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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 § 3.34

§ 3.34 Mode of Acceptance Can Be Prescribed by the Offeror

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In the making of any bargain, the party making the ''offer'' is proposing an exchange. To do this, the offeror must state both sides of the bargain. The offer must indicate clearly that which the offeror does or promises to do and also that which the offeree is requested to do or promise to do. Unless the party who makes the alleged offer does this, the offeree gets no power of acceptance. To determine what this proposed exchange is, we must interpret the words and acts of the offeror. In order to accept the offer-to make the bargain and close the deal-the offeree must give or promise to give that for which the offeror bargains. If it is in any material respect different, there is no contract. If the offeror asks for a promise in return, that very promise must be made, but the offer may or may not have prescribed the words or acts by which that promise is expressed.

The offeror creates the power of acceptance and has control over the character and extent of the power that is created by the offer. The offeror can prescribe a single and exclusive mode of acceptance.n1 It makes no difference how unreasonable or difficult the prescribed mode may be, if the offeror clearly expresses, in the terms of the communicated offer itself, the intention to exclude all other modes of acceptance. The more unreasonable the method appears, the less likely it will be that a court will interpret the offer as requiring it and the more clear and definite must be the expression of an intention in words.n2 Cases could be collected in great number holding that an attempt to accept was inoperative because it was not in the mode prescribed. The offer may prescribe acceptance ''by return mail,'' by telegraph, by doing a series of specific acts, by producing a stated result, by causing the receipt of a letter of notification.n3 If an attempted acceptance is not in the manner and form required, it may nevertheless constitute a counter-offer. If so, the offeree's power of acceptance is ended and the offeree has no power to ''cure'' the defects. But the offeror now has, in turn, a power to accept the counter-offer, and a ''waiver'' of the defects may constitute such an acceptance.n4

The offeror may suggest a mode of communication or other mode of acceptance without prescribing it as the exclusive mode. If the offeror merely does this, the suggested mode will be sufficient, but other modes that are reasonable under the circumstances will also be sufficient. If no method is either suggested or prescribed, the acceptance must be in a manner that is reasonable, in consideration of the subject matter of the offer and the common usages of humanity.n5

When one party solicits and receives an order or other expression of agreement from another, clearly specifying that there is to be no contract until ratification or assent by some officer or representative of the solicitor, the solicitation is not itself an offer. It is a request for an offer.n6 The order that is given upon such a request is an offer, not an acceptance. The soliciting party is not specifying a mode of acceptance when specifying assent or ratification ''at the home office'' as a prerequisite. The party complying with the request, by giving the order or otherwise, is making an offer. In so doing the offer may or may not prescribe the mode in which the offer shall be accepted. Under such circumstances as these, the offeror seldom prescribes any mode, although the offeror may expressly or tacitly assent to a mode suggested by the soliciting agent. It may be, therefore, that an uncommunicated assent ''at the home office'' will be sufficient.n7 Indeed, it may be that silence and absence of any notice that the order is rejected may be sufficient.n8 The offeree may be and often is the author of the offer made by the offeror and may author the means of acceptance. Thus, where a manufacturer through a sales representative successfully solicits an order, the solicitation may result in the customer signing an order form prepared by the manufacturer. Usually this order form casts the customer in the role of the offeror. The form may specify that the manufacturer will be bound only by the signed acceptance at the home office. Such forms should be interpreted realistically and such maxims as ''the offeror is master of the offer'' should be applied warily in this context. If the offeree authored the form and the clauses providing for the means of acceptance, it should have the power to waive such clauses, unless the offeror has relied on the terms of the offer.

Empire Machinery Co. v. Litton Business Tel. Systems n9 is a case recognizing the realities of such contract formation. Litton's agent said, by letter, that it would install a Superplex phone system on Empire's premises on receipt of Empire's signed order and deposit. Empire's president signed Litton's equipment sales form which had a clause 6 providing: ''This agreement shall become binding when Seller approves it at its home office.'' Litton never signed the agreement and there is no evidence of any formal ''approval''. Nonetheless, Litton cashed Empire's downpayment check and retained the proceeds, supplied Empire with a form letter to be sent to Mountain Bell which recited that Empire had entered into a contract with Litton, it wrote Mountain Bell furnishing details of Empire's ''contract'', it had Empire buy $12,000 worth of equipment to facilitate installation of the Superplex system, and had Mountain Bell change phone numbers for Empire to permit installation. When it turned out that Litton could not make the Superplex system work, Litton defended against Empire's breach of contract suit on the ground that no contract had been formed. The appellate court reversed a trial court summary judgment for Litton, saying that a jury could infer that Litton had manifested assent and there was no doubt that Empire had acquiesced.

Even if the expected mode of acceptance of an order given as above is the sending of a letter or telegram or affixing a signature in a particular location, it will usually not be the only possible mode.n10 The assent of the soliciting party may be sufficiently expressed by actually making one or more shipments of the goods ordered.n11 The making of a shipment or the beginning of manufacture is not operative as an acceptance of an order if the terms of the order made it clear that there must first be a communicated promise to fill the order.n12

Legal Topics:

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

Contracts LawFormationOffersGeneral OverviewContracts LawFormationAcceptanceMethods of AcceptanceGeneral OverviewContracts LawFormationAcceptanceGeneral OverviewContracts LawFormationAcceptanceReasonable Time

FOOTNOTES:

(n1)Footnote 1. See §§ 2.32, 3.23 above.

(n2)Footnote 2. See Panhandle Eastern Pipe Line Co. v. Smith, 637 P.2d 1020 (Wyo.1981) .

(n3)Footnote 3. See:

U.S. - McDonald v. Mutual Life Ins. Co., 108 F.2d 32 (6th Cir.1939) , cert. denied, 309 U.S. 679 , a form was enclosed by which assent to proposal was required.

Alaska - Spenard Plumbing & Heating Co. v. Wright, 370 P.2d 519 (Alaska 1962) , notice in writing expressly required. See § 3.13, cited by the court.

Cal. - Conley v. Fate, 227 Cal.App.2d 418, 38 Cal.Rptr. 680 (1964) , a cash deposit was required and it was not made in time.

Ill. -In Golden Dipt Co. v. Systems Engineering & Mfg. Co., 465 F.2d 215 (7th Cir.1972) , the operative words were: ''This Proposal, when approved by the Purchaser and submitted and accepted by the Company ... expresses the entire agreement... This Proposal is not deemed binding on the Company until accepted on behalf of the Company.'' Other language required a down-payment of 25% to be submitted with the order. The Purchaser's telephone call created no contract. Maclay v. Harvey, 90 Ill. 525 (1878) , return mail; Brophy v. City of Joliet, 14 Ill.App.2d 443, 144 N.E.2d 816 (1957) , the offeror expressly required the acceptance to be in writing.

Mass. - Horne v. Niver, 168 Mass. 4, 46 N.E. 393 (1897) , telegraph; Lewis v. Browning, 130 Mass. 173 (1881) , letter received.

Mo. - Shortridge v. Ghio, 253 S.W.2d 838 (Mo.App.1952) , the terms of a written offer were such as to require signature by the offeree as acceptance.

Pa. - Van Schoiack v. U.S. Liability Ins. Co., 390 Pa. 27, 133 A.2d 509 (1957) , the offeree failed to sign and return a carbon copy of the offeror's letter as the offeror had requested.

Wyo. - Panhandle Eastern Pipe Line Co. v. Smith, 637 P.2d 1020, 1023 (Wyo.1981) ; Crockett v. Lowther, 549 P.2d 303 (Wyo.1976) , detailed typewritten offer to sell realty provided ''when you accept these terms by signing where I provide below, it is yours....'' This was held to prescribe an exclusive means of acceptance. This is seemingly a hyper-technical reading of the offer. The court, on the reported facts, could have determined that there was insufficient evidence of any attempt at acceptance during the lifetime of the power of acceptance.

One who offers a prize for the best plans submitted for construction of a state building is not bound to consider a plan the execution of which would cost more than the amount specified in the offer as the maximum limit. Cope v. Hastings, 183 Pa. 300, 38 A. 717 (1897) .

If a prize is offered to the one submitting the longest list of words that can be made out of specified letters, providing that all rules must be closely followed, one of the rules being that no obsolete, dialectic, or foreign words shall be used, a contestant is not entitled to the prize if she submits a list of 4,137 words containing 2,481 of the prohibited kinds, even though her list contained more correct words than those submitted by any competitor. Scott v. People's Monthly Co., 209 Iowa 503, 228 N.W. 263, 67 A.L.R. 413 (1929) .

In Petition of Uraga Dock Co., 6 A.D.2d 443, 179 N.Y.S.2d 474 (1958) , affirmed Uraga Dock Co. v. Mediterranean & Oriental S.S. Corp., 6 N.Y.2d 773, 186 N.Y.S.2d 669, 159 N.E.2d 212 , the written draft of an agreement for the construction in Japan of two tankers for a buyer expressly provided that no contract or obligation should be ''effective and binding'' on either party unless the buyer should within a stated 10 day period make a payment of 20 percent of the specified price. See note on this case under § 1444; also a note like this one under § 264.

Two parties agreed by telephone on certain changes in a contract for the sale of land, and the vendor then made changes in an earnest money receipt to accord therewith and sent it to the purchaser requesting her to initial the changes and return it. The purchaser initialed most of the changes but overlooked some minor alterations, and returned the receipt as requested. This was held to be an ''unequivocal acceptance.'' Kahn v. Lischner, 128 Cal.App.2d 480, 275 P.2d 539 (1954) .

(n4)Footnote 4. See the note to Koplin v. Bennett, 155 So.2d 568 (Fla.App.1963) , under § 264.

(n5)Footnote 5. We are here dealing with the power of the offeree to bind the offeror. It is a matter of course that the offeror can not hold the offeree if the latter's communication, reasonably interpreted, is not an expression of assent to any contract. A letter stating, ''Your order ... is at hand and will receive our prompt attention. Thanking you for the same'' was held not to be an expression of acceptance. Courtney Shoe Co. v. E.W. Curd & Son, 142 Ky. 219, 134 S.W. 146 (1911) .

Uniform Commercial Code § 2-206 provides:

''(1) Unless otherwise unambiguously indicated by the language or circumstances

(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;

(b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

This section is in accord with the better reasoned cases under the common law. In harmony with this Code provision is Mid-Continent Petroleum Corp. v. Russell, 173 F.2d 620 (10th Cir.1949) .

U.S. - Kansas Power & Light Co. v. Burlington N. R. Co., 740 F.2d 780, 787 (10th Cir.1984) , cert. dismissed, 469 U.S. 1200 .

Ala. -Cf. King v. Travelers Ins. Co., 513 So.2d 1023 (Ala.1987) , a statement in the offer to this effect, ''Please try to reply to this offer by tomorrow,'' is not an imperative.

Cal. - In re Crossman's Estate, 231 Cal.App.2d 370, 41 Cal.Rptr. 800 (1964) , noted under § 264, involved an option which specified two modes of acceptance interpreted by the court as not being the exclusive modes of acceptance. In Devencenzi v. Donkonics, 170 Cal.App.2d 513, 339 P.2d 232 (1959) , the defendant sent to plaintiff by mail a written order for goods, in duplicate, saying: ''If this is agreeable to you please sign the two copies. Keep one for your files and return the other copy to me as soon as possible.'' The plaintiff mailed a written acceptance of the order, without signing and returning a copy of the order. The court held that a contract was made. The words of the order did not ''impose an absolute condition as to the manner of acceptance, but only suggested a method that would be satisfactory'' to the offeror.

Mich. - Opdyke Invest. Co. v. Norris Grain Co., 413 Mich. 354, 320 N.W.2d 836 (1982) .

Mo. - Sargent v. Wekenman, 374 S.W.2d 635 (Mo.App.1964) , acceptance of a broker's offer of services on stated terms may be by conduct as well as by words.

(n6)Footnote 6.

Fla. - Meekins-Bamman Prestress, Inc. v. Better Constr., Inc., 408 So.2d 1071 (Fla.App.1982) .

Ky. - O'Daniel Motors v. Handy, 390 S.W.2d 453 (Ky.1965) . A doubtful case. Purchaser signed a ''Used Car Buyer's Order'' that provided: ''THIS ORDER NOT BINDING UNTIL ACCEPTED BY DEALER.'' The car was delivered to the purchaser. The court held that there was no acceptance because the ''order was not signed by appellant or anyone for it.'' This is an insufficient explanation for the decision. The order did not refer to a signature and delivery might well have been the dealer's manifestation of acceptance. See U.C.C. § 2-206.

Pa. - McCrea v. Automatic Heat, Inc., 161 Pa.Super. 545, 55 A.2d 564 (1947) .

Or.-This section is quoted in Martin v. Ore Ins. Co., 232 Or. 197, 375 P.2d 75 (1962) . The plaintiff made a written application for an accident insurance policy in the amount of $4,000, making material false representations therein. The defendant replied by letter saying, ''it will not be possible for us to accept it for the coverage requested. However, we are agreeable to considering the application for the principal sum of $3,000... If this is agreeable to you, please advise and we will change the application accordingly....'' The plaintiff assented to the change, and it was made by the defendant on the application. A policy was then issued, with the altered application attached. The plaintiff asserted that his application with its false representations had been nullified by the defendant's counter-offer, thus eliminating the representations. The court held that the defendant's letter was merely a request for an altered application. It was not in such terms as to create a power of acceptance in the applicant.''

W.Va. -A contract to sell land made by an agent, subject to the owner's confirmation or approval, is not an enforceable contract. Fultz v. Connelly, 139 W.Va. 528, 80 S.E.2d 438 (1954) .

Wis. - McWhorter v. Employers Mutual Cas. Co., 28 Wis.2d 275, 137 N.W.2d 49 (1965) . Customer's signing of purchase order from used car dealer is not a contract when purchase order provided it was subject to seller's acceptance. Therefore, dealer's insurer still covered the car when prospective purchaser became involved in an accident.

The solicitation may be in such terms as to be itself an operative offer. The requirement of another expression of assent, at the home office or otherwise, must itself be communicated in order to be a limitation upon what would otherwise create an immediate power of acceptance.

''The claim that is now urged rests entirely upon the contention that the clause 'all contracts or orders taken are subject to the approval of the executive office at Hyde Park, Mass.,' is to be deemed a part of the proposal. If this provision was a part of the proposal, there could be no proof of a contract in the absence of evidence that the order was approved and that the defendant had been notified of that fact. In view of the manner in which this provision is printed upon the stationery of the plaintiff it cannot be held, as a matter of law, that it was incorporated in and a part of the proposal... If an issue had been raised upon the trial, whether it was a part of the proposal that issue would have presented a question of fact to be determined by the jury... When an offer, proposal or contract is expressed in clear and explicit terms, matter printed in small type at the top or bottom of the office stationery of the writer, where it is not easily seen, which is not in the body of the instrument or referred to therein, is not necessarily to be considered as a part of such offer, proposal or contract.'' B.F. Sturtevant Co. v. Fireproof Film Co., 216 N.Y. 199, 110 N.E. 440 (1915) .

See § 2.12 above.

(n7)Footnote 7. International Filter Co. v. Conroe Gin, Ice & Light Co., 277 S.W. 631 (Tex.Com.App.1925) . A solicited order stated ''This proposal ... becomes a contract when accepted by the purchaser and approved by an executive officer of the International Filter Company, at its office in Chicago.'' Note that the ''acceptance by the purchaser'' was the making of the offer to purchase. In Chicago, a vice-president wrote on the document ''O.K. ... P.N. Engel.'' At that time it became a contract.

(n8)Footnote 8. A provision that the order must be ''countersigned'' at the home office by the offeree, no communication to the one giving the order being contemplated, may be waived. It is enough that the offeree begins the making of the goods ordered, subject to the notice requirement of U.C.C. § 2-206. Albright v. Stegeman Motorcar Co., 168 Wis. 557, 170 N.W. 951, 19 A.L.R. 463 (1919) .

See § 3.18, Silence as Acceptance.

In AA Home Improv. Co. v. Casem, 145 So.2d 624 (La.App.1962) , the defendant signed the plaintiff's printed form that required acceptance at the home office. The court held that a notice of revocation given before the plaintiff attached its signature was effective.

See Armour & Co. v. Celic, 294 F.2d 432 (2d Cir.1961) , noted under § 3.13. Even if no notice of the acceptance at the home office is sent, actual knowledge by the offeror of the offeree's intention and the receipt of goods shipped in accordance with the written terms offered will be sufficient to bind the offeror.

In Nelson Equipment Co. v. Harner, 191 Or. 359, 230 P.2d 188, 24 A.L.R.2d 999 (1951) , the buyer's written order for a machine provided that it should become binding when ''accepted at the home office'' of the seller. A written acceptance on the order itself was effective, ''subject only to the duty to inform the defendant.''

In Town of Hempstead v. United States Trucking Corp., 31 Misc.2d 419, 219 N.Y.S.2d 637 (1961) , the Town requested bids using a form that specified that the issuance of a Town purchase order would constitute an acceptance of the bid. This was held not to be an exclusive method. An acceptance of the defendant's bid by a resolution of the Town Board consummated a contract, without a reduction of its terms to a formal writing. The bidder specified no method of acceptance. Its failure to object to the Town's suggested method made that an effective method but did not make it exclusive of other reasonable methods.

(n9)Footnote 9. 115 Ariz. 568, 566 P.2d 1044 (1977) .

(n10)Footnote 10.

N.Y. - Manning v. Michaels, 149 A.D.2d 897, 540 N.Y.S.2d 583 (1989) . Prospective purchasers of real property sought return of their down-payment held in escrow by vendors' attorney. A rider to the contract for sale, which had been signed by the parties contained the sentence, ''By signing this Rider, Seller's attorney has agreed to act as escrow agent as provided above.'' The purchasers had backed out on the deal and argued that the attorney's signature on the rider was a condition precedent to formation of the contract. The court disagreed. Purchasers' submission of an amended contract and rider constituted an offer. Nowhere did the offer indicate that the attorney's signature was required for a valid acceptance. The purchasers' acquiescence in the mode of acceptance and the attorney's acting as escrow agent was evidence of mutual assent.

Pa. - Hatalowich v. Redevelopment Authority, 454 Pa. 481, 312 A.2d 22 (1973) . An offer to purchase real property, addressed to the authority provided: ''Acceptance, or rejection, of this proposal shall be made by depositing such acceptance, or rejection, notification in the United States mail addressed to the proposer at the address set forth below.'' The authority passed a resolution accepting the offer and directed that a final agreement be drawn up. This was held to be a sufficient acceptance as the quoted language did not provide for an exclusive mode of acceptance.

(n11)Footnote 11. Dunkel Oil Corp. v. Independent Oil & Gas Co., 70 F.2d 967 (7th Cir.1934) . Here, the court speaks of the offeree's having ''waived'' a formal acceptance by shipping goods. It is most likely that the offeror had not prescribed a ''formal'' acceptance. It is certain that the shipment of goods as ordered and their receipt by the offeror would be a sufficient communication of acceptance of the proposed contract.

When one party has led the other reasonably to understand that there will be no binding contract until an expression of approval by an attorney, engineer, or some third party, this party should not be allowed to trick that other into a contract by ''waiving'' the requirement if the condition is potentially for the benefit of either party. The other party may indeed make an offer that is not conditional on the required approval. If this is done, a contract can be consummated without the approval. See Power Service Corp. v. Joslin, 175 F.2d 698 (9th Cir.1949) .

In Allied Steel & Conveyors, Inc. v. Ford Motor Co., 277 F.2d 907 (6th Cir.1960) , a purchase order provided: ''Acceptance should be executed on acknowledgment copy which should be returned to buyer.'' The court held that this merely suggested a mode of acceptance and that a contract in accordance with the terms of the order was consummated by the offeree's beginning performance with the knowledge and assent of the buyer. See also notes under §§ 3.8 and 3.9.

(n12)Footnote 12.

U.S. - National Trading Co. v. Vulcanite Portland Cement Co., 159 Fed. 403 (2d Cir.1908) .

N.Y. - White v. Corlies, 46 N.Y. 467 (1871) .