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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 § 3.21

§ 3.21 Silence Plus Additional Circumstances

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There are many cases in which, because of the past relations of the parties or of accompanying circumstances, the silence of the offeree after receipt of an offer has been held to constitute acceptance and to create a contract. These are all cases in which the conduct of the party denying a contract has been such as to lead the other reasonably to believe that silence, without communication, would be sufficient. Usually it has been the offeror who asserts that the offeree has accepted by silence and who is suing the offeree for breach,n1 but the question may arise with the parties reversed, the offeree asserting a justified belief that silence would be a sufficient acceptance. Thus, if the offer states, for example, that the offeror is so certain that the offeree will accept that the offeree's silence will be taken as acceptance, there are at least two possible reactions by the offeree. The offeree may regard the offer as sheer impudence and remain disdainfully silent, refusing to reply, having no intent to accept. On the other hand the offeree may be pleased to accept, and refrain from communicating this intent to accept because of a feeling of security engendered by the terms of the offer. In the first instance, no contract exists under the rules stated in §§ 3.18 and 3.19. In the second instance a contract is formed because the offeror has made it reasonable for the offeree to accept silently.n2

One who sees a party wall being built by a neighbor on their common boundary line, knowing that the neighbor expects to be reimbursed one half the cost, and makes use of the wall, is bound to pay therefor, even though mere silence might not be sufficient evidence of a promise to pay.n3 It is clear that a party will not be permitted to receive and enjoy benefits, knowing that they are being offered at a price, without paying for them, if there was an opportunity to reject them without any expense or material inconvenience when they were offered. Silence may here consummate acceptance because the facts fairly call upon the receiver of such benefits to speak or to pay. For example, frequently services are rendered under circumstances such that the party benefitted knows the terms on which they are being offered. If this party receives the benefit of the services in silence, when there was a reasonable opportunity to reject them, this party is manifesting assent to the terms proposed and thus accepts the offer.n4

There are other circumstances where it is reasonable that the offeree should notify the offeror of a lack of intent to accept. If the parties agree in advance that silence shall constitute acceptance, their agreement will be given effect.n5 A course of dealing between the parties may make the need of such a communication reasonable.

Thus, where a party ships goods to another at the latter's standing request, the receipt and retention of the goods without any notice of refusal to accept them have been held to sustain a verdict that there was an acceptance and a promise to pay.n6

It is the custom of insurance agents to send to an insured a renewal policy, with bill for the premium, shortly before the expiration of the insured's existing policy. The course of dealing between the agent and the customer may be such as to justify this procedure and as to cause the latter's silence and failure to return the new policy to operate as an acceptance of the offer of renewal.n7 A different result is reached if there was no such previous course of dealing,n8 or if the new policy that is sent is different from the existing one as to the extent of coverage, the amount of premium, or in other material respects.n9

It is not uncommon for a company to send out a traveling sales representative to solicit orders, without power to contract, expressly providing that all orders are subject to acceptance at the home office. In such cases, it seems reasonable for the party whose order was solicited to expect word from the soliciting company within a reasonable time if the order is not accepted. There are well-considered cases holding that acceptance may be inferred from silence,n10 especially when supported by the previous custom of the parties or a general trade usage.n11 Other cases have held that the circumstances were not such as to justify an inference of assent to the order.n12

Where an application has been made for an insurance policy, accompanied by the premium, it has been held or intimated that unreasonable delay in considering the application may operate as an acceptance,n13 or constitute a tort of negligence.n14 The general rule, however, seems to be that such delay is in itself no acceptance.n15 In life insurance there are considerations of policy that have affected court action and that may not be applicable in other contract cases. There must be hesitation in generalizing from cases in the insurance field alone.

It sometimes happens that unordered goods or unsolicited instruments (such as checks tendered in settlement of a disputed bill) are shipped on terms offered by the owner of the goods or maker of the instrument. The offeree then exercises dominion over the goods or the instrument in a manner inconsistent with the ownership rights of the offeror. If the offeree contends that the offer has not been accepted, what is the relationship of the parties? The offeree may be a tortfeasor, having converted the goods without intending to accept the offer. By ancient notions of estoppel, at the option of the offeror, the offeree will be estopped from characterizing the conduct as tortious.n16 This ancient rule is continued both by the Restatement (Second) of Contracts § 69n17 and Section 2-606 of the Uniform Commercial Code.n18 Thus, in one case a storekeeper was in possession of a display stand under an equipment lease and the lease was properly terminated by the lessor. When terminating, the lessor gave the storekeeper the option to purchase the display stand or to return it. The lessee failed to reply to this offer or to a follow-up letter. A motion by the lessee for summary judgment was denied on the grounds that if the lessee continued to exercise dominion over the object, the offer would be deemed accepted.n19 While most of the cases involve goods or other personal property,n20 the same result can obtain in cases where an offeree of rights to real property claims to be a trespasser rather than a contracting party.n21

Where a periodical is sent by mail under circumstances such that the addressee knows that it is being offered at the subscription price, the receipt and reading of the periodical have been held to be an acceptance.n22 As one court said: ''In this case defendant admits that, notwithstanding he ordered the paper discontinued at the time when he paid a bill for it, yet plaintiff continued to send it, and he continued to take it from the post office to his home. This was an acceptance and use of the property, and, there being no pretense that a gratuity was intended, an obligation arose to pay for it.''n23 Although this line of logic is consistent with the ancient tradition of estoppel, it has seemed particularly outrageous, where the goods are sent as a deliberate selling tactic thus unfairly exploiting the purposes for which the rule was originally created. Legislation has been enacted in an effort to curtail such abuses.n24 Outside of this abusive area, the ancient rule continues unmodified.n25

The same rule applies to offers written on checks or on cover letters accompanying checks that seek to achieve a release or an accord and satisfaction. The cashing or depositing of the check is an exercise of dominion over the offeror's funds, and regardless of the intention, the offeree is estopped from denying that the offer was accepted.n26 The same result applies where the offeree merely retains a cashier's check for longer than a reasonable time.n27 Whether the offeree can avoid this result by indicating that the cashing or depositing is under protest is a matter of controversy.n28

Where two parties have made a contract, the terms of which are clear and definite, and later one sends to the other a formal written instrument for execution that contains terms varying from those of the contract previously made, the mere retention of the instrument in silence has been held not to be operative as an acceptance. No estoppel arises merely from continuing performance as the contract requires and receiving the compensation prescribed therein.n29

As discussed earlier, conduct can be a form of communication. An offeree whose conduct indicates assent to the offer, creates a contract. It is neither silence nor conduct alone that creates the acceptance. It is the fact that the conduct, intentionally or carelessly, expressly or impliedly communicates to the offeror that the offeree intends to accept.n30

The prior edition of this treatise, under this section, contained the following language: ''where goods are shipped on different terms from those proposed by the buyer, the acceptance and user of the goods without notice of dissent is an acceptance of the terms of the seller's counter-offer.''n31 By virtue of Uniform Commercial Code § 2-207, this no longer represents the law. This provision is discussed in § 3.37, below.

Legal Topics:

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

Contracts LawFormationAcceptanceMethods of AcceptanceSilenceContracts LawFormationAcceptanceMethods of AcceptanceGeneral OverviewContracts LawFormationOffersRejectionsContracts LawFormationAcceptanceReasonable TimeContracts LawTypes of ContractsUnilateral ContractsGeneral Overview

FOOTNOTES:

(n1)Footnote 1. Such a case is Wood & Brooks Co. v. D.E. Hewitt Lumber Co., 89 W.Va. 254, 109 S.E. 242, 19 A.L.R. 467 (1921) . The plaintiff ordered 500,000 feet of lumber on stated terms, saying: ''If you cannot deliver as ordered please advise us immediately.'' The defendant did not reply, but several months later within the specified time, shipped 160,000 feet and requested inspection. Market prices rose, and there was much later correspondence. The jury was justified in finding an implied promise by the defendant to fill the order. Thus, a bilateral contract was made binding both parties. Doubtless, silence alone would have bound neither party.

In Ashland Oil & Ref. Co. v. Beal, 224 F.2d 731 (5th Cir.1955) , cert. denied, 350 U.S. 967 , the parties jointly owned an oil and gas lease, Beal's interest being one fourth. Ashland made a claim against Beal for one fourth of the drilling and operating costs. Beal asserted an agreement by Ashland that it would pay the whole cost, to be reimbursed only out of Beal's share of the net proceeds of production. Ashland promised to reduce the terms of this agreement to writing but never did so. After some indecisive letters, Beal wrote a letter plainly stating the terms of the oral agreement as he believed them to be, and asked for a reply if Ashland differed thereon. Ashland made no reply for 10 months. The court held that Ashland was estopped to deny that the oral agreement was as stated by Beal in his letter. Although silence alone does not operate as assent, here Ashland, by reason of its earlier promise to reduce their agreement to writing, was under a ''duty to reply'' as Beal requested. Clearly, this ''duty'' is not a duty in the Hohfeldian sense; rather, the failure to reply can reasonably be understood as an acceptance.

In Hartung v. Billmeier, 243 Minn. 148, 66 N.W.2d 784 (1954) , citing this treatise at §§ 4.1, 192, the court held that where an employer promised orally to pay a hundred dollars a year bonus if ''you boys stick with me for five years,'' no answer by the employee was necessary. A unilateral contract was consummated by the employee's merely continuing to work at his job and forbearing to exercise the privilege to quit. Note that the employer made a typical offer to a unilateral contract. A reply would not have created a contract.

In Autographic Register Co. v. Philip Hano Co., 198 F.2d 208 (1st Cir.1952) , the cashing of a check by the offeree, without any communication to the offeror, was held to be an operative acceptance and to be a promise to repay on a stated condition.

(n2)Footnote 2. Restatement (Second) of Contracts § 69, provides that silence and inaction operate as an acceptance where ''the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer.'' For further discussion, see § 3.19 above.

(n3)Footnote 3. Day v. Caton, 119 Mass. 513 (1876) . The court said: ''A promise would not be implied from the fact that the plaintiff, with the defendant's knowledge, built the wall and the defendant used it, but it might be implied from the conduct of the parties. If the jury find that the plaintiff undertook and completed the building of the wall with the expectation that the defendant would pay him for it, and the defendant had reason to know that the plaintiff was so acting with that expectation, and allowed him so to act without objection, then the jury might infer a promise on the part of the defendant to pay the plaintiff.''

The recurrence of party wall litigation has led many jurisdictions to enact legislation governing such walls.

(n4)Footnote 4.

U.S. - Laredo Nat. Bank v. Gordon, 61 F.2d 906 (5th Cir.1932) , cert. denied, 289 U.S. 726 .

Conn. - Collins v. Lewis, 111 Conn. 299, 149 A. 668 (1930) ; Canfield v. Sheketoff, 104 Conn. 28, 132 A. 401 (1926) .

Ind. - Wilhoite v. Beck, 141 Ind.App. 543, 230 N.E.2d 616 (1967) , involved household services rendered by a distant relative. On services within the household consult generally 94 A.L.R.3d 552, 92 AL.R.3d 726, and 7 A.L.R.2d 8 .

Md. - Laurel Race Course, Inc. v. Regal Constr. Co., 274 Md. 142, 333 A.2d 319 (1975) .

Neb. - Emery v. Cobbey, 27 Neb. 621, 43 N.W. 410 (1889) .

Ohio - Berjian v. Ohio Bell Tel. Co., 54 Ohio St.2d 147, 375 N.E.2d 410, 8 Ohio Op.3d 149 (1978) . The plaintiff's office manager arranged for the listing of plaintiff in the yellow pages. The defendant sent its form agreement, calling for plaintiff's signature. This constituted the offer, as the employee with whom the office manager had dealt was not empowered to enter into contracts except on the company's standardized terms. Plaintiff never signed, but the office manager called to correct a minor omission in the proposed listing. It was held that the plaintiff had accepted the telephone company's terms. The call about a minor correction may have itself implicitly conveyed an acceptance of the terms of the offer. However the court bases its decision of the fact that plaintiff had accepted the telephone company's services, without expressing a rejection of the offer, with knowledge of the terms upon which they were offered, citing this section of the treatise.

Wash. -In Hanson v. Puget Sound Navigation Co., 52 Wash.2d 124, 323 P.2d 655 (1958) , the owner of a boat authorized the plaintiff to act as broker in finding a purchaser. At the time of transfer of the boat to a purchaser procured by plaintiff, plaintiff repeated the terms as he understood them. The sale price was $25,000 and plaintiff was to receive the balance for his services. The owner made no reply, but proceeded to close the transaction with the plaintiff present. The owner's silence constituted assent.

The plaintiff's services as an agent to procure contracts were rendered at the instigation of a third party acting without authority in Ballard v. Tingue Mills, Inc., 128 F.Supp. 683 (D.Conn.1954) . The defendant was silent, but received the benefit of the service with knowledge that a commission was expected. Enforcement of the defendant's implied promise was denied for reasons of illegality. See note under § 1450.

(n5)Footnote 5. Fineman v. Citicorp USA, Inc., 137 Ill.App.3d 1035, 92 Ill.Dec. 780, 485 N.E.2d 591 (1985) .

(n6)Footnote 6. Hobbs v. Massasoit Whip Co., 158 Mass. 194, 33 N.E. 495 (1893) . The court said: ''The proposition stands on the general principle that conduct which imports acceptance or assent is acceptance or assent in the view of the law, whatever may have been the actual state of mind of the party-a principle sometimes lost sight of in the cases. O'Donnell v. Clinton, 145 Mass. 461, 463, 14 N.E. 747 ; McCarthy v. Boston & Lowell R.R., 148 Mass. 550, 552, 20 N.E. 182 .''

In Bohn Mfg. Co. v. Sawyer, 169 Mass. 477, 482, 48 N.E. 620 (1897) , Allen, J., said: ''From the defendant's silence in respect to the plaintiff's proposal to effect insurance at their joint expense, and from his subsequent letters and conduct in respect to the policies, the jury might well infer that he assented to that proposal; and if the jury found that such was the fair import of his correspondence and acts, or that the plaintiff believed and had reason to believe that he did assent to it, his secret intention not to do so was immaterial.''

The same result has been reached where a piano was in the offeree's possession on trial, with a promise to return it if not accepted. F.O. Evans Piano Co. v. Tully, 116 Miss. 267, 76 So. 833 (1917) , noted in 27 Yale L.J. 561.

See, also, the following similar decisions:

Conn. - Wright v. McCormack, 99 Conn. 145, 121 A. 467 (1923) ; Ostman v. Lee, 91 Conn. 731, 101 A. 23 (1917) .

Mass. - Hanson & Parker, Ltd. v. Wittenberg, 205 Mass. 319, 91 N.E. 383 (1910) ; Wheeler v. Klaholt, 178 Mass. 141, 59 N.E. 756 (1901) .

Neb. - Emery v. Cobbey, 27 Neb. 621, 43 N.W. 410 (1889) .

N.H. - Knox v. Perkins, 86 N.H. 66, 163 A. 497 (1932) , promise not to revoke a will inferred from silence.

N.Y. - Place v. McIlvain, 38 N.Y. 96 (1868) .

In Buffalo Arms, Inc. v. Remler Co., 179 Cal.App.2d 700, 4 Cal.Rptr. 103 (1960) , the defendant wrote to the plaintiff: ''Please accept this letter as authorization to ship equipment and tooling as per attached schedule [prices were included] ... on a thirty day trial basis... It is agreed that if at the end of the trial period the Remler Co. decides against the purchase of this equipment, it will be returned ... at no charge to the Remler Co.'' The plaintiff shipped the goods; and they were installed and put in use by the defendant. Regarding this as an offer by the defendant with a power of rescission after trial, the act of shipment by plaintiff was an acceptance. On this theory, the defendant failed to exercise its power by returning the goods and was bound to pay the price. But regarding the letter as a request for a shipment on approval, the shipment was an offer by the plaintiff to sell, with a promise by defendant to accept or to return within a reasonable time after thirty days trial. The defendant sent no notice of either acceptance or rejection for more than three months. The court held that the defendant's conduct operated as an acceptance of the offer to sell. This was in spite of the defendant's affidavit that it had never decided to buy. It was under a duty to return, if it ''decides against the purchase''; failure to return as promised, accompanied by silence, was reasonably understood by plaintiff as an acceptance. The defendant's affidavit alleged that the defendant had orally informed the plaintiff that no decision had been made and that notice would be given when decision was made. The court held, for reasons not approved by this treatise, that the oral proof offered was excluded by the ''parol evidence rule'' as contradicting the terms of the written contract (the letter). But there was no contract, as long as there had been no acceptance. Probably, however, the alleged oral conversations were not sufficient to give the plaintiff ''reason to know'' that the failure to return for three months was not an ''acceptance.''

(n7)Footnote 7. In National Union Fire Ins. Co. v. Ehrlich, 122 Misc. 682, 203 N.Y.S. 434 (1924) , the court held that the customer's retention of the policy for two months in silence operated as acceptance. On his refusal to pay, he was held bound to pay for two months' insurance. From this, it appears that retention of the policy without notice of rejection operates as a promise to pay the premium after the date of the policy and until notice of rejection is given. Thus, the insured is given the protection that he reasonably expects, without getting that protection without obligation to pay for it. The insurer also has a reasonable expectation, as the insured should know. See also § 208 below.

In Bussey v. Trinity Universal Ins. Co., 344 S.W.2d 220 (Tex.Civ.App.1961) , writ refused n.r.e., an insurance agent executed a renewal liability policy as he had done twice before, but this time he kept it in his own office. The insured knew nothing of it and paid no premium. There was no contract on which an injured third person could maintain suit.

(n8)Footnote 8. In Phelan v. Everlith, 22 Conn.Supp. 377, 1 Conn.Cir. 43, 173 A.2d 601 (1961) , this was a first renewal with no such ''course of dealing'' that the defendant had reason to know that his failure to communicate a rejection would be understood as an acceptance.

In Continental Cas. Co. v. Rosenzweig, 105 F.Supp. 253 (S.D.N.Y.1952) , the insurer sent a renewal policy 30 days before expiration of an existing policy. The insured was silent, having no intention to accept. He obtained insurance by a different company. After an accident had occurred (but in ignorance thereof), the insurer gave notice of cancellation, and demanded the interim premium. The insured paid this and gave notice of accident. The court, at suit of the insurer, held that no contract had ever been made. Not only did the offeree (the insured) have no intention to accept the insurer's offer, there was no previous course of dealing justifying an inference of such an acceptance. The insurer could not have compelled the insured to pay the premium, and the insured cannot enforce the promises of the insurer. Note that there was objective evidence of the insured's intent not to accept.

(n9)Footnote 9. In Preferred Risk Ins. Co. v. Central Surety & Ins. Corp., 191 F.Supp. 797 (W.D.Ark.1961) , the defendant sent a renewal policy to the insured but providing increased liability and an increased premium. The insured disregarded it and obtained insurance elsewhere. There was no contract.

(n10)Footnote 10. Laredo Nat. Bank v. Gordon, 61 F.2d 906 (5th Cir.1932) , cert. denied, 289 U.S. 726 . The plaintiff, an attorney, was retained on a contingent fee basis by the defendant, a bank, to bring an action against certain customers of the bank. After the action was brought, the bank engaged in settlement talks with the customers. The bank wired the attorney: ''we must know immediately what will be your fees in the event we accept settlement offered us. Answer quick.'' Plaintiff immediately sent his reply setting his fee at $12,500. The settlement was entered into and after four months of silence the bank objected to the fee as excessive. It was held that the attorney could reasonably infer that his offer had been accepted.

(n11)Footnote 11.

Ky. - Enterprise Mfg. Co. v. Campbell, 121 S.W. 1040 (Ky.1909) .

Miss. - Ammons v. Wilson, 176 Miss. 645, 170 So. 227 (1936) .

N.C. - T.C. May Co. v. Menzies Shoe Co., 184 N.C. 150, 113 S.E. 593 (1922) .

Tenn. - Cole-McIntyre-Norfleet Co. v. Holloway, 141 Tenn. 679, 214 S.W. 817, 7 A.L.R. 1683 (1919) , noted in 29 Yale L.J. 441.

Tex. - Peterson v. Graham-Brown Shoe Co., 210 S.W. 737 (Tex.Civ.App.1919) .

Vt. - Hendrickson v. International Harvester Co., 100 Vt. 161, 135 A. 702 (1927) .

In International Filter Co. v. Conroe Gin, Ice & Light Co., 277 S.W. 631 (Tex. Com. App.1925) , reversing 269 S.W. 210 (Tex.Civ.App.) , the order for a machine clearly stated that it should become a contract on approval by the plaintiff at its home office. The order having been marked approved, it was held to make a contract, binding on the offeror, without any notice either received or started.

See Armour & Co. v. Celic, 294 F.2d 432 (2d Cir.1961) . The plaintiff, after negotiations, drafted and sent to defendant a ''Contract of Limited Agency,'' expressly providing that it should not be binding on plaintiff until signed by its division manager. It provided for shipment of goods on consignment for sale on plaintiff's account for cash. The defendant signed it and sent it to the plaintiff. The manager signed it, but sent no notice to defendant. Thereafter, the defendant received shipments of goods, with knowledge that the plaintiff sent them on ''consignment.'' Such knowledge was equal to ''notice'' and operated as an assent to the terms of shipment. Defendant was not a purchaser on credit. Its use of the goods on its own account was a ''conversion.'' See also note under § 3.11.

(n12)Footnote 12.

Ala. - Gould v. Cates Chair Co., 147 Ala. 629, 41 So. 675 (1906) . The vitality of this case was cast in doubt in Brunswick Corp. v. Sittason, 277 Ala. 45, 167 So.2d 126 (1964) , where an agreement made by an agent without authority was deemed ratified by the principal's lengthy silence.

Dist.Col. - Metzler v. Harry Kaufman Co., 32 App.D.C. 434 (1909) .

N.Y. - Senner & K. Co. v. Gera Mills, 185 App.Div. 562, 173 N.Y.S. 265 (1918) .

In Sell v. Gen. Electric Supply Corp., 227 Wis. 242, 278 N.W. 442 (1938) , there had been no previous sales and plaintiff knew that acceptance of his order was dependent upon his being made a new distributing agency.

(n13)Footnote 13. Northwestern Mut. Life Ins. Co. v. Neafus, 145 Ky. 563, 140 S.W. 1026 (1911) ; Dorman v. Connecticut Fire Ins. Co., 41 Okl. 509, 139 P. 262 (1914) . In both cases, however, it was held that there was no contract.

Mass. - McCue v. Prudential Ins. Co., 371 Mass. 659, 358 N.E.2d 799 (1976) . Plaintiff having had a 28-year relationship with Prudential, was solicited by a Prudential agent to apply for a Prudential health insurance policy and to refrain from making an application to Blue Cross. There was a long delay in processing the policy, largely caused by the plaintiff's physician, whom had been asked by Prudential for a medical history. The Prudential agent failed to follow company procedures to inform the plaintiff that a 45-day delay meant that the application was automatically rejected. The jury could infer that a contract existed because the plaintiff could reasonably believe that the application had been accepted.

Mich. - Cartwright v. Maccabees Mut. Life Ins. Co., 65 Mich.App. 670, 238 N.W.2d 368 (1975) , rev'd, 398 Mich. 238, 247 N.W.2d 298 . Defendant's agent solicited a life insurance application from decedent and his wife and an advance premium was paid. The insurer took 73 days to decide to reject the application. In the interim, the applicant died. It was held to be a question of fact whether the insurer acted with reasonable promptness. It quoted from an earlier case: ''In insurance contracts of this character it is the duty of the company to act with reasonable promptness. Failing to reject within a reasonable time, the law implies an acceptance.'' Reversed on the grounds that, under the circumstances. Where the application contained grossly inaccurate representations concerning the applicants past medical history, an unreasonable time had not elapsed. 398 Mich. 238, 247 N.W.2d 298 (1976) .

14. See note 14 on page 420.

Miss. - Old Equity Life Ins. Co. v. Jones, 217 So.2d 648 (Miss.1969) . The insurance company was said to be estopped from denying it had accepted where an application for health insurance was not denied within a reasonable time. Note, also that the premium check had been deposited and the funds retained for the same period.

N.D. -In Lechler v. Montana Life Ins. Co., 48 N.D. 644, 186 N.W. 271, 23 A.L.R. 1193 (1921) , an insured was solicited by agents of the Insurance Company to renew his lapsed insurance policy. He assented and gave his application for reinstatement and his note for back premiums. The Company held the application and note for five weeks and then returned them to the agent with instructions to return them to insured. The agent failed to do this until after the insured died six weeks later. The insurance was held to be reinstated.

S.Car.-In Moore v. Palmetto State Life Ins. Co., 222 S.C. 492, 73 S.E.2d 688 (1952) , the insurer was held to be estopped to deny its acceptance of an application for accident insurance by reason of its failure to notify the applicant of its rejection and other conduct of its agent.

Tex. - Combined American Ins. Co. v. Parker, 377 S.W.2d 213 (Tex.Civ.App.1964) , writ refused n.r.e. The insurer was held estopped to deny coverage under a medical insurance policy by reason of its silent inaction after receipt of a check for the first premium.

Wash. -In Freimuth v. Glens Falls Ins. Co., 50 Wash.2d 621, 314 P.2d 468 (1957) , the plaintiff held an insurance policy on a yacht, limited to use in Alaskan waters. He requested the defendant's general agent in Seattle for an endorsement including coverage on a trip from Alaska to Seattle. He was advised that a ''survey'' was necessary. The general agent employed a marine surveyor in Alaska, directing him to make the survey and authorizing him to approve or disapprove the projected trip, coverage to be dependent on his survey. The agent's letter was shown to the plaintiff. The surveyor approved the trip, on certain conditions accepted by the plaintiff. This approval was sent to the general agent in Seattle by air mail on May 28, with the information that the plaintiff expected to sail the next day. On receipt of this letter, the agent sent it to defendant's marine office in Seattle, with a note requesting endorsement ''if you believe this acceptable. If not please call.'' Two days after receipt of the survey and letter and five days after the yacht's departure, the yacht was burned. Defendant denied coverage. The court held that the acts of the surveyor and the general agent, plus the defendant's delay, operated as acceptance, the plaintiff being reasonable in so understanding. The court held that a ''prima facie'' case was made out without any proof of the ''authority'' of the general agent.

There are cases holding that the insurance company's unreasonable or negligent delay in acting on an application is tortious. This raises problems of general public policy and the nature of the insurance business quite different from the problems of offer and acceptance. See Carl W. Funk, ''The Duty of an Insurer to Act Promptly on Applications,'' 75 U. of Pa.L.Rev. 207 (1927); William L. Prosser, ''Delay in Acting on an Application for Insurance,'' 3 U. of Chi.L.Rev. 39 (1935). Nevertheless the existence of established tort law is relevant in the drawing of inferences of assent from inaction and silence.

See Thomas v. Life Ins. Co. of Ga., 219 La. 1099, 55 So.2d 705, 32 A.L.R.2d 483 (1951) , recognizing tort possibility, but holding that insurance company was not liable.

(n14)Footnote 14. Duke v. Valley Forge Life Ins. Co., 341 So.2d 1366, 1 A.L.R.4th 1193 (La.App.1977) ; Thomas v. Life Ins. Co. of Ga., 219 La. 1099, 55 So.2d 705, 32 A.L.R.2d 483 (1951) (life insurance applications); Continental Life & Accident Co. v. Songer, 124 Ariz. 294, 603 P.2d 921, 18 A.L.R.4th 1099 (1979) (health insurance).

(n15)Footnote 15.

U.S. - Misselhorn v. Mutual Reserve Fund Life Ass'n, 30 Fed. 545 (1887) .

Ala. - Alabama Gold Life Ins. Co. v. Mayes, 61 Ala. 163 (1878) .

Ill. - Moore v. Insurance Co. of North America, 49 Ill.App.2d 287, 200 N.E.2d 1 (1964) , despite payment of initial premium and a three month delay.

Ind. - Metropolitan Life Ins. Co. v. Brady, 95 Ind.App. 564, 174 N.E. 99 (1930) .

Miss. - Savage v. Prudential Life Ins. Co., 154 Miss. 89, 121 So. 487 (1929) .

N.Y. - Joseph Schultz & Co. v. Camden Fire Ins. Ass'n, 304 N.Y. 143, 106 N.E.2d 273 (1952) ; Hughes v. John Hancock Mut. Life Ins. Co., 163 Misc. 31, 297 N.Y.S. 116 (1937) , modified, 254 App.Div. 570, 3 N.Y.S.2d 899 (1938) .

Okl. - Van Arsdale & Osborne v. Young, 21 Okl. 151, 95 P. 778 (1908) .

In Swentusky v. Prudential Ins. Co., 116 Conn. 526, 165 A. 686 (1933) , the insurance company was held not liable in tort for the neglect of its agent to forward promptly an application for insurance.

In Wadsworth v. New York Life Ins. Co., 349 Mich. 240, 84 N.W.2d 513 (1957) , the plaintiff sued as beneficiary of life insurance applied for by her husband, a combat pilot in Korea. The words of the application indicated that the insurance would be effective when the first premium was paid and the company had received satisfactory evidence of insurability, without actual execution of a policy. These two events occurred, and the company received several monthly premium payments thereafter. The company put a policy in the agent's hands for delivery only when the insured signed an additional form. The court held that, although ''mere silence or inaction by the insurance company'' would not constitute an acceptance of the application, the terms of the application and the action of the company made the question of acceptance an issue for the jury. It was error for the trial court to dismiss the case. The withholding of the policy until an additional form was signed did not have the effect of a counter-offer if the jury should find that an acceptance of the application had already occurred.

In Bellak v. United Home Life Ins. Co., 244 F.2d 623 (6th Cir.1957) , the court held that it was error not to give the following instruction: ''that if the jury found that payment of the premium had been made by the insured and that he had passed his medical examination, the insurance company could not hold the application in abeyance for an unreasonable time; and if the jury did find such an unreasonable delay they would be justified in rendering a verdict in favor of plaintiff.'' The court said that ''it was not necessary to prove also that a binding receipt had been issued to the insured.''

Cases contra are collected in 40 Yale L.J. 121; 75 U.Pa.L.Rev. 207.

Tex. - Debenport v. Great Commonwealth Life Ins. Co., 324 S.W.2d 566 (Tex.Civ.App.1959) , insurance application expressly stated that insurance would not be in effect before approval at home office, and no negligent delay.

In Rapp v. Lester L. Burdick, Inc., 336 Mass. 438, 146 N.E.2d 368 (1957) , an application for accident insurance given to an insurance agent was expressly conditional on acceptance at the home office. Because of the agent's delay in sending in the application, the company did not receive the application until after an accident in which the applicant was killed. There was no ''binder'' or other agreement for temporary insurance. The application was made on November 16, the agent sent it in on December 14, the death occurred on December 30, and the policy was executed on January 2. In an action ''in contract or tort'' to recover the amount of the policy, the court held no contract had been made. There was no showing of negligence or of the agent's undertaking of diligence.

(n16)Footnote 16. In Louisville Tin & Stove Co. v. Lay, 251 Ky. 584, 65 S.W.2d 1002 (1933) , unordered goods were shipped to a store in Corbin, Kentucky, operated by Mrs. Lay. She had not ordered the goods and they were not the type of merchandise she dealt in. Rather than accept or reject the goods, she directed the carrier to speak to her husband who operated a different store. The husband took delivery. This direction by her to the carrier was held to constitute such an exercise of control over the goods as to amount to an acceptance.

In Indiana Mfg. Co. v. Hayes, 155 Pa. 160, 26 A. 6 (1893) , the plaintiff shipped 64 refrigerators to the defendant. He had not ordered them, but it would seem that plaintiff's sales representative may have placed the order without authorization. He accepted delivery from the railroad and had the refrigerators carted to his warehouse. This was an acceptance as a matter of law.

In Ferrous Products Co. v. Gulf States Trading Co., 160 Tex. 399, 3 Tex.Sup.Ct.Jour. 198, 332 S.W.2d 310 (1960) , Borden owed money to Ferrous. Borden ordered steel beams from plaintiff asking them to be sent to Metallic at an address where Ferrous was located. Plaintiff immediately shipped the beams. Borden had informed Ferrous to expect a delivery. When the beams arrived, an authorized Ferrous employee scratched out Metallic's name on the invoice and inserted Ferrous' name. Ferrous credited Borden with the purchase price. Apparently he had convinced Ferrous that the beams were his. Plaintiff recovered the reasonable value of the beams from Ferrous. The court put the grounds of recovery on the basis of quasi-contract. It should be noted that plaintiff had three options. There was a contract based on the estoppel notion discussed here. There was a tort of conversion. When there is such a tort, the aggrieved party has the option of ''waiving the tort'' and suing in quasi-contract.

(n17)Footnote 17. Subdivision (2) provides ''An offeree who does any act inconsistent with the offeror's ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him.''

(n18)Footnote 18. This provides: ''(1) Acceptance of goods occurs when the buyer ... (c) does any act inconsistent with the seller's ownership, but if such act is wrongful as against the seller it is an acceptance only if ratified by him.''

(n19)Footnote 19. In re Windsor Communications Group, Inc., 53 B.R. 297 (E.D.Pa.1985) . The court relied, in part, on the Restatement (Second). It could have cited to the U.C.C., which is the governing authority.

By analogy, in Durgin v. Kaplan, 68 Cal.2d 81, 65 Cal.Rptr. 158, 436 P.2d 70 (1968) , it was held that silent acceptance of stock in payment of debt constituted acceptance which would exonerate guarantor of debt under the California Civil Code.

(n20)Footnote 20. In Raible v. Puerto Rico Industrial Development Co., 392 F.2d 424 (1st Cir.1968) , the defendant was the pledgee of the plaintiff's stock. Because the plaintiff's debt was overdue, defendant, under the terms of the pledge, could foreclose on the pledged stock by declaring itself the owner of the stock. It did not do this, but voted the stock in favor of a corporate restructuring that was greatly inimical to the pledgor's interests. ''Under these circumstances, we think that [defendant] is subject to the principle that one who has a right to become owner of property, and whose subsequent actions towards the property can be justified only on the theory that it was the owner, will be held in law to have exercised its election.'' 392 F.2d at 428 .

(n21)Footnote 21. In Hugie v. City of Shady Cove, 85 Or.App. 229, 736 P.2d 567, 569 (1987) , review denied, 303 Or. 699, 740 P.2d 1212 (1987) , plaintiff gave the City of Shady Grove the option to acquire a perpetual right of way for sewer lines across plaintiff's property. In exchange, plaintiff was to be allowed a specified number of sewer connections. By the terms of the agreement, the city was to exercise the option by giving written notice in a specified way. It never gave such notice but proceeded to install sewer lines across plaintiff's property. When plaintiff discovered this, plaintiff asked for the promised sewer connections but the city refused. It was held that the city could not ''escape the obligations and obtain the benefits of an agreement by unilaterally appropriating the other's property or services instead of following the contractual procedure for notifying the other party of its intent to buy or use them and pay for them in accordance with the contract.''

In Wright v. County of Sonoma, 156 Cal. 475, 105 P. 409 (1909) , under claim of right made in error but in good faith, B dug a well on A's unused land and took water, having little or no market value and no value to A, doing no injury to the value of the land. Immediately prior to commencing litigation to enjoin B from taking further water, A notified B that he would charge B $50 a day for every day on which B takes water from his land. The court refused to treat this arrangement as a contract. It did not deem A's threat to be an offer. The Restatement (Second) of Contracts, in using this case as an illustration, gives it a somewhat different explanation. It provides the basis for illustration 11 to § 69. Comment e to § 69 explains: ''where the offeror seeks to take unconscionable advantage of a mistake made in good faith, no social purpose is served by an award plainly in excess of reasonable value even though the exercise of dominion is tortious.'' This case was distinguished in Russell v. Texas Co., 238 F.2d 636 (9th Cir.1956) , cert. denied, 354 U.S. 938 , where owner of the surface rights wrote to the owner of mineral rights, who was conducting exploratory drillings on the land, offering a revocable license to use the surface at a stated rental per day and recited that continued use of surface would be constituted as an acceptance of the offer. The court held the continued use was an acceptance of the offer, stating that in the Sonoma County case the notice was not an offer but an attempt to ''inflict a penalty by means of liquidated damages.'' Query, whether this is a sound distinction. In Russell, the offer of $150 per day may not have been unreasonable.

(n22)Footnote 22.

Del. -Ward v. Powell, 3 Har. 379 (1841).

Mo. - Prospect News Printing Co. v. Swindle, 15 S.W.2d 922 (Mo.App.1929) .

N.H. - Fogg v. Portsmouth Atheneum, 44 N.H. 115 (1862) .

Wis. - Goodland v. Le Clair, 78 Wis. 176, 47 N.W. 268 (1890) .

Eng. -Weatherby v. Banham, 5 C. & P. 228 (1832).

Where the periodical sent is not read or used, there is no duty to pay. Realty Records Co. v. Pierson, 116 N.Y.S. 547 (App.Term 1909) .

(n23)Footnote 23. Austin v. Burge, 156 Mo.App. 286, 137 S.W. 618 (1911) .

(n24)Footnote 24. See, The Postal Reorganization Act, 39 U.S.C.A. § 3009; McKinney's-N.Y.Gen.Obl.Law § 5-322; Neb.Rev.Stat. § 63-101.

(n25)Footnote 25.

Ariz. -In Pace v. Sagebrush Sales Co., 114 Ariz. 271, 560 P.2d 789 (1977) , a wholesale lumber dealer delivered unordered lumber, as well as lumber that had been requested to a retail lumberyard operator. The retailer marked the invoices ''not ordered'' but accepted the deliveries and placed the lumber in its inventory and resold it. The conduct of the retailer overrode its words.

Iowa - Prestype Inc. v. Carr, 248 N.W.2d 111 (1976) . ''The trial court as fact finder would have been justified in finding ... defendant complained about no aspect of the order... This failure to reject the merchandise and failure to complain of any term pertinent thereto supports the conclusion defendant adopted plaintiff's terms of sale.'' This contract could equally be deemed to be based upon a true implication of fact.

N.Y. -The buyer of a building that contained leased air-conditioning units, refused to pay the balance of the payments due on the leases or to allow the lessor to repossess the units. Held: the buyer could not judicially claim the status of a tortfeasor. The tort measure of damages would have given the lessor a smaller recovery. Conditioner Leasing Corp. v. Sternmor Realty Corp., 17 N.Y.2d 1, 266 N.Y.S.2d 801, 213 N.E.2d 884 (1966) .

Pa. - Chorba v. Davlisa Enterprises, 303 Pa.Super. 497, 450 A.2d 36 (1982) . In 1974, decedent made an offer to purchase certain land from a coal company. The offeree accepted a deposit of 10% of the price, and stated that the acceptance of the offer was subject to the approval of its board of directors. Three and a half years went by, apparently without further communication. The offeror had died and the attorney for the estate sent a notice that the ''administrators 'were accepting our option to purchase the property.''' The court indicated that the offeree's holding on to the offeror's money for such a long period could create an acceptance. New pleadings and a trial were required.

Tex. - European Import Co. v. Lone Star Co., 596 S.W.2d 287 (Tex.Civ.App.1980) .

(n26)Footnote 26.

Conn. - County Fire Door Corp. v. C.F. Wooding Co., 202 Conn. 277, 520 A.2d 1028 (1987) .

Iowa - RMP Industries, Ltd. v. Linen Center, 386 N.W.2d 523 (Iowa App.1986) .

Tex. -In Warrior Constructors, Inc. v. Small Business Invest. Co., 536 S.W.2d 382 (Tex.Civ.App.1976) , no writ. Warrior guaranteed up to $50,000 of a note taken up by the SBIC. Default occurred, and Warrior began paying its installments as they became due, accompanying the payments with a form letter stating that all payments reduced Warrior's ''liability, if any, as a surety by that same amount.'' The first time this happened, the SBIC objected to that provision, writing Warrior it would not honor that provision in the future. Warrior stopped making payments after it paid $50,000; the SBIC sued for another $50,000. On this point the court held for Warrior, based on the rule that an offeree may accept the offeror's terms by taking possession and exercising dominion over the money tendered.

Wis. -In Pick Foundry v. General Door Mfg. Co., 262 Wis. 311, 55 N.W.2d 407 (1952) , the owner sent a duly executed lease to the lessee for the latter's acceptance. The lessee made three alterations and executed it as altered, including his check for rent. The owner saw the alterations, made no objections, and cashed the check. This was held to be an acceptance of the lessee's counter-offer.

(n27)Footnote 27. Bestor v. American National Stores, Inc., 691 S.W.2d 384 (Mo.App.1985) .

(n28)Footnote 28. This topic of check cashing or retention is discussed in § 3.17 above. See also § 3.8 above.

(n29)Footnote 29. Maryland Cas. Co. v. United States, 169 F.2d 102 (8th Cir.1948) .

(n30)Footnote 30. This section is cited in N.L.R.B. v. Local 825, Int'l Union of Op. Eng., 315 F.2d 695, 52 L.R.R.M. 2756 (3d Cir.1963) . The Union requested Ernst to sign a written agreement. This he did and returned the signed copies to the Union. The latter thereupon acted in accordance with the instrument, referring its members to Ernst. The court held the Union bound by the contract, even though it did not sign.

In Gateway Cable T.V., Inc. v. Vikoa Constr. Corp., 253 So.2d 461 (Fla.App.1971) , Gateway and Vikoa negotiated an oral agreement, a writing was prepared that had a clause requiring the signatures of two Vikoa officials as a condition to its effectiveness. They never signed, but cashed Gateway's check. Vikoa encouraged Gateway to begin performance and Gateway started work. New management took over and refused to proceed with the agreement. The trial judge directed a verdict for Vikoa, but was reversed. Despite the absence of the signatures, the jury could find assent in fact.

In Gateway Co. v. Charlotte Theatres, Inc., 297 F.2d 483 (1st Cir.1961) , the plaintiff, owner, having leased its theatre to Charlotte, ''orally negotiated the terms of an installation contract'' (air conditioning) with Valley Electric Co. on June 4. Valley reduced the terms to writing and forwarded two signed copies for Gateway to sign and return one. Gateway signed, but inserted a provision that the work was to be ''fully completed'' by June 22. This copy was mailed to Valley, with a covering letter saying: ''It is my understanding that this installation is to be completed so that it is in full operation by June 22.'' Valley made no reply, but immediately ordered the necessary special equipment. The trial court held that Valley was not bound to complete by June 22. The judgment was reversed and the case remanded for a new trial. Even if the added provision had not been orally agreed to and the alteration was wholly unauthorized, it might be found that Valley knew of the alteration and assented to it by silence and proceeding with performance. Even if Valley had not observed the alteration, the covering letter gave it reason to know that such an alteration might have been made. The oral negotiations on June 4 might have been intended to operate at once as a completed contract, but even if so, the parties had power to modify it. Also, the parties may have intended that a contract should not exist until a formal writing was executed. Extrinsic evidence was necessary to resolve these issues. The court said that, ''A covering letter may be part of the total agreement.'' The ''parol evidence rule'' is not mentioned; it has no application.

(n31)Footnote 31. A typical case supporting the proposition was Lubell v. Rome, 243 Mass. 13, 136 N.E. 607 (1922) . Buyer offered to buy stockings at $5.85. Seller replied accepting, but fixing terms as 1% discount 10 days' time. Seller shipped at once. Buyer received and kept the goods, said nothing of new terms, but wrote complaining of quality. Held, seller's counter-offer was accepted.