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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

Supp. To CHAPTER 3 ACCEPTANCE AND REJECTION OF OFFER

1-3 Corbin on Contracts Supp. to § 3.24

Supp. to § 3.24 Acceptance by Post

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(A) The following cases cite this section or its predecessor, § 78:

(1) United States v. Donald Lane Construction, Commercial Indus. Constr. & Supply Co., 19 F. Supp. 2d 217 (D. Del. 1998) (quoting the predecessor to this section) (notice of revocation or termination of a contract, effective upon receipt, is the best analogy to notice of a lawsuit). This case is fully discussed in § 3.15 of this supplement.

(2) Werne v. Brown, 955 P.2d 1053 (Colo. App. 1998) . The ''mail box'' rule has a life outside acceptance: whether payment is effective upon receipt or dispatch.

The Browns entered into a lease and option to purchase with Werne. Having failed to receive a rental payment, Werne sent a timely notice of default, as he was required to do by the contract. The Browns had thirty days to cure the default. Twenty-nine days after notice was sent, the Browns dispatched payment by post, which Werne received seven days later, six days after the end of the thirty day period. Before receiving payment, Werne sent a notice of termination. After returning the check to the Browns, Werne filed an action seeking a declaratory judgment that the lease was terminated and that he was entitled to possession. The Browns counterclaimed for specific performance, claiming that they had cured the default in time. Werne moved for summary judgment, claiming that cure was timely only if received within the thirty day period. The Browns argued that cure took effect upon dispatch. The trial court granted Werne's motion on the ground that the lease did not authorize payment by mail, hence cure was effective only upon receipt.

The appellate court reversed and remanded for trial on whether the lease authorized payment by mail. Payment by mail, the court held, is generally not effective until receipt by the creditor, unless the creditor expressly, by implication, or through a course of dealing directs or consents otherwise. If, however, payment by mail is directed or authorized by the creditor, payment is effective at the time of dispatch. ''When use of the mail has been directed or authorized,'' wrote the court, ''the vast majority of courts, acknowledging the risk inherent in using the mail, have allocated that risk to the party in control of the transaction.'' The question was, therefore, whether Werne had authorized payment by mail.

The court found that summary judgment on this issue was improper. The lease provided that rent was to be paid ''at the address specified in this Lease,'' which was a post office box (no way to get around payment by mail there). Werne's attorney later advised the Browns of a change in Werne's address-far away in Kentucky-and directed that the rent be ''sent'' there (the post is still one way to send things). Perhaps only because the Browns failed to move for summary judgment, the court remanded.

That condition prevented city's statement from operating as an acceptance. This case is also noted in § 2.3.

(3) Taylor v. Boehm, 58 Va. Cir. 229 (Cir. Ct. 2002) . A statute permitting a purchaser to cancel a contract for the sale of land required notice of cancellation to be either hand-delivered to the seller or delivered by U.S. Mail within three days after the purchasers' receipt of a property owners' disclosure packet, which the purchasers received on September 3. On September 6 (Labor Day), the purchasers instructed their realtor to cancel the contract. The realtor telephoned the seller's realtor, who conveyed the notice to the sellers on the evening of September 6. On the afternoon of September 7, the purchaser sent a written notice to the sellers by overnight mail that the contract was canceled. This letter was received by the sellers on September 9. The sellers brought an action for breach of contract and the purchasers sought summary judgment on the footing that they had exercised their right to cancel the contract. The court held that the notice was not timely. The court rejected the purchasers' claim that actual verbal notice on September 6 was sufficient since the statute required written notice to be received by the sellers within three days. The court also rejected the purchasers' argument that they should have enjoyed a one-day extension in giving notice because of the holiday. The purchasers' reliance on another statute allowing such an extension with respect to filing a judicial proceeding was not applicable to this statute, which did not distinguish ''business'' days from ''calendar'' days. Moreover, the court held that even if the additional day had been granted, the mere sending of the notice on September 7 was not effective under this statute requiring the notice to be received. The written notice was not received until September 9. Corbin is cited as authority for the court's conclusion that, where notice of cancellation of a contract is to be given by mail, the notice is not valid until it is actually received.

(4) Norkunas v. Cochran, 168 Md. App. 192, 895 A. 2d 1101 (2006) quotes Corbin's analysis recognizing the risk of transmission and the importance of choosing a final rule with a slight advantage in favor of the postal acceptance (''mailbox'') rule since the offeror invited the acceptance and could have controlled that risk if she so desired. The case is also discussed at 1.16(A) and 3.13(B).

(B) The following case is noteworthy:

(1) Okosa v. Hall, 315 N.J. Super. 437, 718 A.2d 1223 (1998) . An automobile insurance policy required a quarterly premium payment to be made on February 28, 1994. At the close of business on the 28th, the insurer directed a letter to the insured, which was posted on March 1, 1994, advising him that they had failed to pay their installment, and informing them that if they did not pay the premium by 12:01 a.m. on March 16, the policy would be automatically canceled. The letter further stated: ''If we receive payment on or before the cancellation date, we will continue your policy with no interruption in the protection it affords. If you've recently mailed your payment, please disregard this notice.'' On March 15, the insured mailed, by certified mail, a check for the required amount. The insured was involved in an automobile accident on March 16, and the insurance company disclaimed protection.

The insured sued to recover personal injury protection. The trial court entered summary judgment in favor of the insurer, and the insured appealed. The Appellate Division reversed, holding that under the mailbox rule, the insured's premium payment by certified mail on the day before expiration of policy avoided cancellation. The court stated that since the insurer addressed the insured by mail concerning the late premium, it authorized the insured's response with payment by mail and thus constituted the postal authorities as its agent. The court noted that ''[t]he use of certified mail by plaintiffs was perspicacious because it insured proof of mailing and its use avoided the thorny issue which would arise from a fraudulent response by them that post-dated the accident.''

Supplement to Notes in Main Volume

4. N.Y.- Morton's of Chicago, LLC/Great Neck LLC v. Crab House, Inc., 297 A.D.2d 335, 746 N.Y.S.2d 317 (App. Div. 2002) . The defendant (the Crab House) operated under a lease that required it to provide a written offer to the landlord (Morton's) to terminate the lease before the lease could be assigned or the premises sublet. By letter of February 11, 1999, the Crab House advised Morton's that it had found a suitable subtenant and was, therefore, offering Morton's the option of terminating the lease. In a telephone conversation on February 18, Morton's counsel informed the Crab House that Morton's accepted the offer. On the same day, Morton's mailed a certified letter to the Crab House confirming its acceptance. In a certified letter dated February 18 and facsimile transmission dated February 19, the Crab House attempted to revoke its offer. On February 22, the Crab House and Morton's each received the other's certified letters of February 18. The court held that the Crab House offer was accepted by the oral acceptance of Morton's counsel on February 18. While the lease required the offer to terminate to be in writing, there was no requirement that the acceptance of the offer had to be written. Moreover, Morton's letter of February 18 confirming the acceptance was mailed before the Crab House faxed its revocation. Since the acceptance of an offer is effective upon dispatch, the court held that the termination offer would have been deemed accepted at that time even if the counsel's acceptance had been ineffective.

Or.- In re Marriage of Reich, 176 Ore. App. 442, 32 P.3d 904 (App. 2001) . An offer for a settlement agreement authorized acceptance by mail. The facts disclosed that the acceptance was mailed before a facsimile revoking the offer was received. The acceptance was, therefore, effective to form the settlement agreement.

9. Justifying the mailbox rule as an allocation of risk of nondelivery to the offeror as master of the offer is supported by the similar deposit-payment rule applicable to the mailing of insurance premiums. See Dalton Buick v. Universal Underwriters Ins. Co., 1 Neb. App. 1104, 511 N.W.2d 189 (Neb. App. 1993) , rev'd, 245 Neb. 282, 512 N.W.2d 633 (deposit-payment rule inapplicable where policy language clearly provides to the contrary).

The predecessor to this section is quoted in Cantu v. Central Education Agency, 884 S.W.2d 565 (Tex. App. 1994) , which held that a Superintendent could reasonably accept by mail a teacher's written offer of resignation, tendered by hand. The teacher offered to resign shortly before the start of the school year, when the school district needed to act immediately to locate a replacement. She made the offer on a Saturday, when the Superintendent could neither receive nor respond to it. Her request that her final paycheck be forwarded to an address fifty miles away indicated that she could no longer be reached in town and did not intend to return to the school premises or school-district offices. These facts justified the different mode of acceptance.