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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 § 3.39

§ 3.39 Power of Acceptance Not Terminated by a Counter-Offer if Either Offeror or Offeree So Prescribes

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The power of accepting an offer, whether revocable or irrevocable, is created by the act and will of the offeror. It is believed that its creator should be able to determine the duration of its existence. If the offeror has led the offeree to believe that it will exist for a stated time, or for a reasonable time, the creator cannot terminate the power at an earlier time without causing notice of revocation to be received by the offeree prior to acceptance, or unless the power to revoke without such notice has been expressly reserved. This rule of law is for the protection of the offeree. But the rules of law, heretofore discussed, to the effect that the power of acceptance is terminated by a counter-offer or a rejection are solely for the protection of the offeror. The offeror can, in the beginning, cause the power to accept the offer to continue for a time that would otherwise be regarded as very unreasonable. Likewise, the offeror can extend the legal operation of the offer by renewing it from time to time. There seems to be no good reason why the offeror should not be able to prevent the offeree's power of acceptance from being terminated by a counter-offer or rejection. Suppose that the offer says: ''This offer shall continue to be open for your acceptance until I notify you to the contrary, even though you may reject it daily or send me numerous counter-proposals.'' This should be given the effect that is intended.n1

Likewise, the offeree may well be held to have the power to prevent a counter-offer (or even a rejection) from terminating the power of acceptance. Suppose the offeree should say: ''I am still considering your offer, but meantime, I am now willing to buy the property you offer if you will reduce your price by $500.'' There is no reason why this should lead the offeror into a change of position, or why it should operate to terminate the power of accepting the original offer still under consideration.n2 The same result should obtain if the offeree says: ''As at present advised, I must reject your offer, but circumstances may change, and I may later consider your offer again.''

No one doubts that one who has made an offer can disregard or refuse the counter-offer, and by a return communication make the original offer once more fully operative.n3 There seems to be no sufficient reason for holding that the offeror has no power to produce this continuing result by expressing such an intention in advance.

In Quinn v. Feaheny, n4 on Sept. 13 the defendant made an offer to sell property on stated credit terms, in the same letter saying: ''I will consider a cash proposition. Make me an offer.'' Plaintiff made such an offer on Sept. 20. There were delays due to defendant. The plaintiff telegraphed on Sept. 21: ''If my cash offer not satisfactory ... I herewith accept your offer of Sept. 13.'' This was held to consummate a sale, the cash offer not being accepted.

Legal Topics:

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

Contracts LawFormationOffersRevocable OffersContracts LawFormationOffersIrrevocable OffersContracts LawFormationCounteroffersContracts LawFormationAcceptanceGeneral OverviewContracts LawFormationOffersRejections

FOOTNOTES:

(n1)Footnote 1. According to Restatement (Second) of Contracts § 38(1): ''An offeree's power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention.''

(n2)Footnote 2. Collins v. Thompson, 679 F.2d 168 (9th Cir.1982) . Prisoners at Washington State Reformatory brought a class action to end allegedly unconstitutional over-crowding. The state offered a consent decree, one of the terms of which had an effective date of March 1, but which also incorporated by reference a plan which had a date of April 1. After the state amended its proposal to be entirely consistent with the April 1st date, the prisoners moved for approval of the decree as initially proposed, or in the alternative asked that all members of the class be notified of the April 1st date. It was held that the prisoners' counter-offer (the March 1st date) did not terminate the power of acceptance because it did not impliedly reject the state's offer.

According to the Restatement (Second) of Contracts § 38(2): ''A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement.''

(n3)Footnote 3. In Livingstone v. Evans, 4 D.L.R. 769 (Alberta 1925) , the defendant offered land at $1,800. The plaintiff replied by wire: ''Send lowest cash price. Will give $1,600 cash. Wire.'' The defendant replied: ''Cannot reduce price.'' Thereupon the plaintiff accepted the original offer. The court decreed specific performance, holding that the defendant's reply to the plaintiff's counter-offer and request was a renewal of his offer.

In Santa Monica Unified School Dist. v. Persh, 5 Cal.App.3d 945, 85 Cal.Rptr. 463 (1970) , the school board approved a resolution of necessity authorizing condemnation proceedings for Persh's land. An offer to purchase in lieu of condemnation was made. Persh made three counter-offers, each of which was rejected. The deputy superintendent of the district indicated that Persh could still accept the original offer, which he proceeded to do. The court indicated that on general principles of contract law a contract would have been made; however, the statutes governing the making of contracts were not complied with because the original offer made under proper procedures no longer was effective.

Two Arizona cases, involving the termination of offers by lapse, rather than by counter-offers, are nonetheless instructive. Ramsay v. Sierra Vista Unified School Dist. No. 68, 144 Ariz. 260, 697 P.2d 343 (App.1985) ; Walker v. Sierra Vista Unified School Dist. No. 68, 147 Ariz. 604, 712 P.2d 451 (App.1985) . In each of these cases, offers to tenured teachers for renewal of their contracts had lapsed. In the first case the District subsequently offered the teacher a renewal on the same terms as were contained in the lapsed offer. The court held that, upon the teacher's acceptance of the offer, the teacher's tenure had been reinstated. In the second case the teacher was subsequently offered a renewal as a probationary teacher, which he accepted. His tenure was held not to be reinstated. The moral of these two cases is that once a power of acceptance has come to an end, any alleged renewal of the offer must be interpreted by the general rules of interpretation.

(n4)Footnote 4. 252 Mich. 526, 233 N.W. 403 (1930) .