the prior offer properly expresses assent to the terms of the counter-offer, a contract is thereby made on those terms.n3 The fact that the prior offer became inoperative is now immaterial, and the terms of that offer are also immaterial except in so far as they are incorporated by reference in the counter-offer itself. Very frequently, they must be adverted to in order to determine what the counter-offer is. Often, the acceptance of a counter-offer is evidenced by the action of the offeree in proceeding with performance rather than by words.n4

Silence will not be an acceptance except under circumstances which would make it so operative in the case of an original offer.n5 If the original offeror proceeds with performance in consequence of the counter-offer, there can be no successful action for breach of the terms originally proposed.n6

The terms ''counter-offer'' and ''conditional acceptance'' are really no more than different forms of describing the same thing. They are the same in legal operation. Whether the word ''offer'' is used or not, a communication that expresses an acceptance of a previous offer on certain conditions or with specified variations empowers the original offeror to consummate the contract by an expression of assent to the new conditions and variations. That is exactly what a counter-offer does. Both alike, called by either name, terminate the power of acceptance of the previous offer. They might properly be discussed under a single heading, instead of under two headings as is done here.

Legal Topics:

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

Contracts LawFormationAcceptanceMethods of AcceptanceSilenceContracts LawFormationOffersGeneral OverviewContracts LawFormationCounteroffersContracts LawFormationAcceptanceGeneral Overview

FOOTNOTES:

(n1)Footnote 1. John's Insulation, Inc. v. Siska Constr. Co., 671 F.Supp. 289 (S.D.N.Y.1987) , summary judgment denied, count dismissed, 774 F.Supp. 156, 1991-2 Trade Cas. (CCH) P69586 (S.D.N.Y.1991) . Equivocal wording of a communication alleged to be a counter-offer prevents it from being such. The crucial fact said the court, is whether it appears, from examining the writing, that the original offeror could reasonably have expected to be bound to particular terms upon acceptance.

Duval & Co. v. Malcom, 233 Ga. 784, 214 S.E.2d 356 (1975) . Malcom sent Duval a signed proposed ''output contract'' for the purchase of cotton. Duval added the words ''Projected yields on back'' and wrote on the back ''600 pounds per acre or about 875 bales'', added its signature and sent a copy back. The projected yield stated by Duval was significantly higher than past yields from the same land, and Malcom complained, saying they had no deal. Duval then added the words ''Buyer will accept all output regardless of whether it is more or less than the projected yield'' to a copy and gave it back to Malcom who allegedly stalked out of the room at this point. In view of the importance of an estimate in an output contract (U.C.C. § 2-306), the added estimated figure was a material alteration of the offer and constituted a counter-offer. The later attempted acceptance was ineffective. The court properly determined that Uniform Commercial Code § 2-207 was irrelevant, as there had not been ''a definite expression of acceptance.''

(n2)Footnote 2. Cain v. Noel, 268 S.C. 583, 235 S.E.2d 292 (1977) . The school board offered a deal to an administrator. In exchange for his resignation, the board would pay him six months salary. Three days after the deadline he said he would accept their deal and tendered his resignation, which was accepted. The board refused to pay, saying their offer of a deal expired with the deadline. The court held, relying upon this section, that the administrator's attempt to accept their deal operated at least as a counter-offer, which was accepted by the board when they accepted his resignation.

(n3)Footnote 3.

U.S. - Baltimore & O.R. Co. v. Youngstown Boiler & Tank Co., 64 F.2d 638 (6th Cir.1933) ; American Lumber & Mfg. Co. v. Atlantic Mill & Lumber Co., 290 Fed. 632 (3d Cir.1923) .

Conn. - Riverside Coal Co. v. Elman Coal Co., 114 Conn. 492, 159 A. 280 (1932) .

Kan. - Steele v. Harrison, 220 Kan. 422, 552 P.2d 957 (1976) ; Kansas City v. Industrial Gas Co., 138 Kan. 755, 28 P.2d 968 (1934) , a belated acceptance was assented to.

Ky. - Shaw v. Ingram-Day Lumber Co., 152 Ky. 329, 153 S.W. 431 (1913) .

Minn. - Lewis v. Johnson, 123 Minn. 409, 143 N.W. 1127 (1913) ; Knaus Truck Lines, Inc. v. Donaldson, 235 Minn. 453, 51 N.W.2d 99 (1952) .

Miss. - Reed Bros. v. Bluff City Motor Co., 139 Miss. 441, 104 So. 161 (1925) .

N.C. - Normile v. Miller, 313 N.C. 98, 326 S.E.2d 11 (1985) .

Okl. - Kingfisher Mill & Elevator Co. v. Westbrook, 79 Okl. 188, 192 P. 209 (1920) .

Wash. - General Lithographing & Printing Co. v. Washington Rubber Co., 55 Wash. 461, 104 P. 650 (1909) .

A buyer signed a proposed contract promising to pay $25,000. The vendor wrote at the bottom, ''I agree to accept $27,000.'' The buyer then altered his figures to $27,000, initialed the change and handed back the instrument. A contract was thus made. Brill v. Mushinsky, 194 F.2d 158, 90 U.S.App.D.C. 132 (1952) .

In Selig v. Philadelphia Title Ins. Co., 380 Pa. 264, 111 A.2d 147 (1955) , a counter-offer was held to have been accepted by a letter from the original offeror, although it did not contain the word ''accept.'' It did contain some suggestions but it was not made conditional thereon.

Where one requested an agent to procure insurance on a fleet of trucks within an area known as Zone 3, and the agent procured policies applicable in Zone 1 where rates were higher, retention of the policies and payment of premiums at the lower rate were not an acceptance of the counter-offer of the agent and there was no implied promise to pay the rates for Zone 1. The applicant had protested and had been assured of an adjustment. Williams v. Morrow, 272 S.W.2d 909 (Tex.Civ.App.1954) .

In B.L. Montague Co. v. Somers, 94 Ga.App. 860, 96 S.E.2d 629 (1957) , the purported acceptance of a contractor's offer varied sufficiently so that it operated as a counter-offer, but was in its turn ''accepted'' by the contractor. His offer was to do the work for $110,000, ''No taxes included'', while the reply promised to pay a ''lump sum of $110,000'' with no mention of taxes. The contractor had to pay the sales tax.

In Schwartz v. Handorf, 7 Wis.2d 228, 96 N.W.2d 366 (1959) , the plaintiff delivered to defendant a signed offer to purchase land on stated terms. The defendant altered it by excepting an easement of way and then signed it and returned it to plaintiff. By this action, the defendant made a counter-offer by a writing sufficient to satisfy the statute of frauds. The plaintiff orally communicated his acceptance of this counter-offer. The court held that this oral acceptance consummated a contract, and that the writing signed by the defendant was sufficient to make the contract specifically enforceable against the defendant. The defendant's subsequent notice revoking his counter-offer was of no effect.

Where an employee's letter in reply to the employer's written offer stated that an allowance for moving expenses was still to be discussed, it was a question of fact for the jury to say whether the employer later orally promised such an allowance. Goeckel v. Stokely, 236 N.C. 604, 73 S.E.2d 618 (1952) .

Where an offer was made with a specific condition and the offeree refused to assent to the condition, the existence of a contract on the offeree's terms was sufficiently shown by the fact that the offeror thereafter ordered shipments to be made under the contract. Whiteman Food Products Co. v. Prodotti Alimentari etc., 31 N.J.Super. 277, 106 A.2d 321 (1954) .

(n4)Footnote 4. In Baker v. Maytag, 207 So.2d 300 (Fla.App.1968) , plaintiff proceeded to sell shares of stock to buyer after buyer's counter-offer to the effect that plaintiff's right of first refusal would not apply to any single sale within 60 days of the sale to the buyer.

In W.G. Maltby, Inc. v. Associated Realty Co., 114 Conn. 283, 158 A. 548 (1932) , the plaintiff's offer to lease property on certain terms was accepted in writing by the lessor, with two variations of some importance. The plaintiff thereupon moved in and occupied the premises for some months. A lease for a year with privilege of renewal for five years was consummated thereby.

See, also:

U.S. - American Lumber & Mfg. Co. v. Atlantic Mill & Lumber Co., 290 Fed. 632 (3d Cir.1923) ; jury might infer assent.

La. - North Louisiana Milk Producers Assoc. v. Southland Corp., 352 So.2d 293 (La.App.1977) , writ denied, 354 So.2d 200 , noted under § 3.11 above.

Minn. - Farmers State Bank v. Sig Ellingson & Co., 218 Minn. 411, 16 N.W.2d 319 (1944) ; M. Samuels & Co. v. Zorbas, 182 Minn. 345, 234 N.W. 468 (1931) ; Johnson v. M.J. O'Neil, Inc., 182 Minn. 232, 234 N.W. 16 (1931) .

N.J. - Vaughan's Seed Store, Inc. v. Morris April & Bros., 123 N.J.L. 26, 7 A.2d 868 (1939) .

Ohio - Rupright v. Heyman, 67 Ohio App. 355, 36 N.E.2d 902, 21 Ohio Op. 305 (1940) .

El Hoss Engineering & Transport Co. v. American Independent Oil Co., 289 F.2d 346 (2d Cir.1961) , cert. denied, 368 U.S. 837 , is a case in which El Hoss submitted its signed 54 page draft of a contract for extensive construction work to Aminoil, one clause of which provided for arbitration of disputes. Aminoil signed the instrument, adding below its signature that the acceptance was ''subject to'' the furnishing of performance bonds and insurance within 14 days. This was clearly a ''conditional acceptance.'' But El Hoss made no objection, and both parties proceeded with performance, Aminoil several times extending the time for procurement of the bonds and insurance. Disputes soon arose, and Aminoil repudiated the contract. El Hoss applied for an order to compel arbitration, and the District Court sustained the application. The Court of Appeals reversed this, holding correctly that the ''acceptance'' by Aminoil was ''conditional,'' but holding incorrectly that no valid contract existed, and that Aminoil was not bound to arbitrate. One judge dissented. The Court of Appeals should have sustained the lower court. The ''conditional acceptance'' did not consummate a contract, but it operated as a counter-offer and was assented to by El Hoss by at once proceeding with performance, Aminoil itself participating therein. This case is discussed at length under § 1444.

Beginning the performance specified in an offer may not operate as an acceptance if the evidence shows that the offeree was still insisting on terms at variance with the offer. Griggs v. Oak, 164 Neb. 296, 82 N.W.2d 410 (1957) .

(n5)Footnote 5.

U.S. - Columbia Malting Co. v. Clausen-Flanagan Corp., 3 F.2d 547 (2d Cir.1924) .

Ill. - Maclay v. Harvey, 90 Ill. 525 (1878) .

Iowa - Ferrier v. Storer, 63 Iowa 484, 19 N.W. 288 (1884) .

Me. - Phillips v. Moor, 71 Me. 78 (1880) ; Jenness v. Mt. Hope Iron Co., 53 Me. 20 (1864) .

N.Y. - Tencza v. Hyland, 171 A.D.2d 1057, 569 N.Y.S.2d 242 (1991) . Original offerors signed their acceptances of the counter-offer, which was delivered to their attorney who communicated with the original offeree in an attempt to negotiate some concessions, not revealing that the clients had signed their acceptances. The original offeree had the power to, and did, revoke the counter-offer.

Pa. - Blaisdell Filtration Co. v. M.L. Bayard & Co., 311 Pa. 6, 166 A. 234 (1933) .

Wis. - Russell v. Falls Mfg. Co., 106 Wis. 329, 82 N.W. 134 (1900) .

Eng. - Morrell v. Studd, [1913] 2 Ch. 648 .

(n6)Footnote 6.

U.S. - Iselin v. United States, 271 U.S. 136, 46 S.Ct. 458, 70 L.Ed. 872 (1926) .