136 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

Supp. To CHAPTER 3 ACCEPTANCE AND REJECTION OF OFFER

1-3 Corbin on Contracts Supp. to § 3.25

Supp. to § 3.25 Acceptance by Telephone or Other Electronic Means

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(A) The following case is noteworthy:

(1) Etablissement Asamar Ltd. v. Lone Eagle Shipping Ltd., 882 F. Supp. 1409 (S.D.N.Y. 1995) (applying New York law). Revocation sent by facsimile was not effective until it was received. This case is also noted in § 3.35.

137 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

Supp. To CHAPTER 3 ACCEPTANCE AND REJECTION OF OFFER

1-3 Corbin on Contracts Supp. to § 3.28

Supp. to § 3.28 Acceptance Must Manifest Assent and Be Unconditional

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

(1) Ohio Bank v. Beltz, 2002 Ohio App. LEXIS 4931 (Sept. 19, 2002) . This case is fully discussed at § 3.18.

(2) Gingerich v. United States, 54 Fed. Cl. 222 (2002) . The partners reached a settlement agreement with the IRS after they contested the IRS's final partnership administrative adjustment (FPAA), which is essentially a notice of deficiency. The government subsequently filed assessments against the partners individually. The partners sought refunds of the moneys paid, contending that the assessments were made after the one-year limitations period pursuant to I.R.C. § 6229(f), which is commenced upon the execution of a settlement agreement. The case turned on the date of the settlement agreement. If, as the partners argued, it was the date they returned their purported acceptances to the IRS, then the assessments were untimely as they were made more than a year from that date and the partners were entitled to a refund. If, as the IRS argued, it was upon execution of the parties' closing agreements, then the assessments were timely as they were made within a year from that date and the parties were not entitled to a refund. The court concluded that the plaintiff's ''executed acceptance'' letters were not acceptances. They were counter offers because they did not mirror the government's offer. The court cited Corbin for the general principle that an acceptance must be the mirror image of the offer (the ''matching acceptance'' rule). This conclusion was also bolstered by the court's finding that the parties intended to execute a closing agreement to finalize the settlement. The court agreed with the IRS and granted its motion for summary judgment. This case is also cited at § 3.32.

(3) University Hosps. of Cleveland, Inc. v. Lynch, 96 Ohio St. 3d 118, 772 N.E.2d 105 (2002) . This case is fully discussed at § 3.18.

(4) Bennett v. Truttman, 2004 Cal. App. Unpub. LEXIS 1648 (Cal. Ct. App. 2004) . Where the buyers of real estate changed the time for closing by three days pursuant to the suggestion of the seller's agent, the court cited Corbin's proposition that any expression of assent that changes the offer in any material respect may be a counter offer but cannot be an acceptance. The court held for the plaintiffs in finding no material change in the acceptance. This case is fully discussed at § 3.32 of the supplement.

(5) Lobar, Inc. v. Lycoming Masonry, Inc., 2005 Pa. Super 201 (2005) . The Plaintiff general contractor used t he defendant subcontractor's bid in calculating its bid and was awarded the contract. The plaintiff then sent a subcontract agreement to the defendant which refused to sign causing the plaintiff to pay a much higher price for the subcontract work. The plaintiff brought this action for breach of contract and for promissory estoppel to recover the difference between the defendant's and the replacement cost. The defendant argued that no contract was formed because the terms of the subcontract agreement sent by the plaintiff differed substantially from the terms of the bid and thus constituted a counter-offer rather than an acceptance. The defendant moved for summary judgment and the trial court granted the motion on the breach of contract claim but denied it on the promissory estoppel claim. The instant court noted that the issue of whether a contract existed between the parties hinged upon whether the contract that plaintiff sent defendant materially altered the terms of defendant's offer so as to constitute a counter-offer. The court noted Corbin's caution that whether a communication is an acceptance or a counter offer in a given case is not always easy to answer and requires the same common sense process of interpretation applied in so many other cases. The court noted that the record showed the parties had entered into similar subcontracts in the past and that the only reason the defendant did not sign this contract was not because it contained additional objectionable terms but because the defendant had mistakenly submitted a bid based on concrete masonry units that were less expensive than those required by the specifications. Although the issue was not before the appellate court, it noted that the record seemed to reflect a prior course of dealing that established a contract in this instance. Under these facts, the court could accept the trial court's promissory estoppel analysis. In Hedden v. Lupinsky, 405 Pa. 609, 176 A.2d 406 (1962) , the supreme court rejected a promissory estoppel analysis where the general contractor used the subcontractor's bid but then changed the terms in its purported acceptance of the subcontractor's to constitute a counter offer. The court viewed the controlling precedent as indistinguishable from the issue before the court, albeit the general contractor's acceptance appeared to be effective in the instant case. The court concluded that there was either a contract or not and that should have been determined by a finding that the plaintiff had either accepted the defendant's bid offer or had made a counter offer. It should be noted that the holding does not suggest the inapplicability of promissory estoppel to the classic situation where the subcontractor's bid is relied upon by the general contractor in making its irrevocable bid on the entire project, but after receiving the award, the subcontractor attempts to revoke its offer before the general contractor can accept that offer. As the instant court stated, the only issue in this case was whether the general contractor accepted the subcontractor's offer or made a counter offer.

(6) Nungesser v. Bryant, 283 Kan. 550, 153 P.3d 1277 (Kan. 2000) . An insurer made an oral offer to settle an accident involving injury the plaintiff motorcyclist for the policy limit, with payment to be made to the motorcyclist and the Medical Center had filed notice of a hospital lien. The motorcyclist's attorney eventually offered to settle for the policy limits if the check would be made payable to the motorcyclist and the attorney, with the attorney escrowing money in his trust account to address the Medical Center's lien. The insurer refused, and the motorcyclist filed suit against insured. On review, the supreme court noted that the trial judge found, as a matter of law, the communications between the motorcyclist's attorney and insurer did not form a settlement contract. The supreme court explained that ample Kansas case law supported the proposition that an unconditional and positive acceptance was required to form a contract. Citing Corbin, the court noted that where the acceptor attaches conditions to his acceptance not comprehended in the proposal, there can be no agreement without the assent of the proposer to such conditions. The trial judge had concluded that the motorcyclist never unconditionally accepted insurer's the offer and the insurer rejected the motorcyclist's counteroffer. Despite the insurer's contentions that an agreement had been reached, the proper identity of the payee of settlement proceeds is a material term. Further citing Corbin, the instant court repeated the well established rule that, in order to create a contract, an acceptance must be unconditional and unequivocal. The uncontroverted facts demonstrated that the motorcyclist never accepted the exact terms of the insurer's offer and, before suit was filed, the insurer refused to modify its offer to accommodate the conditions the motorcyclist required.

(B) The following cases are noteworthy:

(1) Cal Wadsworth Constr. v. City of St. George, 898 P.2d 1372 (Utah 1995) . A city imposed a condition on its acceptance of a bid submitted in response to an advertisement soliciting bids that the bidder reduce its price. That condition prevented city's statement from operating as an acceptance. This case is also noted in § 2.3.

(2) Andolina Shipping Ltd. v. TBS Eurolines Ltd., 84 F. Supp. 2d 527 (S.D.N.Y. 2000) . Eurolines wished to charter a vessel owned by Andolina. After a series of counteroffers, the parties reached agreement on the main terms of a charter party, called a ''fixture'' in the trade. The fixture contained a provision for compulsory arbitration. As is common practice within the shipping industry, the fixture was subject to reconfirmation by the charterer, in this case within 24 hours. Eurolines sought and obtained four consecutive extensions of the deadline for reconfirming the fixture (''lifting the subject'' in the trade). Andolina maintained that Eurolines represented these extensions as necessary to receive ''European Union'' approval to pay certain transport charges at the discharge port, and approval that Andolina understood to be a ''minor issue.'' Upon the vessel's arrival in port, Eurolines advised Andolina that the subject was not lifted on the charter party and that it would not accept delivery. Andolina filed a petition to compel arbitration.

The court denied the petition, on the ground that the parties hadn't entered into a binding contract because Eurolines had not lifted the subject. Andolina argued that in light of Eurolines' representations in requesting extensions, ''subject to reconfirmation'' was merely a ''detail,'' and that the charter party was formed when the owner and charterer agreed to its essential terms. Andolina was relying on the doctrine in Admiralty Law that a fixture is considered a binding contract, even if it is ''subject to details,'' that is to say, if the less important terms of the charter party remain to be resolved. The court rejected this argument, quoting United States v. Newport News Shipbuilding & Dry Dock Co., 571 F.2d 1283, 1286 (4th Cir. 1978) : ''When an offer or a counteroffer is accepted subject to a condition or reservation, neither party is bound to an agreement until the condition or reservation has been withdrawn or satisfied.''

(3) Ohmer v. Mel Farr Ford, Inc., 2001 Ohio App. LEXIS 3551 (Ohio Ct. App. Aug. 13, 2001) . The court needed to construe whether the plaintiff's signature on a release with the words ''under protest'' constituted a valid acceptance of the defendant's offer or a new counteroffer. Noting that there must be a demonstrated intention to assent to the terms of the offer, the court found the signature ''under protest'' to be a grumbling acceptance rather than a counteroffer. There were no different or additional terms to which the defendant was required to assent. Rather, this was an acceptance with an expression of dissatisfaction. This case is also noted at § 3.30 of this supplement.

(4) P & O Ports Fla., Inc. v. Continental Stevedoring & Terminals, Inc., 904 So. 2d 507 (Fla. Dist. Ct. App. 3d Dist. 2005) . The parties formed a stevedoring company that contained a buy-sell provision allowing either party to offer to purchase the other's interest. The offeree was required to accept the offer or purchase the offeror's interest on the terms of the offer. The agreement also contained a non-compete provision precluding the party who purchased the business from competing with the company in a certain location for three years. P & O offered to purchase Continental's interest, but the offer contained a provision waiving the non-compete provision. Continental sought a declaratory judgment that the offer was invalid since the parties intended the non-compete provision to survive a transfer of a member's interest. The trial court appointed a special master to conduct evidentiary hearings resulting in a finding that the non-compete provision was intended to survive a transfer of a party's interest in the company. At this point, P & O attempted to revoke the offer. Continental filed a motion to render the revocation invalid, but this issue was never ruled upon. Pursuant to the recommendation of the special master, the trial court ruled that the non-compete provision survived any sale of a member's interest and the offer was valid but it contained the non-compete clause. Continental could accept this offer and the parties were ordered to refrain from competing with each other for three years. On appeal, the instant court agreed that the non-compete clause survived any attempt to transfer a member's interest. The court, however, disagreed with the trial court's finding that Continental could accept an offer modified by the court that P & O never made. The court relied on the familiar rule that an acceptance of an offer must be the mirror image of the offer (the ''matching acceptance'' rule). A concurring opinion cites Corbin, § 2.18 in concluding that P & O effectively revoked its offer. The majority disagreed on the footing that an appellate court should not resolve a complex case such as this case on an issue that was not addressed by the litigants nor ruled upon by the lower court.

(5) Bergt v. McDougal Littell, 2006 U.S. Dist. LEXIS 93046 (N. D. Ill. 2006) . McDougal, a book publisher, sent a letter to the agent of Bergt stating that it could pay $200 for a license to reproduce Bergt's copyrighted painting, Primavera, in a school textbook with a ''print run of 40,0000.'' The agent responded with a document captioned ''Invoice'' stating that ''Rights are granted to reproduce'' the work for a ''reproduction fee of $200.'' It included a transparency of the painting and asked for its prompt return. Years later, Bergt discovered that the painting had been reproduced in over a million copies of the textbook and brought this action for copyright infringement. McDougal moved to dismiss the complaint on the footing that the letter from Bergt's agent did not limit the number of reproductions. The court found that McDougal's letter containing the 40,000 limitation was an offer since it manifested a willingness to enter into a bargain so made as to justify Bergt in understanding that his assent to it would conclude a contract (Restatement (Second) of Contracts, § 24). The court deemed the ''slightly more elusive'' response from Bergt through his agent as an acceptance rather than a counteroffer as suggested by McDougal. The caption, ''Invoice,'' suggested a record-keeping function rather than a counteroffer. It seemed intended as a final communication rather than contemplating a reply from McDougal. The absence of the other terms in the offer dealing with the number of reproductions suggested an intent to accept McDougal's offer as stated rather than a counteroffer. The inclusion of the transparency further indicated the offeree's intent to conclude the contract on the terms of the offer. The notion that the response was a counteroffer was further undermined by the common sense analysis that the agent would be operating against its principal in providing the right to unlimited print runs for the same $200 fee which McDougal offered to pay for a run of 40,000. In summary, the response to the offer suggested nothing except an intention to accept the offer on its terms. The motion to dismiss Bergt's complaint was, therefore, denied.

Supplement to Notes in Main Volume

2. In Schreiber v. Olan Mills, 426 Pa. Super. 537, 627 A.2d 806 (1993) , the recipient of a telemarketing solicitation dispatched a letter to the telemarketing company declaring that any future solicitations would be considered by them as creating ''a contract with us for our listening services,'' compensation for which would be at specified hourly rates. The court properly rejected the claim that two subsequent solicitations constituted an ''acceptance'' of this ''offer.'' The trial court concluded that ''the plaintiff's communiqu'e'' was ''in the nature of a 'cease and desist' request rather than an 'offer' to 'listen ... for hire' to the solicitations of the defendant.'' The appellate court agreed, adding that there could be no bargained-for-exchange where one of the parties-here the offeree-acts without any intention of binding itself to a contract. Though the trial court's reasoning

6. Heritage Excavation, Inc. v. Briscoe, 105 P.3d 700 (Idaho Ct. App. 2005) . Interested in developing his land, the defendant approached the plaintiff (a developer of adjoining land) to install a sewer line to his property. The line was installed and the plaintiff sent a bill for $20,000. The defendant protested the bill and sent a letter to the plaintiff stating that the defendant would pay less than $5000, but would give the plaintiff the first opportunity to buy or to meet any offers he might receive when he decided to sell the property. The plaintiff responded with a written option and right of first refusal that included thirty-two pages of attachments. It proposed that the plaintiff would pay the sum in his letter for the sewer line and the plaintiff would compromise the remainder of the bill in exchange for the right to purchase the defendant's property upon the earlier of the defendant deciding to sell the property or ten years. The defendant refused to sign this document and sent a check for $5000 to the plaintiff which was cashed. Two years later, the defendant agreed to sell his property to others. The plaintiff claimed that the defendant breached its right of first refusal contract with the plaintiff and demanded specific performance. The district court found no existing contract between the parties. On appeal, the instant court recognized the letter from the defendant as an offer, but found that the plaintiff's option and right of first refusal response did not accept the offer. The response differed substantially from the offer by providing an option rather than a right of first refusal and making the option exercisable at the end of ten years even if the defendant had not decided to sell. The court restated the general rule of contract law that an acceptance must be identical with the offer and unconditional. An acceptance that varies the terms of the offer is not an acceptance. It is a rejection and a counter offer that must be accepted to form a contract. The plaintiff, however, alleged that the defendant had rejected the option proposal because he already had an existing contract with the plaintiff and a more formal document was unnecessary. The court found that, at best, this evidence would suggest that the defendant had rejected the plaintiff's counter offer and renewed his original offer. There was no evidence that such a renewed offer was ever accepted by the plaintiff. The court affirmed the granting of summary judgment by the district court. (no intention to offer) is plausible, the appellate court's addition (no intention to accept) puts the decision on more solid ground.

6. Wash.- Rorvig v. Douglas, 123 Wash. 2d 854, 873 P.2d 492 (1994) (handwritten modifications made by offerees constituted a counteroffer and not an unequivocal acceptance).

8. U.S.- First Commerce Corp. v. United States, 335 F.3d 1373 (Fed. Cir. 2003) . In this Winstar case (an explanation of Winstar litigation may be found in Section 76.1, Footnote 7), the plaintiff was organized to acquire a financially troubled savings and loan (thrift) institution. In its bid letter, the plaintiff requested a regulatory forbearance concerning the amortization of goodwill according to a straight-line method over 25 years which was not in accordance with GAAP (generally accepted accounting principles). In its subsequent formal application, however, it did not request such forbearance, but indicated that goodwill would be amortized in accordance with GAAP. The Federal Home Loan Bank Board (FHLBB) approved the application but its approval included the non-GAAP forbearance requested in the plaintiff's bid. When Congressional legislation imposed more stringent requirements on parties such as the plaintiff which acquired financially troubled thrifts, like the other Winstar plaintiffs, the plaintiff brought this Winstar action for breach of contract. The FHLBB claimed that no contract existed on the footing that the plaintiff's application rather than its bid was an offer and the FHLBB response to that offer (containing the non-GAAP provision) did not match the terms of the offer (containing the provision in accordance with GAAP), i.e., since the response was not the ''mirror image'' of the offer, it could not be an acceptance of the offer. The Court of Federal Claims found no contract between the parties. The instant court held that the plaintiff's bid was not an offer, but even if it constituted an offer, it was superseded and revoked by the plaintiff's subsequent application since a subsequent offer inconsistent with the original offer may revoke the original offer. The FHLBB response, however, constituted a counteroffer containing the non-GAAP term which the plaintiff claimed it accepted by its conduct in acquiring the thrift. Since the Court of Federal Claims did not consider this analysis, the case was remanded to that court to determine whether the counteroffer was accepted by the plaintiff's conduct.

9. U.S.- Associated Milk Producers, Inc. v. Meadow Gold Dairies, Inc., 27 F.3d 268 (7th Cir. 1994) . This case is also noted in § 2.8.