§ 2.14 Duration of Power of Acceptance Created by an Offer

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Courts and writers often speak of the ''duration of an offer''; also of the ''termination of an offer'', but if an offer is an expression of assent, as we have defined it here, they do not mean the time occupied by that expression or the time when that expression is complete. Instead, they are thinking of the legal operation of the offer-of the power of acceptance created in the offeree. They do not care how long the offeror took to express the terms of the offer. Instead, they want to know how long the offeree has within which to accept and whether the time limit has arrived. We shall speak here, therefore, of the duration of the power of acceptance and the termination of that power.n1

At the time of making the offer, the offeror has full control of its terms, of the person who shall have power to accept, of the mode of acceptance, and of the length of time during which the power of acceptance shall last. The offer may specify in it the time within which acceptance must occur; if it does so, the power of acceptance is limited accordingly.n2

The offeror's limitation of the time is not operative if it is not communicated so that the offeree knows or should know of it,n3 but if so communicated, it operates with certainty. It makes no difference that the time specified is much less than a reasonable time. The offeror is the creator of the power, and the power dies, just as it was born, by the expression of the creator's will. The offeror need make no offer at all and may word the seeming offer so that it is impossible to accept. A offers to sell property to B for a sum of money, saying ''this must be accepted no later than yesterday.'' There is no offer at all, and no power of acceptance. A says to B, ''I offer you all my land in Alaska for $500, on condition that you accept within an hour.'' At the end of an hour B's power of acceptance is gone. It makes no difference that B has spent much money and effort in an attempt to discover the character and value of A's holdings or that the time limit was highly unreasonable.n4

Occasionally, it may be difficult to interpret the words of an offer and to determine whether or not the offeror has in fact fixed a time limit. Thus the offeror may write, ''please reply by return of post,''n5 or may telegraph ''confirm immediately.''n6 Do expressions such as these mean that the power to accept shall in the first hypothesis last only until the next post leaves, or in the second hypothesis last only a minute or two? This question cannot be answered here. The answer depends upon the context and all the circumstances. It is nothing more than a sort of directing guide to say that the meaning given to such expressions is that which would be given to them by a reasonable person in the exact position of the offeree. Since the offeror has chosen the words, the court will in case of doubt adopt the meaning that is more favorable to the offeree,n7 but if a reasonable person in the offeree's position would have known that the meaning was doubtful, the power of acceptance should usually be restricted to the shorter time. The factors by which a ''reasonable time'' is determined, to be discussed below, will usually be decisive in cases where the words of the offeror do not clearly set a time limit for acceptance.

Even seemingly clear deadlines imposed by the terms of the offer require interpretation. Assume an offer is dispatched on February 1, stating that it expires in eight days. Assume further that it is received at noon on February 3. If a purported acceptance is dispatched on February 15, no difficult process of interpretation is needed to conclude that the acceptance is too late.n8 In borderline cases it may, however, be crucial to know whether the counting should begin from receipt of the offer or from its dispatch. Some have thought that in the absence of countervailing indications the time should be measured from dispatch because the offeree should know that the deadline was imposed for the offeror's benefit.n9 Another reason given is that an expression does not become an offer and has no legal existence except when and if received.n10 This second reason confuses the legal definition of an offer with the reasonable meaning an offeree would understand it to have. What is sought is the reasonable understanding of a person in the position of the offeree and if the answer is unclear after careful reading of the offer, in the light of all the circumstances, the general rule is that the message is to be construed against its author.n11 If a reasonable person would understand that the meaning of the deadline was doubtful, then the power should be restricted to a shorter time. Another problem in the meaning of the hypothetical offer we are discussing is, assuming the reasonable understanding is that the computation begins on receipt, should the day of receipt be included in the eight day period? The general understanding is that it is not encompassed. The day of receipt is excluded but the day of acceptance is included.n12 The best practice would be for the offeror to avoid creating the doubts discussed in this paragraph by providing language along these lines: ''This offer will expire on February 9, at 5:00 p.m., E.S.T.''

It is not unusual for a seller or promoter, in order to induce the purchase of stock, bonds, or other property, to promise the buyer to repurchase the subject matter if the buyer shall ''at any time'' become dissatisfied with the bargain. This is an irrevocable offer, but the buyer's power to accept it does not last forever, although the words ''at any time'' appear to include a long if indefinite period. They should be held to make a ''reasonable time'' long enough to give the buyer an opportunity to learn the value of the purchase by experience with its productiveness of income and with the market.n13

In a New York case, an option for the purchase of alcohol expired on a legal holiday. The plaintiff accepted the next day. In an action for the defendant's failure to perform, the acceptance was held valid under Section 25 of the General Construction Law which provides that ''where a contract by its terms requires the payment of money or the performance of a condition on a public holiday, such payment can be made or condition performed on the next business day succeeding such holiday.''n14 Note that an option is a contract as well as an offer. A revocable offer would not be controlled by such a statute. A statutory period may, however, implicitly be a term of the revocable offer.n15

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FOOTNOTES:

(n1)Footnote 1. See Restatement (Second) of Contracts § 35 comment a.

(n2)Footnote 2.

U.S. - ITT Defense Communications Div. v. United States, 197 Ct. Cl. 11, 453 F.2d 1283, 1290 (1972) . This contract for ITT to supply portable receivers provided that if the government contract officer did not notify ITT in writing no later than August 15 of the availability of funds for the next fiscal year, it was terminated. A message was delivered to the teletype center for transmission at 4:10 p.m., but was not sent out until the morning of August 16. The government contracting officer did call ITT at 4:10 p.m. to tell it the message was being sent. ITT claimed the government's notice was not timely, and though it furnished the items in question, it was not bound by the contract price. The court agreed. Note, that because this option was connected to a contract of sale and was not a mere option, a contrary conclusion could have been reached pursuant to the reasoning in § 2.15 of this treatise.

Kurio v. United States, 429 F.Supp. 42 (S.D.Tex.1970) .

Wis. - Athe v. Bartholemew, 69 Wis. 43, 33 N.W. 110 (1887) , an acceptance by telephone at 3:45 P.M. of an offer saying ''must know by 2:30 today'' was too late. In accord is Restatement (Second) of Contracts § 41(1).

''At any time'' does not mean forever. Starkweather v. Gleason, 221 Mass. 552, 109 N.E. 635 (1915) . But ''at any time ... this contract shall apply to heirs and assigns'' means throughout the option holder's life. Henry v. Page Dairy Co., 65 Ohio App. 517, 30 N.E.2d 812 (1940) .

In Ellis' Adm'r v. Durkee, 79 Vt. 341, 65 A. 94 (1906) , an offer was made to buy shares of stock ''at any time after six months.'' The power to accept was held to exist for two months after the expiration of the six months period, even though by the end of the six months the shares had become unsalable on the market.

This section is cited in Akers v. J.B. Sedberry, Inc., 39 Tenn.App. 633, 286 S.W.2d 617 (1955) , a case that is noted herein under § 2.16.

In Housing Authority of Lake Arthur v. T. Miller & Sons, 239 La. 966, 120 So.2d 494 (1960) , the plaintiff's power of acceptance of an irrevocable bid was good for a 30-day period, beginning when bids were opened on April 22 at 2 P.M. On May 22, the 30th day thereafter, at 2 P.M. the bidder gave notice revoking the bid, but the plaintiff disregarded it and gave notice of acceptance at 3:30 P.M. The court held the acceptance to be within the 30-day period, including the whole business day on the last of the 30 days. See note on this case in § 3.36.

In Dobson & Johnson, Inc. v. Waldron, 47 Tenn.App. 121, 336 S.W.2d 313 (1960) cert. denied, the defendant made a written offer, to sell land, saying ''This offer expires on July 1, 1958.'' The plaintiffs as offerees wrote and signed their acceptance on the writing constituting the offer and delivered it to the authorized agents of the defendant on July 1, 1958. Later on that day the defendant told these agents that the offer was withdrawn, having expired on June 30. The court held that the acceptance was operative when delivered to the agents, that the power of acceptance lasted through July 1, and that the attempted revocation by defendant was not effective because not received by the offerees prior to their acceptance. No mode of acceptance was specified in the offer.

In Davies v. Langin, 203 Cal.App.2d 579, 21 Cal.Rptr. 682 (1962) , the defendant owner made a written offer to sell, subject to acceptance within two days. Defendant's agent presented this to the plaintiff who signed an acceptance within the two days and gave it to the agent. This acceptance was on time, even though the agent did not report it to the owner until several days later. Even if the defendant had specified that the acceptance must be reported within two days, in this case the defendant ''waived'' the delay by indicating assent when the delayed acceptance was reported to him. His act, here described as a ''waiver'', was operative as an acceptance, because the plaintiff's delayed acceptance operated at least as a counter-offer to purchase.

(n3)Footnote 3. See Ward v. Board of Education, 36 Ohio App. 557, 173 N.E. 634 (1931) , the school board mailed to a teacher on June 15 a proposed written contract to be signed and returned, the board voting at the same time that all contracts must be returned by July 2. The plaintiff received her contract June 18, and knew nothing of the vote. She signed and returned her contract on July 5; but the board had employed another teacher. Her acceptance was too late, for the court held that a reasonable time had expired.

(n4)Footnote 4. If acceptance is required to be within a stated time, a later acceptance is not made valid by the fact that the offeror prevented acceptance in time by absenting himself. Brach v. Matteson, 298 Ill. 387, 131 N.E. 804 (1921) .

It is otherwise, however, in the case of a binding option, in which the option holder has an irrevocable power during the specified time. If the option giver prevents the giving of notice of acceptance on time, the holder has a reasonable time thereafter. Unatin 7-Up Co. v. Solomon, 350 Pa. 632, 39 A.2d 835 (1944); Wilson v. Bailey, 8 Cal.2d 416, 65 P.2d 770 (1937) , oral assurances of extension; Holden v. Efficient Craftsman Corporation, 234 N.Y. 437, 138 N.E. 85 (1923) , same.

See also the note to Epstein Hebrew Academy v. Wondell, 327 S.W.2d 926, 76 A.L.R.2d 1187 (Mo.1959) , § 264.

In Caldwell v. Anschutz Drilling Co., 13 Utah 2d 177, 369 P.2d 964 (1962) , after oral negotiations, the defendant (in Denver) drafted and sent to the plaintiff (in Utah), a written offer to sell certain leases, containing the following paragraph: ''This contract must be executed by buyer and earnest money and executed copy of the contract received by the seller on or before February 23, 1961, or this contract is null and void and the seller and buyer are relieved of any obligations hereunder.'' On being informed by telephone that because the banks would be closed on February 22, it would not be possible to deliver the certified check on the 23d, the defendant said that the 24th would be in time. This clearly extended the time for acceptance by the buyer. At 2:30 P.M., February 24, the plaintiff's agent went to the defendant's office in Denver, empowered to sign the contract and close the deal, if the defendant would not assent to certain changes. The defendant refused such assent; whereupon the plaintiff's agent offered to sign the contract and to give his personal check for the down payment. The defendant refused the uncertified check. The agent then asked the defendant's president to go with him to the bank, where he would cash his check and make the down payment in cash. The president refused to do this. Thereupon, the agent said that he would get the check certified and left for that purpose. It was too late, the bank having closed. The plaintiff sued ''to establish and enforce a contract.'' The trial court sustained the defendant's motion to dismiss. This was reversed by the Supreme Court, holding that the plaintiff was entitled to a trial on disputed issues. It said that the facts alleged by the plaintiff supported his theory ''that after mailing the contract to plaintiffs, defendants got a better deal and thus did not want the plaintiffs to complete the transaction; that the plaintiffs made a valid and bona fide offer to perform within the reasonable time as extended by defendants but were prevented from doing so by the latter's conduct.'' This is quite correct, provided that a ''contract'' was ever made. The written paper signed by the defendant was not a contract; it was an ''offer''. So far as reported, it was not an irrevocable offer. Further, the plaintiff, having never signed it, was never bound by it. The mode of acceptance, stated in the writing, consisted of the delivery of the instrument duly signed and accompanied by a certified check. The agent's ''valid and bona fide offer'' to sign and obtain the check (or the cash) was not an operative ''acceptance'' of the defendant's offer. The court treats the defendant's written offer as if it were itself a binding ''option contract.''

(n5)Footnote 5.

U.S. - Eliason v. Henshaw, 17 U.S. (4 Wheat.) 225, 4 L.Ed. 556 (1819) .

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

N.Y. - Palmer v. Phoenix Mut. L. Ins. Co., 84 N.Y. 63 (1881) . The letter arrived at 9:00 a.m., stating ''You will confer a great favor if you send by return of mail....'' The response was posted after the 1:30 p.m., but before the 6:00 p.m. departure of the mails. This was held to be a timely acceptance, effective although never received. See also Howells v. Stroock, 50 App.Div. 344, 63 N.Y.S. 1074 (1900) .

Eng. -Tinn v. Hoffman & Co., 29 L.T. (N.S.) 271 (1873, Ex.Ch.); Adams v. Lindsell, 1 B. & Ald. 681 (1818), ''receiving your answer in course of post.''

An offer that conditions acceptance on replying by ''return mail'' does not preclude other forms of communication which arrive with the same dispatch as the mails. The term is an expression of time rather than of a means of communication.

(n6)Footnote 6. L. & E. Wertheimer, Inc. v. Wehle-Hartford Co., 126 Conn. 30, 9 A.2d 279, 125 A.L.R. 985 (1939) . The telegram was received at 8:29 a.m. and a reply was dispatched at 11:16 a.m. Under all the circumstances this complied with the instruction ''confirm immediately.''

James v. Marion Fruit Jar & Bottle Co., 69 Mo.App. 207 (1896) . The telegram was received Saturday night. A reply on Monday morning did not comply with the instruction ''wire immediately.''

(n7)Footnote 7. A strict application of the above rule, applied to an offer expressly stating that the offeree may accept ''at any time,'' would lead to the result that the power of acceptance would be perpetual, but it has been held that the offeree ought to know that the offeror does not mean this. The result is that the offeree has only a reasonable time. Starkweather v. Gleason, 221 Mass. 552, 109 N.E. 635 (1915) . The use of such a phrase by the offeror ''is to be taken into consideration in determining what is a reasonable time.'' Kaplan v. Reid Bros, 104 Cal.App. 268, 285 P. 868 (1930) .

In Cox v. Huffman, 159 Tex. 298, 319 S.W.2d 295 (1958) , the court held that the broker's commission was conditional on sale within five days. A purchaser was produced to whom the owner made the sale after five days. This did not entitle broker to commission specified if the sale had been made within five days. See in general § 2.30.

(n8)Footnote 8. See, e.g., McKibben v. Mohawk Oil Co., 667 P.2d 1223 (Alaska 1983) , where the offer state ''please contact this office within twenty days of the date of this letter.''

(n9)Footnote 9. 1 Samuel Williston, Contracts § 53A (3d ed.).

(n10)Footnote 10. 1 Amer.L.Rev. 434, 456, quoted in Caldwell v. Cline, 109 W.Va. 553, 156 S.E. 55, 72 A.L.R. 1211 (1930) .

Wis. -Plaintiff's attorney granted defendant an indefinite extension of time within which to answer a complaint. Several months later he wrote defendant's attorney demanding that an answer to the complaint be received within ten days. It was held that the ten day period began to run from receipt of the demand on the theory that the demand had no effect until received. Oostburg State Bank v. United Savings and Loan Ass'n, 130 Wis.2d 4, 386 N.W.2d 53 (1986) .

Eng. -An offer dated in September stated that ''you are for the space of a month to be at liberty to accept this offer....'' Applying stare decisis, the court concluded that ''month'' meant lunar month and the offer expired at the end of September, although this was not the understanding of either party. Neither justice nor public policy is served by such decisions. Morrell v. Studd, [1913] 2 Ch. 648 .

(n11)Footnote 11. Caldwell v. Cline, 109 W.Va. 553, 156 S.E. 55, 72 A.L.R. 1211 (1930) , noted in 79 U.Pa.L.Rev. 637 (1931); 17 Va.L.Rev. 503 (1931); 37 W.Va.L.Q. 310 (1931). The offeror's offer stated, ''will give you eight days in which'' to accept or reject. Because the language indicated that the offeree would have eight days to think about the offer, under any view of the matter, the calculation did not commence until receipt.

(n12)Footnote 12.

U.S. - Clements v. Pasadena Fin. Co., 376 F.2d 1005 (9th Cir.1967) .

Alaska - Gumear v. Interior Credit Bureau, 627 P.2d 647 (Alaska 1981) .

La. - Housing Authority v. T. Miller & Sons, 239 La. 966, 120 So.2d 494 (1960) .

N.Y. - Barnet v. Cannizzaro, 3 A.D.2d 745, 160 N.Y.S.2d 329 (1957) .

Tenn. - Dobson & Johnson, Inc. v. Waldron, 47 Tenn.App. 121, 336 S.W.2d 313 (1960) .

In some jurisdictions, the methodology of counting is codified. E.g., West's Ann. California Civil Code § 10; N.Y.-McKinney's Gen'l Constr. L. § 20.

(n13)Footnote 13. See the following cases:

Ill. - Kincaid v. Overshiner, 171 Ill.App. 37 (1912) , apparently no limit, 5 years after stock became worthless was not too long.

Iowa - Moench v. Hower, 137 Iowa 621, 115 N.W. 229 (1908), 18 months during which buyer was an employee, not too long in spite of market depreciation.

Mass. - Starkweather v. Gleason, 221 Mass. 552, 109 N.E. 635 (1915), 5 months held too long, after a receivership, but query.

N.J. - Edge v. Boardwalk Securities Corporation, 115 N.J.L. 286, 179 A. 270 (Err. & App.1935), for jury to say whether 6 years was too long.

N.Y. - Fitzpatrick v. Woodruff, 96 N.Y. 561 (1884), 3 years not too long, first default of interest then occurring.

Ohio - Henry v. Page Dairy Co., 65 Ohio App. 517, 30 N.E.2d 812 (1940) , promise was to buyer, her ''heirs and assigns'', hence during her life at least.

Wash. - Brooks v. Trustee Co., 76 Wash. 589, 136 P. 1152 (1913) , years held too long.

In Santa Clara Properties Co. v. R.L.C., Inc., 217 Cal.App.2d 840, 32 Cal.Rptr. 333 (1963) , a written contract for the sale of corporate stock, the agreed price of which had been paid, provided: ''Buyer is allowed a period of 10 days within which to examine the books ... and should the Net Worth in their opinion be more or less than the amount shown on the attached balance sheet, buyer shall have the option of requesting a full refund ...''. This was held to give the buyer a conditional option to rescind, by notice, within 10 days and not an option to rescind by a notice given within a reasonable time after the expiration of a 10-day period for examining the books. The buyer's own parol testimony showed that this was the understanding. The option expired at the end of 10 days. See also § 265, 573.

(n14)Footnote 14. Joannides v. Assimacy, 216 App.Div. 133, 214 N.Y.S. 692 (1926) .

(n15)Footnote 15. Gumear v. Interior Credit Bureau, 627 P.2d 647 (Alaska 1981) . Gumaer made an offer of judgment on January 24. Interior purported to accept on February 6. Alaska's rules gave ten days for the offeree to accept such an offer. The court ruled that the offer had lapsed.