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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 § 3.18

§ 3.18 Silence as a Mode of Acceptance

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It is an old maxim that silence gives consent, but this is not a rule of law. It is certain that, if the only facts are that A makes an offer to B and B remains silent, there is no contract.n1 This is true whether the offer is made orally or by mail or telegraph. Silence may indicate that the offeree did not hear or receive or understand the offer, or that the offer was still under consideration.n2 It may instead indicate that the offeree preferred to give no thought to the offer and to waste no time and effort in making a reply, whether orally or by a writing. In such cases, the offeror is not reasonable in giving to the offeree's mere silence an interpretation that the offeree accepts. So, if a party sends a book or paper or other goods to another, with a letter saying that it is offered for sale at a specified price, the party to whom it is sent is not bound by a contract to pay for it if that party does nothing and says nothing. If a party to an existing contract proposes a modification thereof, the mere silence of the other party leaves the contract as before without modification.n3 European opinion appears to agree with the Anglo-American law, as indeed it should where the usages of business and business understandings and expectations are substantially alike.n4 Often, however, silence coupled with conduct or with expectations reasonably engendered by a prior relationship can reasonably be understood by the offeror as an acceptance.n5

A case that not infrequently occurs is one involving bailor and bailee. Where goods are stored in the possession of the bailee without any controlling contract, and the bailee writes to the owner saying that the storage charge to be paid thereafter will be a specified amount, the owner's silence is not operative as an acceptance in the absence of other circumstances justifying an inference that it is intended as such.n6 The owner, on other grounds, may have to pay a reasonable price for the storage, but has not contracted to pay the specified amount. The case of a tenant, who remains in possession after the expiration of the lease or other express tenancy contract period, is a different case for several reasons. It involves property law, the history of which differs from that of the law of contract. And, also, the tenant is voluntarily retaining a possession and enjoying its benefits, with knowledge of the terms to which the landlord had previously consented. In order that either party may be held to different leasehold provisions, it must be shown that a new contract has been made. Remaining in possession with knowledge of new terms proposed by the landlord may be an acceptance thereof, but it is more than mere silence.

One who has repudiated or otherwise broken a contract may make an offer of ''rescission,'' hoping thereby to escape from paying damages or to recover payments made. Mere silence by the other party is not acceptance, nor should the court so interpret the efforts of the injured party to mitigate the loss by retaking possession, making a resale, or otherwise.n7

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

Contracts LawFormationAcceptanceMethods of AcceptanceSilence

FOOTNOTES:

(n1)Footnote 1.

U.S. - Beach v. United States, 226 U.S. 243, 33 S.Ct. 20, 57 L.Ed. 205 (1912) ; Cook v. The MV Wasaborg, 189 F.Supp. 464 (D.Or.1960) .

Conn. - Shulman v. Hartford Public Library, 119 Conn. 428, 177 A. 269 (1935) , silence that is itself ambiguous is not an acceptance.

Idaho - Vogt v. Madden, 110 Idaho 6, 713 P.2d 442 (App.1985) . Sharecropper offered to renew lease for a year and to rotate to a different crop. Lessor remained silent. No contract.

Ill. - Overseas Development Disc Corp. v. Sangamo Constr. Co., 686 F.2d 498 (7th Cir.1982) ; Clark v. Potts, 255 Ill. 183, 99 N.E. 364 (1912) . In Rosin v. First Bank of Oak Park, 126 Ill.App.3d 230, 81 Ill.Dec. 443, 466 N.E.2d 1245 (1984) , it was announced at an auction that the foreclosing bank would have twenty-four hours to decide whether to accept the highest bid. If it rejected the bid, it would pay the high bidder $1500. When plaintiff submitted his bid, the auctioneer announced, ''Sold, subject to seller's acceptance.'' Because the bank did not tender a rejection fee of $1500 within twenty-four hours, plaintiff contended that there had been an acceptance of his bid. A late rejection is not an acceptance. At any rate, plaintiff was notified of rejection within twenty-four hours. Payment of the fee could be made within a reasonable time thereafter.

Kan. - Conry v. McLean, 117 Kan. 595, 232 P. 1030 (1925) , failure to announce after a test whether offeree desired to buy.

Ky. - Cincinnati Equipment Co. v. Big Muddy River Consol. Coal Co., 158 Ky. 247, 164 S.W. 794 (1914) ; Kentucky Portland Cement & Coal Co. v. Steckel, 164 Ky. 420, 175 S.W. 663 (1915) .

Mich. - Grice v. Noble, 59 Mich. 515, 26 N.W. 688 (1886) .

Mo. - Revere Copper & Brass, Inc. v. Manufacturers' Metals& Chemicals, Inc., 662 S.W.2d 866 (Mo.App.1983) . Rejection of part of an offer and silence as to the rest is not an implicit acceptance of the rest.

N.Y. -In Karlin v. Avis, 457 F.2d 57 (2d Cir.1972) , cert. denied, 409 U.S. 849 , plaintiff sent defendant numerous letters seeking to obtain defendant's commitment to pay a finder's fee for services in bringing about a stock purchase. Setting aside the fact that defendant explicitly rejected a proposal that he pay a fee, the unanswered letters created no contract. There was no unjust enrichment as the other party to the transaction paid a finder's fee. Joseph Schultz & Co. v. Camden Fire Ins. Ass'n, 304 N.Y. 143, 106 N.E.2d 273 (1952) ; Albrecht Chem. Co. v. Anderson Trading Corp., 298 N.Y. 437, 84 N.E.2d 625 (1949) ; Senner & K. Co. v. Gera Mills, 185 A.D. 562, 173 N.Y.S. 265 (1918) .

Or. - Carnahan Mfg. Co. v. Beebe-Bowles Co., 80 Or. 124, 156 P. 584 (1916) ; Suitter v. Thompson, 225 Or. 614, 358 P.2d 267 (1960) .

Pa. - Solis-Cohen v. Phoenix Mut. Life Ins. Co., 413 Pa. 633, 198 A.2d 554 (1964) ; Royal Ins. Co. v. Beatty, 119 Pa. 6, 12 A. 607 (1888) .

S.C. - Raysor v. Berkeley County Ry. & Lumber Co., 2 S.E. 119 (1886) .

Wash. - Troyer v. Fox, 162 Wash. 537, 298 P. 733, 77 A.L.R. 1132 (1931) .

Wis. - Sell v. General Elec. Supply Corp., 227 Wis. 242, 278 N.W. 442 (1938) .

In Royal Ins. Co. v. Beatty, 119 Pa. 6, 12 A. 607 (1888) , the court said: ''It will be perceived that all that the witness says is that he asked the defendant's agent to bind the two policies, as he states at first, or to renew them, as he says last. He received no answer; nothing was said, nor was anything done. How is it possible to make a contract out of this? It is not as if one declares or states a fact in the presence of another, and the other is silent. If the declaration imposed a duty of speech on peril of an inference from silence, the fact of silence might justify the inference of an admission of the truth of the declared fact. It would then be only a question of hearing, which would be chiefly, if not entirely, for the jury. But here the utterance was a question, and not an assertion; and there was no answer to the question. Instead of silence being evidence of an agreement to do the thing requested, it is evidence, either that the question was not heard, or that it was not intended to comply with the request.''

Where there have been informal expressions of agreement, if one sends to the other a memorandum stating his understanding of the terms agreed upon, the silence of the other is not necessarily an assent to that memorandum. Trainer v. Fort, 310 Pa. 570, 165 A. 232 (1933) . But it should usually have some weight as an admission, and if the party thus stating the party's own understanding is permitted to proceed with performance or to change position materially in reliance, there may readily arise an estoppel to assert any different contract. Dickey v. Hurd, 33 F.2d 415 (1st Cir.1929) , cert. denied, 280 U.S. 601 .

Where the parties have a settlement discussion that is inconclusive, a letter sent by one to the other stating the terms of a settlement proposal and requesting comments is not accepted by silence. William F. Klingensmith, Inc. v. District of Columbia, 370 A.2d 1341 (D.C.App.1977) .

In Standard Cas. Co. v. Boyd, 75 S.D. 617, 71 N.W.2d 450 (1955) , Boyd bought a motor car. The dealer, at Boyd's request and expense, obtained a one-year liability policy from the plaintiff insurer. Before its expiration, the plaintiff's agent sent to Boyd a renewal policy. Boyd had not requested this and sent no acknowledgment. Half a year later, the agent paid the premium on this policy to the insurer and wrote to Boyd requesting payment or return of the policy. Boyd intended to pay (so testified) but went on a trip without doing so. On this trip a collision occurred, injuring third persons. Boyd has never paid the premium, but he and the third persons assert the liability of the insurer. In a suit for a declaratory judgment by the insurer, the court held that the policy was never in effect. The act of the agent in sending the renewal policy was a mere offer that was never accepted by Boyd. There were no accompanying facts and no previous course of dealing between Boyd and the insurer that justified Boyd in thinking that he could accept by mere silence and inaction. Observe that acceptance by Boyd would have had to be either by the act of payment of the premium or by promising to pay it. The insurer had given Boyd no reason to believe that his mere silence was a proper way for him to make a promise to pay, and Boyd had given the insurer no reason to believe that by mere silence he had promised to pay. The insurer could have maintained no action against Boyd for the premium. ((So held in Roberts v. Buske, 12 Ill.App.3d 630, 298 N.E.2d 795 (1973) ; J.C. Durick Ins. v. Andrus, 139 Vt. 150, 424 A.2d 249 (1980) where the insurance agents advanced the premiums and sought reimbursement)). It follows that no action will lie against the insurer on the policy.

See also Temptron, Inc. v. Dixie Fire & Cas. Co., 241 S.C. 55, 127 S.E.2d 4 (1962) .

If an agent makes a contract in excess of his authority, the silence of his principal with knowledge of the facts will soon operate as a ratification. In Emco Mills, Inc. v. Isbrandtsen Co., 210 F.2d 319 (8th Cir.1954) , a broker who was authorized to sell 10,000 bushels of soy beans for defendant sold 50,000 bushels instead to the plaintiff, at once sending written confirmation in the latter amount to both parties. The defendant sent no notice of the error for 2 weeks and was held bound by contract for 50,000, the plaintiff being forced to buy at an advance in the market.

Mere knowledge by the seller of goods that the buyer regarded their contract for sale of 150,000 gallons as being reduced in quantity to 100,000 gallons is not sufficient to make the seller's silence operate as an acceptance by estoppel. There must also be a material change of position by the buyer in reliance on the seller's conduct. Western Auto Supply Co. v. Sullivan, 210 F.2d 36 (8th Cir.1954) . Here, the jury was justified in refusing to infer an agreement to modify the contract.

(n2)Footnote 2. In Solis-Cohen v. Phoenix Mut. Life Ins. Co., 413 Pa. 633, 198 A.2d 554 (1964) , plaintiff, a real estate agent, had been managing a building for the prime tenant, who went bankrupt. An employee of the landlord asked plaintiff to continue to manage the buildings. Plaintiff expressed willingness to do so on the previous terms plaintiff had had with the tenant. The employee replied that he had no authority to make such a contract, but asked plaintiff to continue to manage the building until the home office acted on plaintiff's offer. After a month and a half the landlord installed a new managing agent in the building. While there was no question that the landlord owed for services actually rendered, the court found no basis for a finding of acceptance by silence. Accepting the plaintiff's services for one and a half months did not change the matter, as this was a reasonable period for the defendant to mull over the offer.

In Karsch v. Carr, 807 S.W.2d 96 (Mo.App. 1990) , a vendor sent, after earlier negotiations, an offer to sell, an executed conveyance, and other documents including documents to be signed by the offerees. The latter had a survey made and decided not to purchase. Two weeks of silent retention of the documents created no contract.

(n3)Footnote 3.

U.S. - J.A. Markel Co. v. D.L. Stokes & Co., 197 F.2d 933 (5th Cir.1952) .

Or. - Carnahan Mfg. Co. v. Beebe-Bowles Co., 80 Or. 124, 156 P. 584 (1916) .

Pa. - In re Baum's Est., 274 Pa. 283, 117 A. 684 (1922) .

Wis. - Shakman v. United States Credit System Co., 92 Wis. 366, 66 N.W. 528 (1896) .

In Spear-Newman, Inc. v. Modern Floors Corp., 149 Conn. 88, 175 A.2d 565 (1961) , an insolvent debtor proposed a composition and sent to each creditor its check for 25 percent of the debt and a personal note for 5% more, in full settlement. Every creditor except the plaintiff cashed the check. The plaintiff retained the check and note but made no effort to collect them. The defendant made no change of position in reliance. The court held that the plaintiff's conduct did not operate as an acceptance of the offered composition, and that it could maintain suit on its original claim which included a guaranty.

In De Cecchis v. Evers, 54 Del. 99, 174 A.2d 463 (Super.1961) , a warehouseman, after having received goods under an agreement having no liability limitation, sent to the owner a storage receipt containing such a limitation. The owner's silence and failure to return the receipt with an objection did not operate as an assent to the limitation in modification of the contract made.

In Application of Doughboy Industries, Inc., 17 A.D.2d 216, 233 N.Y.S.2d 488 (1962) , a buyer sent in an order for goods on an ''order form'' that expressly provided that no acceptance on any additional or different terms should be binding on the buyer unless assented to by a signed writing. The seller orally accepted the order and made a partial shipment. Three days later the seller sent to the buyer its form of acceptance which provided that silence or failure to object in writing would be an acceptance of the terms and conditions of its acknowledgment form. Neither party read or paid any attention to these provisions in their commercial forms. Performance proceeded and a dispute arose. The seller sought an order to compel arbitration, as expressly provided in its acceptance form. The buyer moved for a stay of proceedings, on the ground that its order form contained no provision for arbitration. Thus, the court says, ''the buyer and seller accomplished the legal equivalent of the irresistible force colliding with the immovable object.'' Undoubtedly, a contract for the sale of goods was consummated by the oral acceptance and shipment, but the question remains whether the seller's acknowledgment form. followed by silence without notice of objection, did not modify that contract by adding the arbitration clause. The court said: ''But, and this is critical, it is not only the seller's form which should be given effect, but also the buyer's form, for it too was used in prior transactions, and as to it too there was a duty to read. Of course, if the two commercial forms are given effect, they cancel one another. (Certainly, the test is not which is the later form, because here the prior form said the buyer would not be bound by the later form unless it consented in writing. It needs little discussion that silence, a weak enough form of acceptance, effective only when misleading and there is a duty to speak, can be negatived as a misleading factor by announcing in advance that it shall have no effect as acceptance [Restatement, Contracts, § 72; Corbin on Contracts, §§ 72-75 [§§ 3.18-3.21]; 9 N.Y.Jur.Contracts, §§ 34, 35] ).'' The addition of an arbitration clause was deemed a material alteration of terms, so that, under the Uniform Commercial Code (as adopted in New York, but not in effect until 1964), just as at common law, the arbitration clause was not assented to by the buyer and was not applicable. The motion to stay the arbitration was granted.

(n4)Footnote 4. ''Is mere silence to be regarded as a declaration of will? Is it to be regarded as assent to an unsolicited offer? On principle everybody is free to answer or not to answer. Special reasons must exist if silence is to be the equivalent of assent. Such reasons may be found in statutory provisions. Silence, however, may be tantamount to assent, according to the requirements of business-custom and good faith, if honesty or practical sense would have required contradiction, if there was no assent. This was the 'common law,' and it is not different under the Civil Code, according to the fundamental idea of sec. 157.

''Silence with respect to oral questions is, on principle, of no legal significance; nor can the request of an absent party oblige one to answer in writing, since this may be inconvenient and burdensome. A statement by the offeror that silence on the part of the offeree will be deemed equivalent to assent is of no legal effect; nor is the sending of an unsolicited article with the statement that its non-return within a certain time shall be deemed an acceptance.'' Dernburg, Das bu"rgerliche Recht: Die allgemeinen Lehren (3rd ed.) p. 452.

See I Formation of Contracts: A Study of the Common Core of Legal Systems 131 (Rudolph B. Schlesinger ed. 1968).

(n5)Footnote 5. See §§ 3.17, above; §§ 3.19-3.21 below. In certain circumstances silence in the face of an account stated can be an acceptance of the account. See § 1313 below and Joseph Carino Plumbing & Heating, Inc. v. Costa, 166 A.D.2d 930, 561 N.Y.S.2d 671 (1990) .

(n6)Footnote 6. In Bowley v. Fuller, 121 Me. 22, 115 A. 466, 24 A.L.R. 964 (1921) , the defendant owned hay stored in plaintiff's barn under circumstances entitling the plaintiff to reasonable compensation. The plaintiff notified the defendant to remove the hay by a fixed date or the defendant would be charged $1 per day storage. The defendant made no reply and did not remove the hay. It was held that there was no contract to pay $1 per day. The court said: ''In our opinion it cannot be said as a matter of law that an express contract was completed. Plaintiff's letters constituted nothing more than an offer communicated to the defendant. In order to perfect the contract and bind the defendant there must have been an acceptance by him. But he neither accepted nor rejected the offer. He did nothing which could be construed into an acceptance. He simply remained silent. He was under no obligation to speak or to act and under those circumstances silence and inaction cannot be converted into acceptance.

''The amount of storage to be paid rested entirely in contract. When the letters were written there was a subsisting implied contract which obligated the defendant to pay a reasonable sum. There was no existing obligation on the defendant to pay the increased demand and it could not be inferred as a matter of law from merely allowing the hay to remain in the barn because the continuing liability for rent could be referred to that subsisting contract, and in the absence of any new contract, would be referred to it. Raysor v. Berkeley Co. Ry. & L. Co., 2 S.E. 119 (1887) . A mere failure to reject cannot be converted into an acceptance unless the offeree has agreed in advance that such silence should be so construed or there was some legal duty resting upon him to that effect. There was no such preliminary agreement here and no such duty.''

See also:

N.Y. - Hazeltine v. Weld, 73 N.Y. 156 (1878) .

Wis. - Christopher v. Jerdee, 152 Wis. 367, 139 N.W. 1132 (1913) .

Compare:

Ala. - American Tie & T. Co. v. Naylor Lumber Co., 190 Ala. 319, 67 So. 246 (1914) .

In Taylor v. Dexter Engine Co., 146 Mass. 613, 16 N.E. 462 (1888) , the defendant was held bound to pay storage because he failed to remove an engine from the plaintiff's premises, but the amount to be paid does not appear.

(n7)Footnote 7. See Van Keulen v. Sealander, 183 Wash. 634, 49 P.2d 19 (1935) . See also Baltimore & L.R. Co. v. Steel Rail Supply Co., 123 Fed. 655 (3d Cir.1903) ; § 1236, Discharge by Rescission.