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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 2 OFFERS; CREATION AND DURATION OF POWER OF ACCEPTANCE

1-2 Corbin on Contracts § 2.19

§ 2.19 Notice of Revocation Necessary

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An offeror has full power over the terms of the offer. The offeror can create in the offeree a power of acceptance that is as limited, or as difficult to exercise, as the offeror pleases and can reserve a power of revocation to be exercised in any way. In order to do this, all that is necessary is that the offeree shall be informed of the limitation, or of the reservation, at any time before the offer is accepted. If the offer is in writing, the limitation, or the reservation, should be expressed in the writing itself, so that knowledge of the whole comes to the offeree at the same time. It is not necessary, however, that such limitation, or reservation, be put into the same writing or into any writing at all. It will be equally effective if orally communicated to the offeree. The statute of frauds and some other statutes require certain kinds of contracts to be in writing. None of these statutes makes any requirement as to the form in which an offer shall be made. The terms of any offer may be all in writing, or all orally expressed, or partly written and partly oral. For the same reason, there is no general requirement that the revocation of a written offer be in writing.n1

After an offer has been made, however, in any manner that is sufficient to make it irrevocable, it cannot be either varied or revoked by the offeror, by any communication either oral or in writing, except possibly by making the terms more favorable to the offeree. A so-called ''binding option'' is an illustration of this. The offeree's power of acceptance cannot be varied by the offeror, either as to the mode of exercising it or as to the substance of the contract to be made, except again for the possibility of variances for the benefit of the offeree. And, of course, the offeror cannot make an irrevocable offer revocable by merely saying afterwards that it shall be so. This would be a contradiction in terms; the so-called irrevocable offer would not be irrevocable.

If the offer as originally made was a revocable offer, then it is subject to variation or destruction as the offeror may wish. By a subsequent communication, the offeror can wholly terminate the power of acceptance,n2 or, likewise, limit the mode of acceptance-as, for example, by requiring an acceptance in writing instead of an oral one or by requiring it to be within an hour instead of within a longer time originally applicable. And further, the offeror can create a power of revocation in a manner that would not previously have been effective. Thus, one who has made a written offer to sell land for a sum of money, with the written statement that it shall remain open for a month, can effectively change it at anytime before acceptance by an oral communication raising the price, or requiring acceptance within a week, or creating a power to revoke the offer by a sale to a third person without notice to the offeree.n3 Any communicated change in the terms of an offer operates as a revocation of that offer.n4

An offeror may expressly provide in the offer that it shall be revocable at will and without notice. An offer with such a provision creates a flimsy power of acceptance in the offeree. It seems probable that the courts would hold in such a case that an acceptance will consummate a contract if made before the offeror has in some way given overt expression to the intention to revoke even if not communicated to the offeree.n5 It is not enough for the offeror merely to assert, after the acceptance has been made, that the offer has been revoked in accordance with the reserved power.

A purported offer that reserves the power to withdraw at will even after an acceptance should not be described as an offer at all, but as an invitation to submit an offer.

One who has made an offer to sell property has no power to revoke it merely by making a sale of the property to a third person.n6 Such a power can be expressly reserved, but the offeree must know the reservation. A sale to a third person may make it hard for the offeror to perform as offered, but the offeree has a power of acceptance even after the property has already been sold, if ignorant of such sale. As appears in subsequent discussion, knowledge by the offeree that the offeror has contracted to sell to another terminates the power of acceptance.n7

If there has been no express provision as to the mode of revocation, either in the terms of the offer as originally made or by some other communication to the offeree, a power of revocation exists nonetheless. The decisions have established the rule in such cases, however, that revocation is not effective unless it has been communicated to the offeree. It is not enough merely to mail a notice of revocation, properly addressed to the offeree; the power of revocation will remain unaffected until the letter has been received.n8 It is here suggested that it should be held effective as soon as the offeree has had a reasonable opportunity to open and read the letter after it has been hand delivered or delivered at the offeror's place of business or home address provided such address would be a reasonable destination for such a letter.n9

In some of the attempts at codifying the law of contracts, such as the Field Code, there are provisions that a revocation is operative just as soon as it is put in course of transmission through the post.n10

It was once held that a change of mind by the offeror, totally uncommunicated, would prevent any subsequent acceptance from making a contract. This holding may have been due to the very commonly expressed opinion that the assent of the two parties must be simultaneously expressed, an opinion long since discarded, or it may have grown out of the generally held notion that there must be a meeting of minds at a moment of time and that there is no such meeting if the mind of the offeror has changed. In a well-known English case, the defendant offered to sell 266 hhd. of tobacco at a stated price if the plaintiff would give notice of acceptance before four o'clock that day. The plaintiff gave such notice before four o'clock, but the defendant had a change of mind and refused to sell. The report says nothing whatever as to any notice to the plaintiff of such change of mind. The court held that no contract was made.n11 There are very many later cases that are definitely in conflict with this; and they must be regarded as establishing the existing law.n12 In a few cases, specious and unnecessary attempts have been made to distinguish the case. It is clear today that the consummation of a contract does not require two actually consenting minds at one moment of time. It is equally unnecessary that there should be simultaneous expressions of consent. Unless a power of revocation without notice is expressly reserved as above explained, a message of revocation is not effective to terminate the power of acceptance until it is received.

In this respect revocation of the offer differs from an acceptance of an offer. It is reasonable that they should differ. An offeror invites an acceptance by the offeree and, because of custom, has reason to know that the offeree will regard the expression of acceptance as closing the deal and as justifying immediate steps toward performance or other action in reliance. The offeree, on the other hand, has never invited a revocation of the offer and usually has no reason to expect one.n13 This is again considered in discussing acceptance by mail.

Legal Topics:

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

Contracts LawSales of GoodsForm, Formation & ReadjustmentFormationOffer & AcceptanceContracts LawFormationOffersRevocable OffersContracts LawFormationOffersIrrevocable Offers

FOOTNOTES:

(n1)Footnote 1. Gabel v. Manetto, 177 N.J.Super. 460, 463, 427 A.2d 71, 73 (1981) . An inter vivos trust of realty reserved a power of revocation in the settlor. The court cited this § 2.19 to support the oral revocation of writings, noting the analogy to the revocation of offers. The court adopted a standard of ''clear and convincing'' evidence for such revocations of trusts.

(n2)Footnote 2. Restatement (Second) of Contracts § 42. Article 16(1) of the United Nations Convention on Contracts for the International Sale of Goods is in accord with the common law. It provides: ''Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance.''

(n3)Footnote 3. See Younglove v. Hoberg, 195 Iowa 281, 191 N.W. 985 (1923) .

(n4)Footnote 4.

U.S. - Travis v. Nederland Life Ins. Co., 104 Fed. 486 (8th Cir.1900) . In Radecki v. Amoco Oil Co., 858 F.2d 397 (8th Cir.1988) , the court was faced with the interplay of Fed. R. Civ. P. 68 and the common law. Plaintiff brought an action under the Petroleum Marketing Practices Act under which attorneys fees were recoverable. After unsuccessful negotiations during which reimbursement for attorney fees were part of the offers made, Amoco made an offer of judgment under Rule 68. The next day it submitted a second offer for the same amount, but making it explicit that attorney fees (which were considerable) were included within the offered amount. If the Rule 68 offer was revocable, the second offer would have revoked the first, but some authorities consider the offer to be irrevocable. Radecki attempted to accept the first offer.

The court avoided the question of irrevocability by finding that the acceptance created no contract because the second offer was but a ''clarification'' of the first. Although ''clarification'' of an offer appears to be a new concept, it appears to have utility as to irrevocable offers without consideration, where there is an open term and there has been neither an acceptance nor reliance. The decision does justice and, depending on other possible findings of fact, it could well have been held there was no contract because of misunderstanding, or, alternatively, because the offeree attempted to seize upon an apparent omission by the offeror. It could also have been held that, in light of the negotiating history, the offer, properly interpreted, included attorneys fees all along.

Mass. - Thayer v. Burchard, 99 Mass. 508 (1868) .

N.Y. - Sinram-Marnis Oil Co. v. City of New York, 139 A.D.2d 360, 532 N.Y.S.2d 94 (1988) , aff'd, 74 N.Y.2d 13, 544 N.Y.S.2d 119, 542 N.E.2d 337 . The analysis by dissenting Justice Murphy was sound. If, as seems to be the case, the majority thought that the public policy announced by competitive bidding statutes required a result different from that which flowed from common law principles, it might have said so, instead of making astonishing and unsound statements as to the common law result.

(n5)Footnote 5. Credit card agreements are agreements of adhesion and are often cast in terms of offers to series of contracts. One case examined a provision to the effect that, ''we can revoke your right to use [the card] at any time. We can do this with or without giving you notice.'' It was held that such provision could not operate retroactively as to charges already incurred. Gray v. American Express Co., 743 F.2d 10 (D.C.Cir.1984) .

(n6)Footnote 6.

Conn. - Tartoria v. Manko, 134 Conn. 345, 57 A.2d 493 (1948) .

Ill. - Threlkeld v. Inglett, 289 Ill. 90, 124 N.E. 368 (1919) .

La. - Kirkland v. Faulhaber, 175 So.2d 917 (La.App.1965) .

Mass. - Brauer v. Shaw, 168 Mass. 198, 200, 46 N.E. 617, 618 (1897) . Holmes, J., wrote: ''It would be monstrous to allow an inconsistent act of the offerer, not known or brought to the notice of the offeree, to affect the making of the contract.''

Mich. - Northeast Theatre Corp. v. Wetsman, 493 F.2d 314, 317 (6th Cir.1974) . Twilite offered to sell four drive-in theaters to Northeast. However, on April 29 it sold to Wetsman and another. Northeast, not having been informed of the sale, accepted and was granted specific performance.

Can. -McKenzie v. Hiscock, 55 D.L.R.2d 155 (Sask.App.1965).

(n7)Footnote 7. See § 2.20 below.

(n8)Footnote 8.

U.S. - Patrick v. Bowman, 149 U.S. 411, 13 S.Ct. 811, 37 L.Ed. 790 (1893) ; Stephen M. Weld & Co. v. Victory Mfg. Co., 205 Fed. 770 (D.N.C.1913) . See N.L.R.B. v. Vapor Recovery Systems Co., 311 F.2d 782 (9th Cir.1962) , as to when a notice of termination was held to have been ''received.''

Colo. - Stortroen v. Beneficial Finance Co., 736 P.2d 391, 402 (Colo.1987) .

Conn. - L. & E. Wertheimer, Inc. v. Wehle-Hartford Co., 126 Conn. 30, 9 A.2d 279, 125 A.L.R. 985 (1939) .

Ill. - Paramount Pictures Distributing Corp. v. Gehring, 283 Ill.App. 581 (1936) .

N.C. - Jeanette Bros. Co. v. Hovey & Co., 184 N.C. 140, 113 S.E. 665 (1922) .

Pa. - Owen M. Bruner Co. v. Standard Lumber Co., 63 Pa.Super. 283 (1916) .

Tex. - Peacock v. Harrison, 189 S.W.2d 500 (Tex.Civ.App.1945) .

Eng. - Henthorn v. Fraser, [1892] 2 Ch. 27 ; Byrne & Co. v. Van Tienhoven, L.R., 5 C.P.D. 344 (1880) .

Restatement (Second) of Contracts § 42 comment b. See also Article 16(1) of the U.N. Convention, quoted above.

(n9)Footnote 9. See Restatement (Second) of Contracts § 68 and U.C.C. § 1-201(25), 1-201(26) and 1-201(27). The agent of the offeree to whom the offer was sent will usually be a proper party to whom a revocation may be delivered. Night Commander Lighting Co. v. Brown, 213 Mich. 214, 181 N.W. 979 (1921) ; Hogan v. Aluminum Lock Shingle Corp., 214 Or. 218, 329 P.2d 271 (1958) .

(n10)Footnote 10. See a criticism of the California code by J.L. Lewinsohn, ''Mutual Assent in Contract Under the Civil Code of California,'' 2 Cal.L.Rev. 345 (1914). Such a provision was applied in Watters v. Lincoln, 29 S.D. 98, 135 N.W. 712 (1912) .

(n11)Footnote 11.

Eng. -Cooke v. Oxley, 3 T.R. 653 (K.B.1790). Counsel for plaintiff argued that there was a ''bargain and sale on condition,'' made at the time of the offer. The court properly denied this, saying that at that time ''the engagement was all on one side'' and was nudum pactum. It was further said that ''the promise can only be supported on the ground of a new contract made at 4 o'clock; but there is no pretence for that.'' This fails to give due weight to the proof that the plaintiff gave notice of acceptance before 4 o'clock and that there was no suggestion of a notice of revocation. It ought not to be required that the plaintiff should affirmatively allege that he had received no notice of revocation, the defendant having said that the offer would remain open till 4 o'clock. The court seems to have thought that the defendant had to assent at the same time that the plaintiff accepted.

U.S. - Kirby-Carpenter Co. v. Burnett, 144 Fed. 635 (5th Cir.1906) , appears to support Cooke v. Oxley, where there was a gratuitous option to buy, with notice of acceptance before any revocation. Cooke v. Oxley seems to have influenced the court to render an erroneous decision in Storch v. Duhnke, 76 Minn. 521, 79 N.W. 533 (1899) .

(n12)Footnote 12.

Conn. - L. & E. Wertheimer, Inc. v. Wehle-Hartford Co., 126 Conn. 30, 9 A.2d 279, 125 A.L.R. 985 (1939) .

Ky. - Klatch v. Simpson, 237 Ky. 84, 34 S.W.2d 951 (1931) .

Mass. - Boston & M.R. Co. v. Bartlett, 3 Cush. 224 (Mass.1849) .

Mo. -In Lynch v. Webb City School District, 418 S.W.2d 608 (Mo.App.1967) , this section was followed, the court holding that a teacher's employment contract, signed and delivered to a board of education member within the allotted time was the acceptance of an offer, which became effective prior to notice to the teacher of the board's revocation of the offer. There was ''substantial compliance'' with statutory formalities.

Vt. - Ellis' Adm'r v. Durkee, 79 Vt. 341, 65 A. 94 (1906) .

Eng. - Henthorn v. Fraser, [1892] 2 Ch. 27 ; Stevenson, Jaques & Co. v. McLean, 5 Q.B.D. 346 (1880); Byrne & Co. v. Van Tienhoven & Co., 5 C.P.D. 344 (1880) .

Scot. -Thomson v. James, 18 Sess.Cas. (Dunlop) 1 (Sess.1855).

(n13)Footnote 13. In Byrne & Co. v. Van Tienhoven & Co., 5 C.P.D. 344 (1880) , the court said: ''When, however, these authorities are looked at, it will be seen that they are based upon the principle that the writer of the offer has expressly or impliedly assented to treat an answer to him by a letter duly posted as a sufficient acceptance and notification to himself, or, in other words, he has made the post-office his agent to receive the acceptance and notification of it.

''But this principle appears to me to be inapplicable to the case of the withdrawal of an offer. In this particular case I can find no evidence of any authority in fact given by the plaintiffs to the defendants to notify a withdrawal of their offer by merely posting a letter; and there is no legal principle or decision which compels me to hold, contrary to the fact, that the letter of October 8th is to be treated as communicated to the plaintiff on that day or on any day before the 20th, when the letter reached them. But before that letter had reached the plaintiffs they had accepted the offer, both by telegram and by post; and they had themselves resold the tinplates at a profit.''

In Thomson v. James, 18 Sess.Cas. (Dunlop) 1 (Sess. 1855), the court said:'' I do not think that the principle to which I have referred, as that applicable to the recall of an offer, applies equally to the acceptance of an offer; or that everything which must be done, in order to effectuate the recall of an offer, must, in like manner, be done in order to give effect to the acceptance of an offer. The two things are in their nature different. The one consists in effectually undoing something that the party himself has already done, and which binds him unless it is effectually undone; the other consists in merely acceding to a proposal made.''